Roth Ira Real Estate

Written by Johnny Kitchens
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Many people are unaware that they can hold real estate in their Roth IRA portfolios. There are a number of reasons for this, not the least of which is the fact that many large banks and investment companies do not offer real estate as an option. The preparation, structuring, and reporting are much more complex than with publicly traded securities, and many of these institutions simply do not want to invest the time and man-power into such investments.

The Roth IRA rules disallow only foreign land (with some loopholes), land already owned by the Roth IRA owner, and land to be used by the Roth IRA owner and his or her relatives. Any other property, for the most part, is eligible to be held in a Roth IRA. This includes both residential properties (including rental properties) and commercial properties (like timber land and office buildings) as long as all proceeds flow into the Roth IRA and all expenses come out of it.

Failure to follow the rules will put your Roth IRA's tax-advantaged status at risk, though, so you must be certain that all protocols are adhered to strictly. For example, if you purchased an apartment building with your Roth IRA five years ago and accidentally payed a plumber with a check from a different account three years ago, you would be liable for taxes and penalties from the beginning of that year. A good IRA advisor with experience in non-traditional IRA investment strategies is absolutely critical for success.

Finding a Non-Traditional IRA Investment Advisor

There are many independent advisors who specialize in non-traditional IRA investing, particularly in regards to real estate. Some do little else, so they are well-versed in following the letter of the law. You want someone with experience because there are so many ways to run afoul of the rules and the penalties can be steep. Shop around and inquire after experience and fees. Some advisors charge small annual fees while others charge a fee every time your IRA pays for repairs, maintenance, or utilities.


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