Real estate investing and the IRA: Secret lovers?

It’s been said many times, real estate can be the best place to invest your money. Now, many who bought in the recent past during the economic decline of the real estate market may choose to disagree with me here. But brighter days are ahead of us in Central Florida. Orlando home sales are up almost 3 percent since July of 2011, and the median price of existing homes sold in July is up nearly 9 percent from this time last year per the Orlando Regional Realtor Association. In fact, Zillow released its second quarter real estate market reports on July 24, and U.S. home values showed their first annual increase nationally since 2007. And with rental rates steadily on the rise, investing in real estate can provide an immediate profit.

But did you know that you can use your IRA to invest? Did you also know that when you invest using your IRA you are not taxed on the income, which includes the capital gains tax? Now that’s a tantalizing piece of information to be sure. Here are the basics when investing in Real Estate with your IRA:

Investments only. Read: You can’t live there. Meaning no primary residences, which includes your kids, your spouse, your parents and grandparents. Basically any of your immediate family. Cousins are OK.

Fixer uppers are fine! The home you invest in can be in any shape you like. Find a steal of an REO in a highly rentable area but it needs a new roof? No problem! You can purchase investment homes from move-in ready condition to properties that need a total redo, says Abigail Othen with NuView IRA in Lake Mary.

Not in it for the long haul? That’s OK too. You can purchase a home and rent it out long term, or buy it to fix and flip. The real beauty of this here again — no tax on your profits, not even capital gains. Any profit made from the investment will flow back into the IRA, until said time you choose to request disbursement of the funds. Only when you pull the money out of the account are you taxed.

Any IRA will do. So bring your Roth, SEP Simple IRAs into consideration for your next real estate investment. You can even use a 401(k) rolled over from a previous employer or a health care savings account.

Zillow went so far as to say in their home value forecast that values will increase in two-fifths of the markets this year. Chief economist for Zillow Dr. Stan Humphries said, “…It seems clear that the country has hit a bottom in home values.” With Orlando-area inventory dropping and median price increasing, it’s never been a better time to invest with your IRA.