Should You Invest Your IRA in Real Estate?

By: Maurice Stouse

IRAs – Individual Retirement Accounts, continue to be one of the keys Americans have to save for and invest in their retirement. For many years the investments available included savings accounts, CDs, annuities and mutual funds. In time, many investment firms made “self directed” accounts available where investors could put their IRAs in stocks and bonds as well.  These accounts also allowed for the purchase and sale of gold and silver, and in real estate.

Assets can be classified three ways: personal, financial and real. Personal assets include jewelry, automobiles, artwork and other collectibles. Financial assets include stocks, bonds, mutual funds, annuities and the like. Real assets include homes, raw land, second homes, rental houses and other similar real assets.

Real estate offers IRA investors the opportunity to diversify their holdings to earn income and potential capital appreciation from a property. In order to accomplish this, the investor needs to find a firm that can act as the trustee and custodian for their IRA. This is what facilitates the investment in real estate. Most of these firms will charge annual fees to administer and custody the real estate assets.

Investors should seek the advice of a tax professional before committing to real estate as an option for their IRA. Investors cannot transfer current real estate owned in to an IRA. The property cannot be lived in by the owner. Expenses, upkeep and taxes have to come from the IRA. In other words they cannot be paid separately. So rental properties, while an investment, cannot provide any other benefits (e.g. you can’t vacation in a rental property that you “own” in your IRA). The same can be said for an office building; you could not rent space in it to yourself.  Liquidity is another consideration. Real estate is considered to be somewhat less liquid than financial assets.

There are ways to invest in real assets through financial assets by utilizing mutual funds that invest in to real estate holding companies.  Most of these companies hold commercial real estate, like buildings and warehouses. Investors could also participate in real estate through funds that invest in home construction or building construction firms.  There are income producing funds, real estate investment trust or REITs, that offer the ability to indirectly invest in real estate and earn income from the portfolio.

To learn more, talk to a Raymond James Financial Advisor today about investment options for your IRA in today’s markets.

Maurice Stouse is a Financial Advisor with Raymond James and he resides in Grayton Beach.  His office is located at Raymond & Associates, Inc., 34851 Emerald Coast Parkway, Suite 200, Destin, FL 32451. Raymond James advisors do not offer tax advice. Please see your tax professionals. Raymond James & Associates, member New York Stock Exchange/SIPC. Phone 850.460.1995. Email: Maurice.stouse@raymondjames.com

Views expressed are the current opinion of the author and are subject to change without notice. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts will occur. Investing always involves risks and you may incur a profit or a loss. No investment strategy can guarantee success.

Investors should consider the investment objectives, risks, and charges and expenses of mutual funds and read carefully before investing. The prospectus contains this and other information about this investment.

The prospectus is available from Maurice Stouse and should be read carefully before investing.

REITs are financial vehicles that pool investors’ capital to purchase or finance real estate. REITs involve risks such as refinancing, economic conditions in the real estate industry, changes in property values and dependency on real estate management