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Licensed in Tennessee, Mississippi, Arkansas & Kentucky
Option - Investing Your IRA into Real Estate
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One popular application of funds in a PENSCO self-directed IRA has been direct or indirect investments in the ultimate "hard" asset: real estate.
When it comes to real estate investing with your IRA, you can invest in property for long-term appreciation, rental income or a short-term “flip” (renovating with the aim of quickly selling at a profit). You can even benefit from real estate without owning the property itself by using self-directed IRA funds to purchase mortgage notes and trust deeds secured by real estate.
Types of Real Estate
What can I buy with a real estate IRA?
With a PENSCO self-directed IRA, you are free to invest in almost any form of real estate – from condominiums and office complexes to farm land and boat slips. You can invest in:
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Homes, apartments and condominiums
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Commercial properties such as retail stores, hotels and office complexes
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Trust deed notes, mortgages and tax liens
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Raw land and lots
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Real estate options
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Other types of property such as farmland, boat slips, mobile homes and timber rights
Key differences of holding real estate in an IRA
Purchasing and maintaining real estate in an IRA differs from traditional property investments in a few important ways:
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The property’s buyer is the IRA, not the investor. That's why paperwork must flow through an IRA custodian like PENSCO.
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All expenses and revenue must go through the IRA. Expenses must be paid by the IRA and any revenue must come into the IRA.
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You cannot use the property for personal reasons. The property must be treated as investment, not for the immediate benefit of you, your business or your family.
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Maintenance and repairs must be done by a third party. If the IRA owner provides any “sweat equity” activities – even something as minor as changing a light bulb — there could be significant penalties.