Converting Assets in Existing Roth IRA to cash to purchase real estate
I’m new here, so I apologize if this is something that may have been asked/answered in the past. I have a Roth IRA with a couple hundred thousand dollars across several mutual funds. Is it possible/allowed to convert these to cash inside the IRA and then use that cash to purchase real estate? Thanks in advance for the help and advice.
Permalink Submitted by Alan - IRA critic on Tue, 2020-11-24 16:11
Yes, you would have to transfer the Roth IRA to a self directed IRA custodian, ideally one that specializes in real estate assets and could provide assistance in avoiding prohibited transactions. You would then purchase the property from a disintered third party with the Roth funds, and your Roth IRA would hold title. You or most immediate family members could not use the property for any personal purposes or occupy it. You would also need enough cash left over in the Roth to pay property taxes, insurance and repairs needed by the property. You would also forfeit the normal tax benefits of holding real estate in taxable accounts such as depreciation and LT cap gain rates when you sell the property.