Arn Cenedella

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Use retirement funds to purchase investment real estate

Many believe the local real estate market is close to hitting bottom.

Some will say the bottom has been reached on the San Francisco Peninsula as close to 50% of all sales now involve multiple offers.

If one believes that this might be a good time to invest in real estate, one option to consider is to use retirement funds in your IRA to purchase investment real estate.

Just like any other IRA that invests in stocks, bonds, or mutual funds; any income or gain is tax-deferred until withdrawal.

With a Roth IRA, since taxes are paid on the funds prior to  investment, any income, gain, or future withdrawal is tax-free.

Like most rules involving the IRA, there are complexities that should be reviewed by your CPA or attorney prior to entering into a decision to use retirement funds to purchase investment real estate.

That being said, if you wish to consider making real estate investments, you should work with a broker who understands the local market and has a working knowledge of the process and potential pitfalls of using retirement funds to invest in real estate.

Click below for more information.

Intro to Real Estate Investment with IRA funds

Additional opportunity to use Retirement Funds to buy real estate

I have written on several occasions about the ability to use retirement funds to purchase real estate.

There is a window of opportunity to convert IRA funds into Roth IRA funds and spread the tax impact out over two years.

As you probably know,  for “regular” IRAs, before-tax funds are placed in an IRA where it grows tax free until the funds are withdrawn and taxed at withdrawal.  In a Roth IRA, “after” tax funds are placed in a Roth IRA and they grow tax free and are TAX-FREE upon withdrawal.

The general theory on IRAs is to put money in and then withdraw after retirement when theorectically your tax bracket will be lower. Of course, with all our government borrowing and defecit spending, who knows tax rates may be higher 10 to 20 years from now than they are today.

Currently, most individuals due to a new law are able to convert IRA funds to ROTH IRA funds and pay the tax due on said conversion over a 2 year period.

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