Individual retirement accounts, or IRAs, are designed to help support your retirement plans. While most IRA invested funds are tied to stock and bond holdings, funds can include real estate investment properties. Existing investment properties you own cannot be directly converted into an IRA. You can, however, sell existing investment properties and use the funds to invest in new IRA accounts. Funds can be placed into a traditional IRA that invests in stocks, bonds, mutual funds or real estate investment trusts, known as REITs. You can also use the funds to establish a self-directed IRA that purchases investment property on your behalf to include in your IRA portfolio.
Step 1
Sell your current investment property. Try to obtain the best market price for the property to avoid losing any value you have accumulated. Consider consulting a financial adviser, tax specialist or lawyer to minimize the tax impact of the sale.
Step 2
Determine the type of IRA that suits your long-term financial objectives and investment preferences. Many financial services firms offer standard IRAs that can include stock exchange-traded funds that have real estate holdings. Self-directed IRAs are more flexible than traditional IRAs and allow for direct purchase of investment holdings by an IRA custodian.
Step 3
Open a new IRA account. You can open a standard IRA at a bank, brokerage firm or other financial services firm. Self-directed IRAs that accept real estate investment property are generally offered by firms that specialize in these more complex investment vehicles. Consider national custodial companies. Ensure the IRA management firm you select provides investment options that suit your investment style and is a financially stable company.
Step 4
Transfer money obtained from the sale of your investment property to your new IRA. You can transfer all or part of the funds, and you can roll over investments in other IRAs to your new IRA account.
Step 5
Select IRA investments. A standard IRA may offer a selection of mutual funds, individual stocks and bond holdings as investment options. Your self-directed IRA can include a mixture of stocks, bonds, mutual funds and real estate. Direct your custodian to purchase real estate from your IRA funds through a signed direction letter. All rents and expenses are funneled through the IRA account.
Tips and Warnings
- You cannot rent any investment properties held in an IRA to yourself or any member of your family.
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