Cash out IRA to purchase rental property | TigerDroppings.com
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aldawg2323
LSU Fan
Lafayette
Member since Jan 2010
259 posts

Cash out IRA to purchase rental property

Would anyone do this? I have about 15k in IRAs/401ks. I need about that much more to make a down payment on a 4 unit rental. Seller asking 137k (i think it could be had for ~120K), rental income ~1,600/month.

I think I know the answer but would appreciate your thoughts.


I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
34059 posts

re: Cash out IRA to purchase rental property
I would do it but I'm a real estate whore


Janky
LSU Fan
Team Primo
Member since Jun 2011
10928 posts

re: Cash out IRA to purchase rental property
You could buy the real estate inside the Ira and not have to liquidate it.


Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
121336 posts

re: Cash out IRA to purchase rental property
quote:

You could buy the real estate inside the Ira and not have to liquidate it.


Right

You can use an IRA to buy rental property

I think there are some rules like you might have to have it managed by a 3rd party

You don't have to do a cash distribution


Janky
LSU Fan
Team Primo
Member since Jun 2011
10928 posts

re: Cash out IRA to purchase rental property
Yes, it has to be a self directed Ira. There are a few banks that offer this.


Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
121336 posts

re: Cash out IRA to purchase rental property
I'm assuming any brokerage account IRA like an etrade account would be considered self directed?


Janky
LSU Fan
Team Primo
Member since Jun 2011
10928 posts

re: Cash out IRA to purchase rental property
No. I have only seen it done through a bank and only a few banks offer it. I am almost 100% sure a regular brokerage IRA will not be able to do it.


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I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
34059 posts

re: Cash out IRA to purchase rental property
I would steer clear of using the suggested option. One mistake with paperwork and the IRS owns your quadplex . Not kidding.....
This post was edited on 2/10 at 9:09 am


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jso0003
Auburn Fan
Birmingham/Atlanta
Member since Jun 2009
5168 posts

re: Cash out IRA to purchase rental property
Yea I believe you would need to roll these over into a very specified kind of self directed IRA in order to buy property within it. Definitely consult with a professional on that.


ItNeverRains
LSU Fan
Franklin, TN
Member since Oct 2007
7611 posts

re: Cash out IRA to purchase rental property
You can do it with an HSA also I believe


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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
31949 posts
Online

re: Cash out IRA to purchase rental property
quote:

You could buy the real estate inside the Ira and not have to liquidate it.


Correct. With a self-directed IRA you can buy basically whatever you want (real estate, art, a stamp collection, etc.)

But I don't know the legal details about how to set this up so all I can advise here is to consult an expert.


11thACR
Appalachian St. Fan
Atlanta, Georgia
Member since Mar 2012
1114 posts

re: Cash out IRA to purchase rental property
This can be done but very carefully and possible higer fees on IRA that would allow real estate investments of this kind.

Can't you borrow the money in any, and I mean any other way. Have you got experience in rental property ? What makes this deal over the top positive ?


aldawg2323
LSU Fan
Lafayette
Member since Jan 2010
259 posts

re: Cash out IRA to purchase rental property
I could bring in a 2nd party to split it with, but would like to avoid that.

The bottom line is that I am going to have to come up with ~25K cash. I have ~10k to put down and ~15k in these retirement accounts. Would a seperate mortgage for the down payment be possible here? The payments on the mortgage are easy for me to handle, I just dont have the cash.

I just purchased my first one last fall and happily plopped down 20% which drained my cash pretty good. So I do have landlord experience. It all hinges on quality of tenant. It is near the one I recently purchased and is in much better shape. Its a good buy, even at the listed price IMO.
This post was edited on 2/10 at 5:53 pm


I B Freeman
Member since Oct 2009
8309 posts

re: Cash out IRA to purchase rental property
You have to use a bank with trust services or a trust company like this company LINK I know nothing about.


tigerrocket
LSU Fan
Member since Aug 2008
102 posts

re: Cash out IRA to purchase rental property
There are custodians who allow you to purchase real estate in an IRA, but I believe you also have to pay all the expenses out of the IRA account. If you don't have the cash in the IRA, you must contribute to the IRA. If you contribute to the IRA, you better be eligible. All rent payments are made to the IRA account as well. I researched this a while, back and thought it was not a good option for me. The best use would be if you are paying cash for the property, have a hefty IRA balance, and are very good at following IRS rules.


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