Mortgage with IRA?

Quick question: I know your IRA can own real estate, but I’m assuming that is only with a cash deal.

Let’s say your IRA has $50,000 but you want to buy a rental property for $150,000 and you need to take out a mortgage. Is there a way to do this, or is buying real estate with your IRA limited to cash only?


you could borrow the money with a non-recourse loan,a loan that the bank can’t go after you personally if there is a problem, that is the only problem I know of in getting a loan with a property you are buying in an IRA,

because of that stipulation (made by the IRS) you will have to pay more down than a ‘regular’ loan,but with if your putting 30% down I would think a banker would be open to talking to you, especially if your buying the property at below market price (so actually you have more than 30% equity)

Wagner (the CPA that frequents these boards) could give you more detailed information

It’s difficult to own property with a mortgage inside an IRA because of the personal guarantee issue. If anything happens and suddenly you need to put money into the deal, you are limited to whatever you can legally put into the IRA. Otherwise, you have busted your IRA.

Then there is the hassle cost. You can’t just write a check for the mortgage, insurance, taxes, whatever. The IRA administrator has to do that, and the fees are not inexpensive for that level of service.

As a borrower, a hard money loan with an IRA is very tough because of the non-recourse issue. Most hard money lenders are going to seek recourse on their loans, but if you can find one that doesn’t have that requirement using the structure you propose could work.

The next issue you’ll run into is LTV. I would imagine if you found a hard money lender with non-recourse his or her LTV will surely be lower than normal, because it would be perceived as a more risky loan, since he couldn’t seek recourse past the property itself. That would mean you’d have to put more cash in.

Then once the IRA does own the property you can’t benefit from the sale or rental of that property from a cash flow perspective. All that money has to go back into the IRA. That’s not so bad if you’re flush and want to grow your IRA, but if you’re looking for cash flow, there are better ways to get a mortgage.

IRA owners should think about the value of their accounts more on an after-tax basis and less on a pre-tax basis. A million dollar IRA is, at least for those in the 35% tax bracket, really a $650,000 IRA on an after-tax basis, said Natalie Choate, an attorney with Nutter McClennen & Fish, author of “Life and Death Planning for Retirement Benefits,” and a nationally known speaker and writer on IRAs.