Can a Self Directed IRA Hold Real Estate?

Real estate has long been considered a solid retirement investment option. Investors should carefully examine its rules and regulations.

Your IRA cannot purchase property from anyone who does not meet the qualifications, and can only hire contractors. In addition, it must report its assets annually.

How it Works

Investors looking to open a self-directed IRA have two funding options when funding it with cash or rolling over funds from an existing traditional or Roth IRA: either contributing the annual contribution limits themselves, or rolling them over from another traditional or Roth account custodian – and leaving all administrative matters up to them.

Custodians allow investors to purchase riskier “alternative assets”, including real estate, promissory notes, cryptocurrency and tax lien certificates; interest in energy projects like oil & gas or renewables projects as well as private placement securities through a custodian; however investors must remain wary as unscrupulous investment promoters often take advantage of custodian oversight gaps to exploit investors with unreasonably high returns and no third-party oversight claims. Red flags for potential investment scams include brand new companies, claims of unrealistically high returns or lack of third-party oversight – red flags could include brand new companies being introduced by custodians without third party oversight being established – or lack thereof

Investors should remember that an IRA property should never be used for personal gain; thus, investors cannot move into or rent the property to themselves or a disqualified person, claim deductions for mortgage interest, depreciation or property taxes or hire themselves to provide repairs or management duties at their IRA property.


Self-directed IRA investments don’t incur taxes during their time spent inside of the account; however, you won’t be able to claim annual deductions for mortgage interest, depreciation and property taxes as you would with traditional IRA investments.

Additionally, you cannot use an investment property as your personal residence or vacation home, nor partner with disqualified individuals or relatives on real estate investments – these transactions are known as prohibited transactions and the IRS assesses a 10% penalty on them.

As such, self-directed IRAs are best suited for experienced investors. You are responsible for conducting all due diligence yourself – such as researching investments, asking questions and verifying all information – before proceeding with any agreement or contract. Otherwise, unwise decisions could cost you money; to protect yourself against this happening again it’s vitally important that you understand and adhere to any rules set in place and avoid fraud promoters – luckily IRAR provides many resources that can assist with that goal.


When investing through a self-directed IRA in real estate, it is imperative to conduct extensive due diligence on both market trends and potential future growth potential. Furthermore, conduct thorough checks on both investment sponsors and properties.

Your IRA cannot purchase or sell real estate from disqualified persons such as yourself and certain family members, nor use it for personal purposes such as living there or lending/leasing it out.

Other prohibited transactions for an IRA account include investing in life insurance policies and collecting precious metals that don’t meet IRS purity standards, while any investments that involve financing must pay UBIT tax on income earned on investment that becomes taxable upon distribution. It is also important to remember that property held within an IRA may be considered an illiquid asset and liquidation may take time, particularly if you’re over 70 1/2. In these instances, required minimum distributions apply as required minimum distributions may also apply with regards to real estate investments.

Getting Started

Self-directed IRAs give you the flexibility to invest in alternative assets like real estate and precious metals, expanding your retirement savings while taking advantage of your industry knowledge. However, you must recognize their responsibilities; failure to vet opportunities carefully enough, make informed investing decisions or avoid prohibited transactions may result in losing tax benefits or incurring penalties on the account.

Since these investments are non-liquid (meaning you can’t quickly sell them), they may require additional maintenance than traditional investments like stocks, ETFs or mutual funds. You must document their fair market values each year – this takes extra work! You will also need a qualified financial or investment professional who can assist in finding and vetting opportunities as well as adhering to IRS rules such as not buying property from disqualified people or renting it to them – myEQUITY provides investment wizards online to guide this process for you at your convenience!

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