Padding your retirement with real estate

NEW YORK (Money) -- Question: I have a chance to pick up two ocean-front condos on the east coast of Florida for about $85,000. I was thinking of buying them in an all-cash deal with my IRA account, but I'm not sure whether you're allowed to own real estate inside an IRA. Can I do this? - Bernard Grossman, Hallendale Beach, Florida
Answer: The short answer is yes, you can invest in real estate through your IRA account. But the question you ought to be asking yourself is whether you should be loading up your IRA with real estate.
A few years ago, when the housing market was booming and everyone saw real estate as a can't-lose strategy for building wealth, buying "sticks-and-mortar" real estate (i.e., actual buildings as opposed to REITs, real estate mutual funds or other securities) within IRAs was all the rage.
Indeed, a slew of advisers and investment firms were pushing everything from condos to single-family homes to commercial properties as ideal IRA investments. And a number of financial publications ran stories that made it seem as if you were an old stick in the mud if you weren't beating the bushes for a sweet real estate deal for your IRA account.
Of course, now that home prices are tanking and the people who followed the advice of the rah-rah real estate crowd have presumably seen the value of their IRA accounts plummet rather than soar, you don't hear as much about the virtues of devoting IRA money to real estate.
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