Third Example of Real Estate Investments That Can Be Made Using IRA Funds
Steve wants to have his IRA purchase a $400,000 rental property with a 50% down payment. This is possible, but without the pooling of other people’s IRAs, the IRA will be subject to tax (UDFI or UBIT) on any income and/or capital gains attributable to the leveraged portion of the investment. The beautiful alternative to borrowing would be to have the IRA purchase the property with other IRA parties, all of whom pay cash. When this is done, there is no UDFI and there are no issues associated with the financing.
This is why we suggest that you use a third party administrator such as Lighthouse Financial, who will find the investments, rehab the properties if necessary, rent or sell them, do maintenance, and issue tax deferred /free growth back to your retirement account.
