How to leverage your IRA property investments with mortgages

So you’d like to take advantage of depressed housing prices and buy a rental property, but you lack a down payment or can’t meet lending criteria for investment properties? Consider using your IRA assets — even if the purchase price exceeds their reach.

Little-known IRS rules allow retirement savers to take “nonrecourse” loans against IRAs and leverage their savings as a down payment to buy investment real estate. With 30% to 40% down, IRA borrowers can get loans on a condo or townhouse, a single-family home, a multiunit apartment building and even commercial property — so long as the rental income will yield positive cash flow.

While the market for these mortgages has been miniscule — recognized leader North American Savings Bank has closed about 850 residential IRA loans since 2005 — demand is expected to mushroom in coming years, especially among baby boomers seeking to diversify out of stocks and into income-producing investments.