Follow the Rules When Using IRA Funds to Invest

Getting A Loan Can Be More Difficult In A Recession

Getting a loan is one option for funding a rental property purchase. During a #recession, lenders tend to tighten the purse strings, making it harder to borrow.

In that scenario, using a self-directed individual retirement account to purchase an investment property could make sense and offer some #tax advantages. That said, there are some guidelines to keep in mind.

It's important to remember that investing in real estate using your retirement funds comes with some strings attached.

Here Are The Basics To Using Your Retirement Funds to Buy Real Estate

First, the property in question must be an allowable investment. That includes vacant lots, raw land, single-family or multi-unit homes, apartments, townhomes, condos and #foreclosures. Mobile homes and timeshares, on the other hand, are generally excluded.

Next, there are regulations regarding the property's use. "IRS rules do not allow you to live in or use a property owned by your #ira," Click says. Furthermore, any improvements or repairs to the #property can't be made by you or by a company that is owned by you or another disqualified person.

In other words, if you run a painting #business, you'd have to outsource painting your rental property to someone else. Otherwise, you'd forfeit any tax benefits associated with owning real estate inside an IRA.

Finally, remember that things like #maintenance, repairs, property #taxes and even your earnest money deposit when buying the property must come from the IRA to avoid triggering tax consequences. For that reason, it's important to make sure you're planning ahead properly if you're considering using a self-directed IRA to buy a #rental #investment.

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