What kinds of property can you purchase through your IRA? Most custodians will allow vacant land, residential or commercial property. Some may also allow leveraged and foreign property.
What if the property you want to buy costs more than you have in your IRA? Are you out of luck? Not quite. You can partner with other people such as a spouse, business associate, or friend. In this scenario, your IRA will own a certain percentage of the property. There are also a handful of restrictions the IRS puts on your use of the property. You can’t live in it or use it as a vacation home, and your business can’t lease space in it. The idea behind this is, since you’re using tax-deferred money, the IRS wants to make darn sure you don’t have any personal use or benefit of the property other than the fact that it’s in your portfolio. Cross that line and they’ll hit you with plenty in taxes and penalties.
More limitations. You can’t place property you already own into your IRA. Furthermore, the property can’t have been owned by your spouse, parents, or children before being placed into your IRA.
Once you’ve decided on a property to buy, the custodian must complete the actual purchase. You can’t do it personally. The title will show the name of the IRA custodian for your benefit. An example would be (Empowered Investor Network, Custodian FBO John Doe IRA). Just an example! PPIN is not an IRA custodian.
Next time – operating your IRA- held property.
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