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Brian, an active duty member of the United States Army for over 15 years, and his wife bought a house near the army base where he was first commissioned. For a better part of a decade, Brian’s home alternated as a rental and a residence between deployments.
“It worked out well,” he says. “It was a home and an investment all at the same time, which was great.”
This was prior to opening a self-directed IRA. Per IRS rules, you cannot personally use or live in an asset held in your IRA.
Searching for Real Estate Investment Opportunities
After selling the home when he was deployed overseas, the experience stirred a curiosity in Brian that continues today. “I was kind of bit by the real estate bug and never really let it go,” he recalls. “Even overseas, I kept looking for properties and things to invest in.”
Upon returning to the United States, Brian wanted to get back into real estate investing, but faced challenges many investors encounter.
After purchasing a new home for his family (not with his IRA) and working full-time, he felt he didn’t have the capital nor the time needed to invest in real estate.
Despite the limitations, curiosity and determination continued to drive Brian.
Turning to Retirement Account for Investment Funding
To this point, Brian’s experience in real estate was solely with his personal funds. He didn’t yet know it was possible to use retirement accounts to invest in real property.
He previously focused on stock and mutual fund investments with his Roth IRA until he learned about self-directed IRAs and the ability to invest beyond traditional investments.
Once Brian discovered a self-directed IRA could invest in real estate, he realized the investment capital he was searching for could be found in his Roth IRA.
“I learned that when the government created retirement accounts, it created them so you could invest in almost anything – with a few exceptions,” he recalls of his discovery.
In fact, self-directed IRAs and alternative investments, such as real estate, have been permitted by the IRS since the IRA was established in 1974.
With his newfound knowledge, Brian decided to move forward. He transferred a portion of his Roth IRA to a self-directed Roth IRA at Equity Trust, while maintaining traditional stocks and bonds in the previous account at another financial institution.