If you have an IRA, you need to invest the contributions in stocks, bonds or mutual funds, correct? Actually, this common perception is wrong. You can make far more money by actually investing in property such as homes, condos and so on.



Investing in the stock or bond market with your IRA is an in the box strategy. You can make a decent return, but is that really what you want? I doubt it. Leveraging your IRA account to buy homes and condos has much more potential.

Before we go on, I should mention this is not a wealth building strategy that involves loopholes or dubious interpretations of the tax code. The IRS readily approves of such investments.

Section 408 of the tax code states clearly you can invest IRA contribution in a variety of property. The wealthy have used this approach for a long time and more than a few now own big portfolios of commercial property, rental properties and so on through their IRAs.

To buy homes, commercial properties, rental properties and so on, you need to open a particular type of IRA. It can be a traditional or Roth version, but it must be self-directed and have a custodian. Most banks and trust companies offer them at a small cost.

This form of IRA can be held both as a traditional or Roth IRA. The structure, however, is a bit different. There is an independent custodian overseeing the account. It is required by law to make sure people don't crazy with investments. The custodian is not expensive.

After setting up your account, you can invest in property. That being said, there are some minor limitations put forth in the tax regulations by the IRS. You cannot buy, for instance, your own home, which would be self dealing.

Most people use their IRA to purchase secondary properties. The classic example is using the strategy to buy rental properties. Millions of Americans now own second homes, and the IRA strategy is a perfect way to pursue ownership. Heck, you can even buy an RV.

The actual fundamentals of the buying process are a bit convoluted. You do not actually purchase property. The custodian of the IRA will do the purchasing. The IRA then reaps the gains in rents or appreciation.

While buying property with an IRA is a good strategy, doing so with a Roth IRA is a much better one. It works the same way, but the tax benefits are tremendous. All distributions made from the Roth with be tax free. It is a nice way to build your retirement nest egg.

Using this strategy to purchase property is fairly straightforward. If you are looking to build wealth in your IRA, make sure to speak with a financial advisor familiar with this strategy.