How to Invest in Real Estate With an IRA

Buying real estate with an IRA is a popular and often worthwhile investment choice. However, those looking to invest in real estate with an IRA for the first time may be unsure of how to go about doing so. There are a number of ways in which an investor can buy real estate with an IRA, and the best choice for you will depend on your unique goals.

Let's take a look at some of the different approaches to how to buy real estate with an IRA.

Standard IRAs and REITs

The most common means of purchasing real estate with an IRA is through a Real Estate Investment Trust, or REIT.

A REIT is a company that is primarily involved in the purchasing and/or maintenance of income-producing real estate, and it distributes the profits to investors in the form of dividends. An IRA can buy shares in a REIT via one of the standard exchanges or in a mutual fund that incorporates a REIT product. The attraction of using REITs to invest an IRA in real estate is the fairly high rate of return that most of the funds yield.

However, from a retirement perspective, there is a downside that should be seriously considered when buying real estate with an IRA via a REIT. Although dividends are paid out on a steady basis, there is little capital appreciation. If you're looking for a nest egg that has the chance to appreciate (as well as provide income), then REITs may not be the best bet for buying real estate with IRA money.

Self-Directed IRAs and Real Estate: Custodian Model

Setting up a Self-Directed IRA for real estate investments can be a better approach than putting your money into a REIT, but you'll need to decide which type of Self-Directed IRA is right for you.

In simple terms, the Custodian model requires a custodian to act as a middleman through whom you access your Self-Directed IRA. Whenever you want to make a transaction, you have to go through the custodian.

Self-Directed IRAs and Real Estate: Checkbook Control Model

A Self-Directed IRA with checkbook control allows you to invest in the asset of your choice in real time. Buying real estate in an IRA with checkbook control requires an LLC to be created.

When you open an account with Broad Financial, we will take care of setting up the LLC for your Self-Directed IRA, and then, you'll be able to open a checking account for it at the bank of your choice. This checking account is under the control of just one person: you!

That means that there is no middleman to go through in order to access your retirement funds.

• If you want to buy real estate with your IRA, just write a check to the seller.
• If you want to buy supplies for renovations, just write a check at your local hardware store.
• If you want to pay a contractor for repairs, just write them a check.

Having access to your Self-Directed IRA via a checking account allows you to gain control of your retirement investing.

A Self-Directed IRA with checkbook control allows you to easily buy investment properties, such as foreclosures, multi-families, and undeveloped land. So to answer the question, "Can you buy real estate with an IRA?" the answer is most definitely, "Yes!"