A self directed Roth IRA invested in real estate could be the answer for those of you that are tired of losing money in stocks or earning less than the inflation rate for bonds and CDs. When purchasing real estate in your IRA, there are some rules that you must follow, but they are relatively simple. Here’s a look at the rules and a little advice about the housing market.

The rules for a self directed Roth IRA invested in real estate, as well as other tax-sheltered accounts, have mostly to do with self-dealing. Your account cannot buy property that is intended for your personal use, whether now or in the future. A vacation home, for example, is not allowable investment.

Parties to the transaction (buyer or seller) cannot include your custodian, your spouse, your ancestors or your lineal descendants, when purchasing real estate in your IRA. An example of a prohibited transaction would be instructing your custodian to purchase a property that is currently owned by your son. There are many other examples, but that should give you the idea.

If you are new to purchasing real estate in your IRA, you should learn all of the rules, learn all that you can about the housing market and take your time when selecting a custodian. A number of custodians do not allow these types of investments. Fees vary considerably among those that do.

About the Market

There are many success stories concerning a self directed Roth IRA invested in real estate. But, as with any other market, there have been some failures. If you’re wise, you’ll learn from the mistakes of others, instead of learning through trial and error. You will make more and avoid losses by taking your time.

If you are pressed for time, purchasing real estate in your IRA can be difficult. You need time to put together a team; a realtor, a lawyer, a trustworthy custodian, a contractor or maintenance team and an accountant are examples of the people that you will need help from.

There are already groups in place that can take care of many of those jobs for you. If you are going to try to go it a lone, let me tell you a little bit about the current market.

The earning potential for a self directed Roth IRA invested in real estate is “unlimited”, but the market currently offers “limited” opportunities. Until the state of the economy starts to improve, you might not want to buy that beach house.

If you do, you may have to wait a few years before it starts earning any rental income.

In the mean time, the account will have to pay personal property taxes and a rental manager.

The best sector for purchasing real estate in your IRA is at the lower end of the price scale.

People need affordable homes. A self directed Roth IRA invested in real estate can be highly profitable, if you make the right choices.

Selecting IRA real estate turnkey solutions can be the best investment strategy considering today’s economic environment for building your retirement wealth.