Yes you can invest in real estate through your IRA, SEP, pension and profit sharing plan, etc. The steps to do so are actually as easy as 1,2,3...the rules, however, can be a little more complex. Here is the "how," the "rules" will have to wait for another time.
STEP 1: Research "self-directed IRA" on the web. Not all account holders allow non-traditional assets (i.e. real estate) to be held in a qualified retirement account. Most of the big national names do not, however, google "self-directed IRA" and you will have plenty to read. Of the big boys, I am told Charles Schwab may be the only one that allows it. I am familiar with Trust Administrative Services (www.trustlynk.com) and Entrust (www.entrust.com). This is not an endorsement, just a lead :)
STEP 2: Once you have selected an administrator and feel comfortable with their program, it is a simple matter to open an account and have all or a portion of your selected retirement account at another institution rolled over to the new self-directed account.
STEP 3: With the funds in the self-directed account, you can research and select "non-traditional" investments, such as real estate, private limited partnerships, trust deeds, etc., to invest in.
The primary advantage of a real estate investment in a retirement account is that the account may be the only source of sufficient liquid funds to invest in real estate; also, income, whether ordinary or capital gains, will accrue tax deferred in the account. The tax shelter protection of depreciation, however, is lost, since the tax deferred income cannot benefit from the paper loss from depreciation. I personally have a limited partnership investment in my self directed account and I recommend that, while this may not be the right investment for everybody, it is an alternative that should be considered.
