This MSN Money story discussed how to use IRA to invest in real estate.
Basically, it is talking about setting up a self-directed IRA. By doing so, one can basically direct IRA money to whatever purposes, including taking possession of a property. Using it to buy investment properties, and all rental income can add to the IRA and grow tax free or tax deferred. All property value appreciation will have tax advantage too. However, one of the major drawback is mortgage will be very hard to obtain when IRA is the property owner.
Another thing of concern: I suspect if the property is purchased by a regular (pre-tax) IRA, the capital gains can be delayed, but will be taxed eventually. This may be unlike the normal property purchase by after-tax funds, where the first $500,000 capital gain is free from tax upon property sale. This point is not mentioned in the article but will put pre-tax "real esate IRA" to a potentially huge disadvantage.