Using IRA For RE Investment?

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• 
  MikeT101316th December, 2003

  An Overview
  
  All real property is either purchased or sold for your benefit using your Qualified Plan and/or IRA funds.
  
  TYPES OF PROPERTY YOUR IRA CAN OWN
  
  
  Single family and multi-unit homes, apartment buildings, co-ops, condominiums, commercial property, improved or unimproved land, whether it's leveraged or unleveraged, may be purchased by your Qualified Plan or your IRA.
  
  PURCHASING AND SELLING REAL PROPERTY
  
  
  A real property purchase or sale is initiated by executing either a Buy or Sell Direction Letter For Real Estate. Specific Instructions for completion of these direction letters are contained with the forms packet supplied to each account holder. Real property may be bought at auction for your Plan through our unique auction purchase program. Such purchases cannot be made with personal funds and later be reimbursed.
  
  FINANCING THE PURCHASE
  
  
  You may finance or leverage any property you purchase for your Plan. The property is the collateral for the loan. As the property is an asset of the Plan, repayment of the underlying debt must come from contributions to or income from the property or other assets in the Plan.
  
  ENSURING THE TAX-DEFERRED STATUS OF THE ACCOUNT
  
  
  The entire transaction must flow through the tax-free or tax-deferred retirement account. The escrow must be opened by the account, and not in the name of the beneficial owner. Vesting is always in the name of the account. Only Qualified Plan or IRA funds may be used as good faith deposits, down payments, or purchase money.
  
  If title is vested in individual account holder names, it may not be subsequently sold to the tax-deferred or tax-free account.
  
  BUYING OR SELLING FRACTIONAL INTERESTS IN PROPERTY
  
  
  While fractional interests in real property may be purchased or sold, such interests may not be bought from the beneficial owner of the Plan or IRA or members of their family or business, except siblings.
  
  ADDITIONAL REQUIREMENTS
  
  
  When purchased, these properties become assets of your Plan or account. In addition:
  You may not personally own property which you intend to purchase with Plan funds and you must ensure that your intended purchase is not a prohibited transaction
  It must be for investment purposes only
  Neither you, your spouse, nor your family members (other than siblings) may have owned the property prior to its purchase by your Plan
  Neither you nor your family members (other than siblings) may live in or lease the property while it's in your Plan
  Your business may not lease or be located in or on any part of the property while it's in your Plan
  You may receive any property as a distribution from your Plan as a retirement benefit
  
  MANAGING THE PROPERTY
  
  
  You may receive a fee for managing the assets in your IRA. Managing Assets does not include property management conducted by the beneficial owner of an IRA or a company owned more than 50% by the beneficial owner of real or personal property in the IRA. Managing Assets means managing your IRA portfolio. Management fees can be paid to you or other persons or entities you designate on receipt of invoices. A 1099 will be issued to you or other designated asset manager for the year in which such invoices are paid. All of the income and expenses are for the benefit of the account. This includes all property rental or lease income, taxes, property management and repairs. Invoices for expenses are paid on client approval. The recordkeeping and administration expenses may be paid either directly from separate funds or through the Plan, and may be tax deductible.
  
  hope that helps your understanding a little better, you should probably contact companies that handle IRA's and 1031 Exchanges directly for more specific information.
  
  MT
  [addsig]