Real Estate Iras

Written by Johnny Kitchens
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Real estate holdings in an IRA can prove quite profitable, even more so than with traditional IRA investments like stocks and bonds. Real estate has proven to be a sound investment throughout the years despite a few weak markets. As with any investment, though, there are risks. The right piece of real estate can increase in value at an astounding rate. The wrong piece of real estate, however, can slowly depreciate until it must be sold at a loss.

Many people are intimidated by the prospect of folding non-traditional investments, like real estate, into their IRAs. Such investments, especially real estate, often require much more paperwork and require the actions of a larger number of people. Real estate can be a great addition to an IRA portfolio but if all protocols are not met, the IRS can take a great percentage of the profits. The keys to following protocol are a working knowledge of IRA rules and a good IRA advisor.

The laws governing IRAs say more about what you cannot do than what you can. To paraphrase, you cannot gain in the present from your IRA investments. (It was created to shield retirement money only, thus the penalties for early withdrawals and such.) You cannot directly own the assets in your IRA. (You cannot live in a house that is part of your IRA portfolio and you cannot rent it to a relative.) Certain assets (like collectible coins and artwork) are also expressly forbidden.

Real Estate That Can Be Included in an IRA

Get a good advisor, if you do not already have one, and go over the rules of real estate investment within your IRA. When you understand the rules, you can start looking for properties. They can be commercial properties (like franchises, golf courses, rental and resort properties), business properties (like tree farms and grazing lands), or residential properties. The land must be domestic, however. Land in Venezuela does not count, except in certain circumstances.


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