Use IRA Funds for Real Estate

It sounds almost too good to be true: IRA holders can use their retirement funds to purchase real estate before the age of retirement without incurring distribution taxes or penalties. And they can realize their real-estate investment profits tax-deferred in their retirement account.

"Use Your IRA Funds to Buy Real Estate Now"

But it is true, and growing numbers of savvy investors are taking advantage of the opportunity to build their portfolios while saving aggressively for their retirement years. Since 1974, IRA and 401(k) account holders have had the option to personally control the ways in which their retirement monies are invested, including investing in real estate. And because the investment is made on behalf of the retirement account (just like the IRA investing in stocks and bonds), the acquisition is made without triggering a taxable event. Accounts that enable holders to self-direct their funds into investments of their choice (including real estate, tax liens, personal loans, etc.) are known as "self-directed IRAs."

Creating a structure for these self-directed transactions can be complex, so there are financial services companies throughout the country that set up these self-directed accounts. One such company, Guidant Financial Group of Bellevue, Wash., specializes in a variation on the traditional self-directed IRA -- a self-directed IRA LLC. This is basically a self-directed IRA paired with a Limited Liability Company established in the account holder's name.

This two-part structure gives account holders even more control enabling them to use a checkbook tied to their retirement funds. According to Guidant's CEO David Nilssen, "The checkbook control of a self-directed IRA LLC enables you to literally write checks on the spot to purchase foreclosures, tax liens, and other timely investments. Additionally, you don't have to suffer through the delays or costs of running each of your transactions through a traditional self-directed IRA custodian."