self directing from IRA

[Norberto Figueroa]

Was wondering if tapping into my IRA would be a bad thing for real estate. Do I have to roll over to my 401k and borrow? Am I allowed to do it with a traditional IRA.? Any input would help. thanks.

[Doreen Chaisson]

You cannot borrow from your IRA to make a RE investment. You can either open a Self-Directed IRA, transfer funds from your current IRA to the SD IRA, and then purchase RE with your IRA funds. The home would be owned by the IRA, all income goes to the IRA, all expenses, property taxes, etc, are paid by the IRA.

You could take a distribution from your IRA - that would be a taxable event if it's a traditional IRA. If you're under 59 1/2, you'd also be subject to an early distribution penalty. The money is then yours personally to invest however you want.

Your 401(k)may have provisions for taking a loan - in that case, the money is distributed to you personally, and you would then be making a personal investment. You'd have a loan repayment schedule to pay your 401(k) back.