Oceanfront Property Investments

Written by Johnny Kitchens
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There are certain instances when having oceanfront property can seem like a liability (like during a hurricane or a tsunami), but that has not stopped people from living on the coast for the entirety of human existence. Since the dawn of time, people have wanted to live near the water and that is not likely to change. If you are going to build, you can build to withstand the forces of nature quite well. If you are buying an existing structure, you can retrofit and look at your insurance options.

It is important to remember that if you are purchasing said oceanfront property with funds from your IRA, all building, retrofitting, and/or insurance expenses must come from your IRA. Your IRA and all assets therein must be treated as a separate entity from your other assets or your IRA can lose its tax-advantaged status. This is one reason traditional IRA providers rarely offer real estate investing as an option, because of the complexity of the arrangement.

Oceanfront property is often purchased either as a site for development or as a place to retire. Hotels, golf courses, and any of a number of commercial ventures do well near the ocean and can be very lucrative. As a place to retire to, oceanfront property makes for excellent rental income until then. (All rental income must flow into the IRA, however, until you start to take distributions.) Before you can move in, though, you and the property will have to meet certain criteria.

Living on Property Owned through Your IRA

Under certain conditions where your IRA's oceanfront property will be your first home or is deeded to you as a gift, you may be able to move in early. Otherwise, you will have to wait until the property has been in your IRA for the required length of time and you have started taking distributions from your IRA. At that point, you can take the property as a distribution and move in without triggering any penalties.


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