IRAs have been around since 1974, when Congress offered tax benefits for these personal retirement accounts and from the beginning, sophisticated financial advisers have been using them to buy real estate for their wealthy clientele.

Actually, you can invest in just about anything– foreign as well as domestic real estate, boats, investment companies and start-ups– as long as the assets are not used by the individual investors or their immediate family.

Although they represent a minute percentage of the total IRA market, business is booming.

" About 75 percent of Baby Boomer retirees roll their 401( k) retirement funds into IRA accounts, a market that’s growing by$2 billion every year.

The government is even providing more security for these accounts: IRA accounts now carry FDIC insurance for up to$250,000.

Real estate lenders have come around as well.

Two years ago, banks wouldn’t finance loans for properties purchased through IRAs, so when people wanted to buy real estate with their IRAs they needed to come up with 100 percent cash.

( Of course, this worked only for the very affluent.) Now Kansas-based North American Savings Bank offers IRA loans for real estate in 50 states.

One of the differences between self-directed securities is that there’s no industry doing it for you," said Vince McCord, a CFO from San Jose who has invested in three real estate partnerships with his IRA account.

Legally, the IRA fund( not its owner) not only buys the real estate but administers the property, so funds must be available in the IRA for maintenance and other real estate expenses.

If IRA-funded real estate is at risk of foreclosure, the owner of the IRA can make a temporary loan, but he or she can’t simply pay off the mortgage, without a massive penalty. (Read More)

Source: SFGate: Surreal Estate

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