Partitioning assets in a Self Directed IRA

[Tyler Dunlap]

Is it possible to open a self directed IRA but not use all of the money for real estate? I would like to tap into my IRA for cash without necessarily forfeiting my ability to buy and hold securities and mutual funds also. Can anyone shed some light on how this works? Thanks.

[Brian Eastman]

@Tyler Dunlap A self-directed IRA is simply and IRA with more investment choices. Properly configured, such a plan will allow you to invest in anything the IRS rules allow for (as opposed to just what a firm sells, which is the normal route with Wall St firms). So yes, the IRA can own property and also hold conventional assets.

Depending on portfolio size, however, you may wish to have two separate IRA plans. You do not necessarily want a large stock portfolio sitting in the same plan as real estate, as the latter can create liability exposure.

When you say "tap my IRA for cash", that is not what is happening. You are not accessing IRA funds for your own investments. The IRA is investing directly into real estate. The IRA purchases property, pays for the expenses, and receives the income in a tax-sheltered fashion. You cannot personally access the cash for your own benefit, just as you cannot access what is in your IRA that is invested in the stock market today.