I've read a Roth IRA Real Estate article but would like a little more clarification.

From my understanding, you can invest the full amount of the Roth IRA into purchasing a home (I don't mean first-time home buyer exemption) for investment purposes. Hypothetically, if I have $50,000 in my Roth and would like to purchase a $100,000 property. I use $50,000 from my Roth and I supply the other $50,000 via a loan or non-IRA account. If I sell the house for $200,000 could I then move $100,000 back into another Roth account tax free? My reasoning here is because 50% of the property was purchased with my Roth money and therefore 50% of the money I made during the sale should be tax free.

I've been using my Roth to buy mutual funds/stocks for a number of years but I'm a little confused regarding Roth's and real estate. I will of course consult an accountant before I go through with any of this but would just like other FWFers input on this. Thanks!

I'm thinking that you should check with one or more of the following places~

http://www.trustetc.com/

http://www.theentrustgroup.com/

http://www.mtrustcompany.com/default.asp

also remember EVERY PROPERTY EXPENSE must also be paid from the IRA. Any repairs, mortgage, taxes, insurance etc. If the property sits vacant, you better have funds in the IRA to pay the bills. Whatever you do, dont put all your IRA money into the property.

Borrowing to financepart of the property bc the price exceeds your IRA balance makes it much more complicated.

Very good topic - linked to FW Finance IRA FAQ.

xerty said:http://www.fiserviss.com/fiserviss/home.html

Despite recently raising some of their fees, they offer fairly affordable self-directed IRAs (not just for Real Estate).

Do you know any other reliable companies for self-directed IRA LLC?

LH2004 said:Jobowoo said:From my understanding, you can invest the full amount of the Roth IRA into purchasing a home (I don't mean first-time home buyer exemption) for investment purposes.Yes. This means the IRA owns the property, not you.
Hypothetically, if I have $50,000 in my Roth and would like to purchase a $100,000 property. I use $50,000 from my Roth and I supply the other $50,000 via a loan or non-IRA account.Whoa, stop right there. Your IRA can borrow the other $50,000 on its own credit (mortgage or otherwise), but you can't co-invest alongside it (with your money or money you personally borrow).

If the IRA does borrow money, then its profit is going to be taxable, and it's going to have to file a tax return, which isn't fun when you have the option of just holding ordinary investments purely tax-free.
If I sell the house for $200,000 could I then move $100,000 back into another Roth account tax free? My reasoning here is because 50% of the property was purchased with my Roth money and therefore 50% of the money I made during the sale should be tax free.You will not be moving anything out of your IRA. The IRA is going to own the property (or some interest in the property along with other investors that will not include you), just like you don't "move" the proceeds from selling stocks owned by your IRA.

If its a Roth IRA, and you have $20k in it and your Roth IRA wants to buy property worth $100k using $20k of its money as a downpayment and the other $80k as a loan (norecourse debt). Then from what I understand, your roth ira has to pay income taxes on 80% of the money it earns from that property since 80% of the money used to buy that property is borrowed...that tax is calld UBIT. However, since the ROTH IRA does own the entire property, if you sell it for $200k the following year, after the $80k loan is paid off (let's say it was interest-only) then the entire $120k goes into the Roth IRA, correct? Or would you then have to pay cap gains tax on 80% of the profit and then whatever is left stays in the roth ira?

Like someone said earlier, it does get complicated when a roth ira buys property with borrowed funds, but I think it is very beneficial tax wise (you don't have to do 1031 exchanges and you can withdraw it all when you retire tax free).

and what do you mean by this:
"If the IRA does borrow money, then its profit is going to be taxable, and it's going to have to file a tax return, which isn't fun when you have the option of just holding ordinary investments purely tax-free."

if you are indeed talking about the SALE of the property and not just income produced from the property, then it seems that according to that statement, the answer to my question would be that 80% of the $100k profit ($200k-$100k=$100k) or $80k would be taxable and whatever is leftover would go into the Roth IRA instead of the full profit and initial roth ira investment staying in the Roth IRA tax free after the sale, right?

And if I understand you correctly, by saying that "it is not fun compared to holding ordinary investments purely tax-free" you are saying that somebody could do the same thing in a REIT (you invest $20k, they take your $20k as downpayment to buy something worth $100k and later sell it for $200k and pay you a $120k dividend after paying off hte loan)....and that in that case, you don't have to pay taxes on 80% of the profit because the entire profit/dividend came from a REIT?

Thanks OP for the thread. I heard you could withdraw $10K for your first home purchase, but I'd never heard of using a Roth to purchase real estate for investment before.

Psycho41 said:So if you live in the house that is owned by your IRA, can you pay yourself rent to the IRA tax-free?No. Any property purchases with an IRA has to be completely independent of any personal involvement. You cannot even collect the rent or personally do repairs for any investment property owned by your IRA.

CaptainAlias said:Thanks OP for the thread. I heard you could withdraw $10K for your first home purchase, but I'd never heard of using a Roth to purchase real estate for investment before.

Yes, you can do that. Also, don't forget that with a ROTH IRA (doesn't work with Traditional), you can withdraw your principal at any time without penalties. Not sure if you can put it back in. Anyone know if you can?

cafmeyer said:Jobowoo said:CaptainAlias said:Thanks OP for the thread. I heard you could withdraw $10K for your first home purchase, but I'd never heard of using a Roth to purchase real estate for investment before.

Yes, you can do that. Also, don't forget that with a ROTH IRA (doesn't work with Traditional), you can withdraw your principal at any time without penalties. Not sure if you can put it back in. Anyone know if you can?

Not really. You only have a short time period something like 60 days to replace your withdrawn funds. I believe you are asking if you can put the money back sometime in the indefinite future and the answer is "no".

True for most people, but, correct me if I'm wrong, there are exceptions for our soldiers who enrolled after the 9/11 attacks, as well as Katrina victims (I just finished doing my taxes ).