Is It Really Legal to Invest My IRA Funds into Real Estate?



The Federal law that established IRA's is very specific in the types of investments you cannot make with your IRA funds. We've copied several sections of the Code below that we found relating to questions people have had in this program. You can read the entire Code establishing IRA's if you want. A good site is Cornell Law School website 26USC408

(The applicable sections are highlighted in red)

What you CANNOT invest IRA Funds into:

§ 408. Individual retirement accounts

(a) Individual retirement account

For purposes of this section, the term “individual retirement account” means a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries, but only if the written governing instrument creating the trust meets the following requirements:
(1) Except in the case of a rollover contribution described in subsection (d)(3) in [1] section 402 (c), 403 (a)(4), 403 (b)(8), or 457 (e)(16), no contribution will be accepted unless it is in cash, and contributions will not be accepted for the taxable year on behalf of any individual in excess of the amount in effect for such taxable year under section 219 (b)(1)(A).
(2) The trustee is a bank (as defined in subsection (n)) or such other person who demonstrates to the satisfaction of the Secretary that the manner in which such other person will administer the trust will be consistent with the requirements of this section.
(3) No part of the trust funds will be invested in life insurance contracts.


(m) Investment in collectibles treated as distributions

(2) Collectible defined
For purposes of this subsection, the term “collectible” means—
(A) any work of art,
(B) any rug or antique,
(C) any metal or gem,
(D) any stamp or coin,
(E) any alcoholic beverage, or
(F) any other tangible personal property specified by the Secretary for purposes of this subsection.


That's it. You cannot invest IRA funds into an insurance policy, nor can you invest them into collectibles. The only other restriction relates to Disqualified Persons.

You can establish as many IRA's as you want:

(2) Special rules for applying section 72

For purposes of applying section 72 to any amount described in paragraph (1)—
(A) all individual retirement plans shall be treated as 1 contract,
(B) all distributions during any taxable year shall be treated as 1 distribution, and
(C) the value of the contract, income on the contract, and investment in the contract shall be computed as of the close of the calendar year in which the taxable year begins.


You can roll over a part of your existing IRA into a Self-Directed IRA:

(D) Partial rollovers permitted

(i) In general If any amount paid or distributed out of an individual retirement account or individual retirement annuity would meet the requirements of subparagraph (A) but for the fact that the entire amount was not paid into an eligible plan as required by clause (i) or (ii) of subparagraph (A), such amount shall be treated as meeting the requirements of subparagraph (A) to the extent it is paid into an eligible plan referred to in such clause not later than the 60th day referred to in such clause.


This section is intended to be a brief overview of the applicable sections of the IRS Code that may answer questions you may have. It is not intended to be comprehensive and we are not CPA's. If there is any part of the laws relating to IRA's that you do not understand, contact your CPA or we can direct you to a partner who can answer any questions you have.

Check out our Frequently Asked Questions page FAQ or Email me anytime.