Real Estate Investing in Your IRA?

Posted by Keith on June 17, 2007 at 4:51 am  


Several local radio shows/advertising hours tout the concept of self-directed IRAs aimed at real estate investment.
Is this a reasonable idea? I’m below 40 and have about 190K with my wife in retirement
accounts. I could look to put in roughly 10K next year is this enough to make it worthwhile?

I don’t want to have to do a lot of management. I want a few options and then I want to be able to let someone work on implementation. Are there firms you would recommend over others or keys to look for in considering various firms?

Thank you for your time.


My pleasure. First, I do NOT approve of most IRA-Real Estate schemes. First, the technical requirements are substantial. The last time I checked, the IRA account holder must own less than forty percent of the real estate; and that portion could not be leveraged.

Second, trustees who administer the investment of real estate within IRAs charge very significant annual fees. I’ve seen fees as high as four percent per year.

Third, every single time I’ve seen someone try to do this, they are really trying to skirt the law and to make what is really a non-qualifying investment in their IRA. I’ve seen people try to do vacation rental swaps, put money into their business premises through a straw person, and actually try to by their home (calling it an investment property) using IRA funds.

Dennis, I do not believe it is a good idea to get embroiled in that world — especially in light of your comments about not wanting to actively manage your investments.

I would suggest that you either get to one of our advisors (see our free consultation program) in a hurry for an in depth analysis, or that you stop by a Schwab, Fidelity, or Vanguard retail office and permit them to do cursory evaluation of your situation, and to provide some recommendations.

Hope this helps.


Dennis Logue, Jr.


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