Again, I want to emphasize that I am not a financial planner, accountant, CPA or lawyer, however, I have had experience with people who have purchased real estate as part of their retirement or financial plan.
These people come to me because they have been referred. I treat them as I would any other client who is looking for "investment" property.
Some people are under the mistaken assumption that the only permitted investments include stocks, bonds, mutual funds and REITs is incorrect in a self-directed IRA. The only things which are not permitted are those prohibited in Section 4975 of the IRS code, and for IRAs, collectibles. Please note that the IRS does not have an approved or non-approved list of investments.
Next, the purchase of retirement homes in IRAs and Qualified plans: the beneficial owner of such an account may direct his or her plan to purchase a home in an IRA for investment purposes. This means that a disqualified person (say the beneficial owner, his or her ascendants or descendants) may not have use or live in the home, as this would violate the prohibited transaction rules. However, when the individual is eligible to receive a distribution from the IRA or plan, the home may be distributed to the beneficial owner, at which time tax must be paid (unless it is in a Roth IRA) on the value of the home.
The self-directed plans, including IRAs and Keoghs, permit complete diversification in any assets permitted by law, which includes real property, notes and most anything else. This includes leveraged real estate, the leveraged portion being subject to unrelated business income tax.
There are about 15 major companies and hundreds of banks trust departments which administer IRAs and Keoghs where clients have held Real Estate, Notes, LPs, LLCs and many other diverse investments. All of these are regulated by an agency of the federal government. All of these companies and banks know the IRS code, and know what it says. The IRS code along with private letter rulings and prohibited transactions, and publications 560, 590, 575 and more deal with this subject in some form.
If you, or someone you know, is looking for real estate at these rock-bottom prices and low interest rates, please let me know. Or put them in touch with me, and I will make sure that they have all the information they need to make an informed decision.