Quote:
Originally Posted by BrianL99
Buying real estate with an IRA is a can of worms that most folks aren't equipped to handle, financially or otherwise. Anyone who suggests it's "easy" or that it's a panacea for taxes, doesn't understand it very well.
You do "avoid capital gains", but end up paying taxes as if it were regular earned income when you take distributions. Save now, pay later.
Here's a reasonable explanation of the problems, pitfalls and difficulties of buying rental property with an IRA.
Using Your IRA to Buy Real Estate |
Doesn't really sound any different from any other investment in the IRA from a tax point of view. . always taxed at the income rate at withdrawal and no capital gains are paid out when selling the property, standard IRA rules. The biggest difference is that the RE investment is an illiquid investment, and can have very uncertain cash flows.
The cash flow and the financing appears to be the issue with a young IRA, as there isn't a lot of cash accumulated to be able to be successful. The key is that all cash in and out comes from the IRA, which is the cash flow requirement/ non cash invested for unexpected maintenance such as a new roof.
Again, just requires a good financial lawyer and CPA to make it work within the constraints, which are just added costs. . now its significantly easier to get real estate diversification with cash flow from a REIT, so i am assuming that the success or failure comes down to your ability as a property purchase negotiator and tenant/property manager to make it work financially, as well as a significantly sizable IRA with which to start. .