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How to Invest in Real Estate Using Your IRA

One of the things that almost every working American depends on is being able to retire comfortably. We have visions of traveling, sipping fruity drinks poolside, playing with grandchildren, or finally starting the novel we always wanted to write. The reality is, though, that many Americans are forced to work into retirement, and almost 30% of people working in America believe that they will have to in order to be able to maintain a comfortable lifestyle after retirement.

One way that people are preparing for their retirements is to invest in real estate, but doing it in a way that doesn't cut into their income. How? By using the funds in their individual retirement accounts (IRAs).

I thought I couldn't borrow from my IRA...

You can't. Not without fees, penalties, and charges. What you can do, is take a loan with the IRA itself to finance the purchase of the property. The only way to do this is with an IRA non recourse loan.

What is a non-recourse loan?

The non recourse loan agreement works like this: the borrower puts up collateral for the loan, which is typically some sort of real property. The borrower is not held personally responsible for the loan, since the non recourse lender can only seize the collateral associated with the loan and nothing else, which is one of the biggest benefits of a non recourse mortgage loan.

What types of property can I buy with a non recourse mortgage loan?

The point of buying real estate with a mortgage loan is for it to generate income. Here are the three main types of properties that can be purchased with your IRA loan:

  • Commercial Property: This type of property typically houses businesses, offices, or retails stores.
  • Multi Unit Property: This type of property refers to things like multi family homes or apartment buildings.
  • Agricultural Property: This type of property can be purchased and can generate income with a lease contract. It typically supports crops or livestock.

Preparing for retirement can seem to be pretty daunting and stressful, and the longer you wait the worse it is going to get. If you already have an IRA, especially a self directed one that will allow you the freedom to make whatever investments with it you choose, buying real estate can create a lucrative little nest egg to help quash any ideas that you might have to work longer than you wanted to.


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