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May 21, 2024

A Quick Guide to Investing in a Residential Property with a Real Estate IRA

Key Points 

  • Investing in a residential property with a Real Estate IRA opens exciting possibilities for diversifying your retirement portfolio and potentially seeing long-term gains.
  • Establishing a Real Estate IRA provides a tax-advantaged way to benefit from possible property appreciation.
  • At Broad Financial, you can open a Real Estate IRA with Checkbook Control for even more freedom to manage your everyday investment transactions.
residential property that was invested in with a real estate IRA

Owning real estate is a goal for many people. If you invest in property with a Real Estate IRA, you can accomplish that goal while benefiting from tax advantages on any potential gains. Most residential properties in the U.S. are eligible for this type of investment, whether you’re interested in a single-family home or a multi-unit complex. Read this guide to learn more about investing in residential property with a Real Estate IRA.

What Is a Real Estate IRA?

Real estate investment loan

A Real Estate IRA is more broadly known as a Self-Directed IRA (SDIRA). You may also hear it referred to as a Self-Directed Real Estate IRA. Whatever name you choose, the meaning is essentially the same: It’s a retirement account that allows investing in real estate and other alternative assets.

Benefits of a Real Estate IRA

Here are the key benefits of investing in real estate with a Self-Directed Real Estate IRA:

  • Potential rental income, capital appreciation, and asset-sale profits within the IRA are tax-deferred or tax-free, depending on the type of account.
  • You have more control over your investments than with a standard IRA.
  • You can invest in a wide range of residential properties.
  • Real estate is a tangible asset that may be less susceptible to market fluctuations.

Gain Greater Control with a Checkbook IRA

Self-Directed Real Estate IRAs give you the freedom to choose from a wide range of investments, but classic Real Estate IRAs require the custodian to facilitate transactions at the direction of the account owner. Many real estate investments require repeated transactions, such as handling rent or paying for maintenance and repairs. Within the structure of a classic Self-Directed Real Estate IRA, your custodian would have to sign for each of these transactions.

Upgrading your SDIRA to checkbook control is an ideal method for how to buy crypto with a Roth IRA.

Upgrading your Real Estate IRA to one with checkbook control, like the Checkbook IRA at Broad Financial, removes the custodian’s involvement in everyday transactions once checkbook control is enacted. With a Checkbook IRA, you can manage your investments in real time, although the Broad Financial team is always here if you have questions.

When you open a Checkbook IRA, you’ll either open an IRA LLC or IRA Trust along with a checking account for your Checkbook IRA transactions. The LLC or trust will be the entity that holds your real estate investments, and you’ll of course have control of the checking account where the IRA funds are held. Those funds can be used to pay for property-related expenses in real time with a check or wire.

What to Know When Setting up Your Real Estate IRA

When you direct your SDIRA to invest in residential property, it can own the entire property or just a part of it. Keep in mind that all expenses and gains related to the investment must flow through your IRA. Eligible properties include:

  • Single-family homes
  • Townhouses
  • Condominiums
  • Multi-unit complexes (duplexes, triplexes, etc.)
  • Apartments
idea light bulb researching self-directed iras

Before investing with a Real Estate IRA, it's a good idea to become familiar with the SDIRA regulations set by the IRS. To keep your account compliant, you must avoid prohibited transactions. These include purchasing property from a disqualified person, such as yourself or your spouse, and using the property for personal benefit.

Financing options might be available if you don't have enough funds in your IRA to purchase a property or cover a maintenance bill outright. You can use non-recourse loans, where the lender cannot go after your personal assets if the IRA defaults on the loan. The property itself is the collateral for the loan.

Choosing the Right Real Estate IRA Custodian

Your IRA custodian should be experienced, easy to contact, and reliable. At Broad Financial, we work directly with our sister company and industry-leading custodian, Madison Trust. Our specialists will guide you through the process of opening your account and will always be available if you ever have questions.

Investing in real estate can be an excellent way to diversify your retirement portfolio while potentially enjoying long-term gains. By opening a Checkbook IRA with Broad Financial, you gain more control over your retirement investing than you may have ever thought possible. Schedule a discovery call today to learn more about our Real Estate IRA.

Disclaimer: Broad Financial LLC does not provide legal, tax, or investment advice. Please consult with your tax or legal advisor before making investment decisions. 


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