This country is based in large part upon the ability of an individual to take advantage of real estate opportunities. Even though real estate investing has been somewhat flat over the last couple of years of recession, if we look back over history we can see that it is normally a great way for individual investors to build a future for themselves and to take care of their retirement plans. It’s certainly not true, as some people believe, that individual retirement accounts, also known as IRAs, are supposed to be reserved for relatively mundane concepts such as certificates of deposit, for example. What they do not realize is that it’s possible to invest in real estate using IRA funds through a real estate IRA.

When you use a real estate IRA, you can take advantage of some real benefits as you invest in real estate. Your investments can earn tax-deferred or tax-free profits, saving you the tax that you would otherwise have paid in capital gain or income tax, which can be significant — up to 50% or more in some cases.

By utilizing a real estate IRA, you gain true control over estate planning and can harness the power of compound interest, which is often seen as the “holy grail” of investment activity.

There are certain restrictions and rules associated with real estate IRAs, as you would expect. In general, you may not live in or work on the property that your self-directed real estate IRA owns, and may not purchase a property or interest in a property that is already owned by someone classified as a “disqualified” person. This includes yourself, along with your immediate family members and those of lineal descent.

A new real estate IRA can be funded by rolling over funds from an existing 401(k), 403(b), other IRA or qualified retirement source. By establishing a limited liability company, you can also self-direct and self-manage your assets and allocate them to real estate investments without the hassle of going through a custodian for approval. If you are considering rental properties, be sure that your rental income in these cases is placed back into the IRA and not elsewhere.

Be very careful to ensure that all your financial transactions and any other dealings linked to your real estate are pushed through your self-directed real estate IRA. For example, if you are planning to renovate the property, all the expenses incurred must be paid for by the real estate IRA and, when you sell the upgraded property, all the funds must consequently go back into the IRA. It’s not legal to “siphon off” profits associated with such deals, as the real estate IRA itself must be the one profiting from the transaction. You must be sure to avoid anything that could be classified as “self-dealing.” That means that transactions between the buyer and the seller should come together naturally.

Look at the establishment of a self-directed real estate IRA now and when opportunities associated with the rebounding real estate market present themselves to you, you will be ready. While a real estate IRA might not be for everyone, if you have experience investing in real estate, why not use your knowledge of the real estate market to dramatically increase the returns in your IRA?