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Question for the Money Doctors

Question submitted on Mar 28, 2012.

Question

i want to use my ira to invest in real estate flips and rentels and be able to pay my self for improvements on the properties and put the profits back into my ira

Answer

You can use your IRA funds to invest in the type of real estate you are inquiring on and this is typically done through a self directed IRA.  However, there are very specific rules that must be followed regarding prohibited transactions.  Transactions that can be interpreted as providing benefit to the account holder are not allowed, one of which is receiving unreasonable compensation for managing property held by the IRA.  So while investing in the underlying real estate to either flip or rent the property is acceptable, you have to be very careful on other types of transactions involving you as the account holder performing services with regard to the real estate.

I recommend you consult with an advisor who specializes in self directed IRAs and real estate so you can structure your transactions in accordance with the rules.  That way, you won't have to worry about running afoul of any regulatory restrictions and their corresponding penalties.


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