If you’re one of those who have been looking at the performance of an IRA and not happy with what you’ve seen over the past few years and considering investing in real estate, you’re not alone. Using a self-directed IRA to buy and finance real estate is an effective, simple way to acquire property. ButInvesting in Real Estate with IRA there are a few things you need to know in advance before taking the next step. Once you’re clear on what you’re allowed to do, contact the IRA custodian who can lay out the groundwork for you.

First, your IRA funds can only be used to finance an investment property and not a primary residence. There are allowances for using money to buy a first time home with an IRA but when buying real estate, it must be an investment property. Vacation homes, beach houses or secondary homes don’t qualify, either. You can occupy the property once you reach retirement age per IRA guidelines, but not until then.

Funds from your IRA and personal or business accounts can’t be comingled. That means using an IRA to buy an investment property also means using that IRA account exclusively. In addition to funds needed to acquire the real estate, IRA funds must be used for maintenance, property taxes and insurance as well.

All rental income must go back into your IRA and not into your business account. This is along the lines of making sure the IRA is used for acquisition and expenses and not comingled with other accounts. Oh, and it’s not just single family rentals that can be acquired with an IRA. Raw land, apartment buildings and mobile home parks are also eligible.

As with any retirement account, make sure you’re absolutely clear on every facet of such a transaction and consult with your financial planner and tax advisor. The IRA custodian can provide the mechanics but won’t be available to provide you with specific financial advice.