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Home > Blog > Investing Your Self-Directed IRA in Real Estate: Rules, Benefits, and Procedures

Investing Your Self-Directed IRA in Real Estate: Rules, Benefits, and Procedures

Investing in Real Estate with a Self-Directed IRA

Real estate is the most popular alternative investment in a Self-Directed IRA. Typically, those who have acquired expertise in real estate feel comfortable making their money in that space rather than the stock market. A Self-Directed IRA offers nearly limitless options for an investor to leverage their experience.

Real estate investment with a Self-Directed IRA

A Self-Directed IRA with checkbook control allows real estate investors to invest in the property of their choice in real time. In a Checkbook IRA, the IRA owns an LLC that you create at the initial setup, and the funds contained in the IRA make all the payments necessary for your property. It is essential that only the Self-Directed IRA handles transactions and payments due to IRS regulations.

Stacking coins next to a miniature house to show real estate investment growth.

The tax-sheltered nature of the Self-Directed IRA makes it an ideal vehicle for real estate investing. Not paying taxes on the profit you make until you claim it as a distribution provides a massive edge that simply can't be achieved otherwise. The combination of the freedom to invest in your area of expertise and the tax advantage that an IRA provides is the best way to see noticeably larger returns than you would ever get with a standard IRA.

Self-Directed IRAs With Real Estate: The Process

Broad Financial makes it safe and simple for you to purchase real estate with your Self-Directed IRA and 401(k) funds. Here's how it works:

  1. When you set up your Self-Directed IRA or Solo 401(k), you'll also be opening an accompanying checking account at the bank of your choice. This checking account will serve as the platform for you to purchase and manage investment properties.
  2. When you're ready to purchase a property, just write a check from your dedicated account. (Yes, it's that easy.)
  3. All deposits (rent checks, proceeds from sales, etc.) are made directly into the checking account, and all expenses (mortgage payments, real estate taxes, capital improvements, utility bills, repairs, etc.) are paid from the same checking account.

In short, the property is owned by your IRA or Solo 401(k), it is managed by you (on behalf of your IRA or Solo 401(k)), and all transactions go through your IRA or Solo 401(k)'s checking account.

pen laying on top of a checkbook to indicate the real-time access to your retirement funds with a Checkbook IRA.

The Advantages of Self-Directed IRAs for Real Estate

  • Financial Agility – Checkbook control allows you to purchase foreclosures, tax liens, and other on-the-spot investments as soon as they are presented.
  • Hassle Free – Your dedicated checking account provides a one-stop destination for all of your transactions. This removes the need for third-party requests that can cause delay and frustration in your real estate purchases.
  • Safety – The checking account for your Self-Directed IRA or Solo 401(k) will be set up by you, at your bank, so it will always be under your control.

Self-Directed IRA Real Estate Rules and Purchasing Restrictions

small house on a table with a "sold" sign, keys, and gavel to indicate the rules of investing with a Self-Directed IRA for real estate.

Although there are no limitations on the type of real estate your Self-Directed IRA or Solo 401(k) may purchase, when you invest your Self-Directed IRA in real estate, rules from the IRS will need to be adhered to.

  • When you're buying real estate for an IRA, the rules dictate that you may not purchase a property with your retirement money that you own. Similarly, you cannot buy a property from your IRA/Solo 401(k).
  • You cannot live in or vacation in a property that your IRA/Solo 401(k) owns.
  • You cannot hire a business owned by a disqualified person to provide a service to your IRA/Solo 401(k)-owned property. For example, if your IRA owns a rental property, you cannot hire your dad's roofing company to replace the roof.
  • You cannot receive a salary for managing the property. However, you may perform managerial services without charging your IRA or Solo 401(k) a fee. (These duties fall under your responsibilities as the non-compensated manager of the LLC or trustee.)
  • You cannot perform physical work on a property that your IRA or Solo 401(k) owns. For instance, you cannot replace a damaged roof by yourself. The reason for this restriction is that the work would be considered a non-cash contribution to your IRA or Solo 401(k), which is prohibited.

You Focus on Your Investing: We'll Handle the Rest

If you're thinking of purchasing real estate with a Self-Directed IRA, the rules shouldn't deter you from investing in this exciting opportunity. At Broad Financial, our self-directed Specialists are here to help make it as easy as possible. We take complete care of your LLC creation, so your focus can be on investing your Self-Directed IRA in real estate, not rules and administrative processes. Schedule a call with us to get started today.

Happy retired couple speaking with a Self-Directed IRA Specialist about their investments and retirement goals.

Interested in Learning More?

Schedule a call with one of our Self-Directed Specialists today to get answers to your questions and find the investment vehicle that's right for you.


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