2024 Guide: Real Estate Investing with Self-Directed IRAs

Self-directed IRAs in real estate follow strict rules: no personal use properties, no paying disqualified persons for maintenance and filing UBIT on profits.

2024 Guide: Real Estate Investing with Self-Directed IRAs

Holding real estate investments within a self-directed IRA comes with its own set of rules. One major restriction is that IRAs cannot purchase properties used as personal residences.

Additionally, IRAs cannot pay disqualified persons to perform maintenance work on property they finance; and investors must file unrelated business income tax (UBIT) returns on profits generated from that portion of the investment.


Real estate can provide an excellent way to diversify an investor's portfolio with higher returns than traditional investments, while also serving as a steady stream of rental income. When added to a retirement investment portfolio, real estate can help expand an investor's nest egg and ensure their financial security in retirement.

Self-directed IRAs allow investors to invest in commercial or residential real estate properties, and real estate-related assets such as REITs and mortgage notes without incurring taxes on the funds invested; however, any gains realized after selling are subject to taxation.

Self-directed IRA investors enjoy many advantages of investing in real estate with a self-directed IRA, including having control of their own retirement savings and being in charge of managing them themselves or hiring outside management services for investment properties purchased with this type of account.

An Individual Retirement Account, or IRA, cannot be used for personal purposes such as living there or renting it to family. Furthermore, improvements or maintenance tasks performed directly by an IRA would likely be considered prohibited transactions by the IRS and therefore investors could instead form a limited liability company that the IRA owns in order to gain better checkbook control over their property investments.

An IRA can be an effective way of reducing fees paid to its custodian; however, it's essential that investors work with a custodian who specializes in self-directed retirement accounts and charges reasonable fees. Investors should understand that purchasing property directly with an IRA is illegal due to regulations regarding prohibited transactions. 

real estate diversification

Tax Advantages

Self-directed IRAs for real estate provide investors with an innovative investment solution to diversify and speed up retirement savings growth. Real estate offers significant potential for income generation while at the same time serving as an effective hedge against market volatility; offering added stability to an overall portfolio.

One of the major advantages that real estate investments provide to clients is diversifying their holdings while taking advantage of tax deferral opportunities (https://www.drs.wa.gov/plan/dcp/). Profits earned can then be reinvested back into an account without worrying about taxes until retirement age arrives.

However, it is essential to remember that while real estate investments offer many potential advantages, they also involve significant risks. Clients must ensure all real estate they purchase is conducted via arms-length transactions with no attempts at sweat equity by themselves or any unauthorized individuals or entities involved; additionally, they must make sure not to acquire properties from disqualified people or entities, as the IRS frowns upon such deals.

Clients should also understand the fees associated with these investments, which can sometimes be steep and vary greatly between providers. To minimize their fees, we advise clients to work with a dedicated custodian for self-directed IRAs with reasonable fees and services, as well as licensed real estate agents who specialize in their target markets for optimal investments.


Real estate assets provide an investor with a unique opportunity to diversify their portfolio and potentially increase returns while mitigating risk and providing steady retirement income streams. However, it is crucially important that investors fully comprehend all of the complexities involved when using an SDIRA to invest in real estate assets.

Contrary to investments such as stocks and bonds, IRA-owned properties cannot be transferred directly. Therefore, it's crucial that an experienced SDIRA custodian provide guidance and support. Furthermore, compliance with regulatory issues like prohibited transactions and record keeping must also be ensured.

Self-directed IRAs offer investors greater control and flexibility over traditional investments like stocks and bonds by providing tax-deferred or tax-free (Roth IRA) growth for these assets, such as real estate. Furthermore, rental income generated by property can be reinvested back into their self-directed IRA to expand it further, offering greater control and flexibility than other options available to investors.

When investing in real estate with an SDIRA, it's essential to work with providers familiar with IRS rules and regulations regarding self-directed IRAs. A trusted provider will help you avoid common errors that can lead to costly penalties, but you can learn more by clicking the link. Also, ensure all transactions meet legal compliance, and minimum IRS requirements, as well as work with you, to identify potential opportunities that fit the mold of what might make sense for your SDIRA - ultimately providing guidance throughout the entire process from beginning to end. 

real estate accessibility


Self-directed IRAs allow investors to use their retirement funds for alternative investments outside of the usual mutual funds and exchange-traded funds (ETFs). SDIRA companies allow clients to choose their own opportunities, giving them control of their own assets while simultaneously reducing fees that would normally accrue with traditional custodians.

With a self-directed IRA, clients can invest in any real estate asset considered an equity investment, from single-family homes and multi-unit apartment buildings to commercial properties, mortgage notes, and raw land itself. Investors may also utilize their IRAs creatively by flipping properties or providing capital for private mortgage lending.

There are certain rules to abide by when investing in property through a self-directed IRA, such as not living or guaranteeing it or claiming tax deductions such as mortgage interest, depreciation, or property taxes. Furthermore, such investments cannot be used as vacation homes or for rental income purposes.

Additionally, it is critical that an experienced property management company be hired in order to oversee your real estate investments within your IRA account. A property manager will help ensure all rent is collected and deposited promptly, as well as that repairs and maintenance are completed on schedule, in addition to paying any required IRA taxes.

One of the main advantages of investing in property with a self-directed IRA is the tax-free rental income. This provides investors with a regular stream of revenue to supplement existing retirement accounts or generate extra revenue in preparation for retirement.