First Example of Real Estate Investments That Can Be Made Using IRA Funds
Bob’s IRA has purchased a single family home from someone other than family. Bob now wishes to have the IRA sell it to his sister with a first mortgage that his IRA will hold. The purchase of a single-family home from an unrelated party is not a problem. Bobs IRA pays $300,000 cash and his IRA holds the grant deed from the sale to his IRA by the third party. Bob's IRA later sells his sister the property and takes back a first mortgage and a down payment in exchange. His IRA gives her a market rate loan for 15 years and receives a 10% down payment. Since this is a $270,000 debt owed to the IRA and not by the IRA, the IRA is not violating any regulations. Bob's IRA has a fixed income investment and is protected because it holds the trust deed in the event his sister defaults on the loan. The transaction may also have the incidental benefit of allowing Bob's sister to purchase the home more easily than she could have on the open market.
