Most people have retirement accounts that look pretty similar. You have stocks, maybe some bonds, mutual funds, some ETF’s maybe. Would you rather be able to hold real estate in your retirement account? Well, investing in real estate with your IRA can make that possible.

There are a few ways you can use your IRA to invest in real estate. Now, let’s get this out of the way upfront, I’m not an attorney, am not giving legal advice, tax advice or any advice really. If you are going to invest in real estate with your IRA, please go get legal advice first. You don’t want to run into tax consequences for doing this improperly.

Ok, with that said, there are a few ways you can use your IRA to invest in real estate. One is to hold real estate for rental income and appreciation. Now realize that the rental income does not come in to you, but rather to the IRA. You must keep your IRA and your personal finances completely separate. This is also true of the sale of the property; proceeds go back to the IRA. Maintenance costs need to be paid by the IRA. It is basically a separate entity.

Another way you can use your self directed IRA to invest in real estate is through trust deed investing. This is where your IRA is lending money that is backed by real estate collateral. Instead of rental income, your IRA earns interest income, then when the borrower pays off the loan, the principal balance goes back to the IRA. Same concept, your IRA is a separate entity.

The third way many people are using their IRA to invest in real estate is for short term fix and flip rehabs. These people are typically either partnering or lending money short term to individuals who buy, fix and flip a property. Returns on this type of investment can range from flat interest or annual interest to participation.

For those looking for new avenues of investing their retirement funds, real estate investing is an option you may consider. Talk to your existing IRA custodian for more information. Not all custodians will allow this type of investing, so you may need to talk to multiple companies. Good luck!