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6 surprising IRA investment options

Retirement » 6 Surprising IRA Investment Options

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Buying real estate directly with your IRA is tricky. You'll need enough money in your IRA to cover all expenses -- maintenance, taxes, etc. There's no commingling of non-IRA funds with your IRA investment. Many IRA administrators won't handle real estate. Finding lenders to help with the purchase has historically been challenging, because any mortgage must be nonrecourse: That is, you and your IRA are off-limits to the lender.

Another important caveat: Buying property for personal use is prohibited with a traditional IRA. There's an exception. You may withdraw $10,000 from an IRA for a home purchase if you qualify as a first-time homebuyer. You'll owe tax on the income, but not the penalty.

But in general, you lose many tax advantages of real estate investing by using an IRA. You can't deduct losses and unlike with, say, stocks, it's tough to cut your losses quickly if conditions turn sour.

Green is a fan of real estate for an IRA, but suggests a simpler route. "Do it through a REIT," she says. REIT is the acronym for real estate investment trust. REITs invest in real estate and mortgages. They're securities that trade like stocks. "They're acceptable and they're income-producing," Green says.


 

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