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Using IRA to buy a house

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We may have a very interesting opportunity to buy a house out of foreclosure--without going into all the gory details, my wife has lived there rent free for four years, and the day of reckoning is coming soon--maybe as early as next week. We will discover whether the bank will continue to extend the current contract for another six months since they have been waiting for prices to improve and they have, so they may want to sell this time. They have given us the price and it is about 10% below the market, so we are thinking about it even though we will be mostly in NJ for the next four years as my wife gets her green card and then citizenship.

 

So here is the question: have any of you used your IRA's to buy real estate in CR?

 

The IRA process is very simple, and yes there are restrictions on the property like not being able to live in it while the IRA owns it, and if we rent it which of course we would for 4 - 5 years, all the rental proceeds flow back to the IRA and are not taxed until withdrawn sometime in the future.

 

What I am interested in is any personal knowledge you have about any nuances here in CR--it is a piece of cake in the US.

 

We obviously will wait until we see what the bank offers, and living there free for another six months is certainly our first choice, but at the right price, other options start to make sense.

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Hey Rick,

 

I think you really should contact ARCR and get Ryan Piercy's their Legal Department's take on this opportunity rather than take our layperson type opinions.

 

They may even have already had another member involved in a similar situation.

 

Fingers X-ed for you.

 

Good Luck,

 

Paul M.

==

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Hi Rick: My parents as well as 4 of my personal clients have purchased using an IRA. Technically you are not supposed to 'live' in the house, but I know many people who do. Of course, that is up to you, but I wonder how the IRS would know if you live there as a vacation home or not? Either way, it can be done. It's paperwork intensive, but it's a great way to use your own funds to invest in the USA and Costa Rica. If you want to send me a private message, I can email you a 'Guide to Buying Real Estate in your IRA' by Pensco Trust that i have saved in my computer. Most of my clients have used Pensco to buy in their IRA. This may answer many of your questions. Regards, Becky

Edited by mediatica

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I recently discussed with my financial advisor [in TIAA-CREF] using my IRA to buy real estate in C.R.; he agreed that it can be done with lots of paperwork, but posed three potential problems:

1. if you transfer $$$ out of your IRA to a place like Pensco, the fees involved may be high or unknown, and at least should be agreed upon before proceeding;

2. you will lose liquidity of IRA funds [depending on how much goes to real estate and how much is left];

3. you should insure that when you reach 70-1/2, there is enough left for minimum distribution requirements [at least in the U.S.].

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Thanks to everyone who replied here and privately. We'll see what the bank offers officially over the next week or two, and if we decide to do it, we appreciate all your input--thanks for ocean's reminder that we need to start minimum distributions at 70 1/2 which isn't just around the corner, bur also isn't all that far away either.

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