Buying a house with a self directed IRA.

Question

I am looking into buying a house for my father with his IRA. There is a "safe harbor" IRA which would enable us to use his IRA funds to purchase property that he can live in without major tax consequences. Just wondering if anyone knows the drawbacks of doing this? It seems like a great idea to me, but many people seem to be negative about it without clear reasons.

Answer 1

Well, one thing is that you have to now watch your own money.  No longer just passing it off to a money manager.

You have to be saavy with it or lose it.

Now, if my IRA had more than a couple grand in it (hey i'm only in my mid 20's =)) I would pull it to a self directed.  My background through education, work experience, and interests would pull me towards using a self directed.

I think most people that have had negative experiences with Self directeds was because they weren't educated about it enough.  They didn't have a plan and lost money becasue of it.

Answer 2

A self directed IRA does not allow the owner to personally use the real estate.

Investment property, such as a rental does qualify.