Can your IRA invest in real estate? Absolutely!
The IRS allows self-directed IRAs to buy real estate without penalties, all while keeping the tax advantages of your account. You can invest in most kinds of property — residential, commercial, raw land, or a fixer upper. With real estate in your IRA, you can earn income from rent, property appreciation, or even fix-and-flip projects.
Your real estate team works with you to choose the property and negotiate the terms, ensuring you find the investment that meets your goals!
Benefits of Owning Real Estate in Your Self-Directed IRA
- Diversification | Invest beyond your usual portfolio
- Ownership| You can own actual, physical property in your IRA
- Independence | You own the property and make the decisions about the real estate investing
Possible Structures
- Hold title to real estate
- Partner with yourself or others
Popular Investment Types to Own in Your Self-Directed IRA
- Single Family or Multi-Unit Homes
- Apartments and Condos
- Commercial Properties
- Raw Land
- Fixer Uppers
The Investment Process
- Open a self-directed IRA account
- Fund the account
- Find an investment
- Make an offer
- Submit an online buy direction letter
- Deliver earnest money
- Under contract/Due diligence/Inspection/etc.
- Investment closing
The Janet Leap Team regularly assists real estate investors in finding investments that meet their goals, including when they are purchasing an investment in their self-directed IRA. Feel free to reach out with any questions or to discuss your specific needs. If you have more questions, read on for our FAQs.
FAQs
Can I buy real estate in my retirement plan?
Yes, the IRS allows it, but not all custodians offer real estate as an option. You’ll need a custodian who supports alternative assets.
Can my IRA get a mortgage?
Yes, but it must be a non-recourse loan, meaning the lender can only seize the property if the loan defaults. These loans often require a higher down payment.
What are the restrictions for buying real estate in an IRA?
The property must be for investment purposes. You, certain family members, and plan fiduciaries cannot use it, and your IRA cannot purchase property you already own.
Where can I find an investment property?
You are responsible for finding a property, typically with a real estate agent. The only rule is that it can’t be a property you or any disqualified person currently own.
Do I need a special real estate agent?
No, you can choose any real estate agent you like.
Can I repair the property myself?
No, you can't personally do any work, nor can disqualified persons or businesses they own. However, you can hire others to handle repairs and control the decisions.
Do I pay capital gains taxes when selling the property?
No, as long as the property is within a tax-deferred Traditional IRA or tax-free Roth IRA. If there’s outstanding debt leverage, UBIT may apply to that portion.
Can I take the property as a distribution and live in it?
Yes, after turning 59.5, you can distribute the property from your IRA and, once fully distributed, use it however you like.
How long do I have to own the property before selling?
There are no time restrictions for buying or selling.
How are expenses for an IRA-owned property paid?
Expenses must be paid from the IRA. If the IRA owns the entire property, it covers all expenses. If it shares ownership, it pays a proportional share. Be sure the IRA has enough funds to cover these costs.
The Janet Leap Team has extensive experience working with investors, including those buying in their self-directed IRAs. We look forward to supporting investors in meeting their real estate goals! Contact us with any questions!
Source: New Directions Trust Company
