If you want to buy real estate using your IRA, you will need to open a self-directed IRA. Although banks, insurance companies and brokerages will help you open a self-directed IRA, they generally limit your investment options to the products they sell. To buy real estate you will have to find an independent administrator to serve as trustee or custodian.

Once you find an administrator, they will walk you through the steps needed to set up a self-directed IRA. You can fund your IRA account with new money, or you could transfer some or all of your assets from a traditional IRA.
An IRA custodian holds your assets and performs all IRA functions. IRA custodians charge from $200 a year in fees just to set up your account and hold your money. There may be additional charges every time you want to authorize a check, for example, to pay a repairman. Or you can hire an IRA adviser who’ll set you your self-directed IRA through a custodian, offer advice and attorney consultations and give you more freedom to write checks from your IRA.

Purchasing the property outright is the simplest way but your IRA can invest in real estate through a down payment and subsequent loan as long as the loan is not guaranteed by the IRA owner or any of the “disqualified persons”, and there is enough liquidity to support the mortgage and expenses.

Stay tuned for more on this topic.