Quote:
Originally Posted by dkaufnelson
I've seen the ad for this man who says you can buy your retirement home through an IRA, but this is totally misleading, as you can only use it as an investment property and can't ever live in it. Here's a concise list of pros/cons: Pros and Cons of Property in an IRA
We've mentioned so many hassles and drawbacks, you might be wondering at this point if there is any point to putting property in an IRA. Historically, real estate has been a good long-term investment as property values rise over time, and long-term appreciation goes hand-in-hand with the long-term investment horizon of a retirement account. In the short term, any income the property generates is tax-sheltered within the IRA. Finally, as a hard asset, real estate helps diversify a portfolio otherwise invested in equities and other securities—not the worst idea in the world.
Pros
• Real estate helps diversify a portfolio, often moving counter to financial markets.
• Real estate has historically appreciated over time, ideal for an IRA's long-term investment horizon.
• Real estate can provide a steady income stream from rents, and any rental income you collect grows tax-free within the IRA.
• You can buy, sell, flip, and accumulate properties.
Cons
• You need to set up a self-directed IRA with a custodian.
• You can’t claim deductions for property taxes, mortgage interest, depreciation, and other property-related expenses.
• All expenses, repairs, and maintenance costs must be paid with IRA funds, and you must pay others to do them and manage the property.
• You and your relatives can’t live in or run a business out of the property.
Check on the internet and you can easily find the laws about IRA investments in real estate!
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I have to disagree with your pro's.
- real estate only diversifies your IRA portfolio, but you can diversify your entire portfolio by buying real estate outside of your IRA.
- real estate appreciates over time but not nearly as much as stocks.
- real estate within an IRA provides no spendable income stream because you can't spend it, and the income does not grow tax free within a traditional IRA. The income and earnings will be taxed as ordinary income when you withdraw it from the IRA.
- you don't need to use an IRA to buy and flip real estate. And, if you lose money on an IRA investment, you cannot offset the loss on your taxes.