Are you familiar with the concept of IRA real estate investing? While it's not widely practiced, or even well known about for that matter, using is IRAs to defer taxes on real estate investments is perfectly allowable according to IRS Code Section 408. Read on for the lowdown on IRA real estate investing...

Why IRA Real Estate Investing?

Well, first and foremost, IRA real estate investing is a wonderful option because it is tax deferred, just like any other investment instruments you can hold within an IRA. Like any IRA, contributions to the account (up to a certain amount each year) are tax deductable for that year's income taxes. Plus, the investment grows tax free within the account until it is withdrawn upon the defined retirement age. IRA real estate investing makes sense because of the potential to invest tax-deducted dollars towards a solid investment that can snowball faster than ever because of the tax free growth.

Where Can I Set Up An IRA Real Estate Investing Account?

Setting up an IRA real estate investing account is a little bit more complicated than setting up a typical IRA. Because the custodian of the account will actually retain the title to the real estate held within, the typical IRA custodians, such as local banks and brokerage firms, tend to shy away from IRA real estate investing accounts.

But don't worry - there are plenty of options when it comes to setting up an IRA real estate investing account. A good place to start is by looking for a custodian that allows self-directed investments. "Self-directed" means that you choose the investments held within, and real estate is often one of those options.

What Is The Caveat Of IRA Real Estate Investing?

The tactic of IRA real estate investing probably won't work for the beginner investor. The reason is simply that it takes time to build up significant funds within an IRA; you cannot just put them there all at once unless completing a qualified rollover or similar allowable transfer. Other pitfalls include the fact that you cannot live in your IRA-held property and the fact that you'll have to pay all income, such as rent, directly into the IRA real estate investing account.

While it's not all that common, you should know that IRA real estate investing is entirely possible and the benefits can be excellent. But do use caution because it can be tricky. If IRA real estate investing is something that you are interested in, be sure to seek the advice of an experienced and competent professional to make sure all of the details are handled correctly.

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