877-742-1270 Live Chat NOW Open New Account   myDirection Login
Self Directed IRA
real estate ira

What is Self Directed IRA?

Fees

IRA Forms Contact Us

Traditional IRA

Roth IRA

SEP IRA

SIMPLE IRA

401(k)

HSA

Coverdell

sdira

Real Estate in IRA

Gold in IRA

Loans from IRA

Private Equity

Securities

Single Member LLC

Your Expertise and Knowledge

sdira

Self Directed IRA Events

Self Directed IRA FAQ

Self Directed IRA Blog

Self Directed IRA News and Articles

UBIT, UBTI, UDFI

IRA Educational Videos

sdira
mydirection self directed IRA client portal

Self Directed IRA Investments - Real Estate IRA

Real Estate in an IRA

The IRS allows an IRA, Individual 401(k), HSA, or ESA to acquire real estate as an asset without penalty and while keeping the tax benefits associated with that account type.

An IRA can purchase any type of real estate, including residential, commercial, raw land, agricultural, and more. The IRA can buy the property outright, meaning the IRA is the title holder. If the IRA does not have the full purchase price, the IRA can partner with a person, company/entity or another IRA, or it can secure a non-recourse loan (see below) to buy real estate.


Real estate in an IRA provides the opportunity to generate income from rent, appreciation, fixing and flipping and more.

Since the inception of IRAs, it has been possible to participate in real estate as an asset. What has not always been easy is finding an IRA provider who was willing to service this type of investment. 

The IRS requires an authorized IRA provider for all IRAs, and not all IRA providers handle real estate, but New Direction IRA does. You, the IRA holder, select the property, negotiate the terms, and direct us to send money from your IRA to close the deal. We make sure that the paperwork substantiates that the asset is part of your IRA and, thus, deserves the tax benefits associated with the account type.  Our knowledgeable staff will guide you through the IRA investment process and ensure that your transactions are prompt and accurate. We offer ongoing free education on SDIRA (Self Directed IRA) Real Estate investing and regulations.

What are the benefits of having Real Estate in an IRA?

  • Real Estate is a tangible asset; you can see it and touch it.
  • Real Estate is an asset that you have experience with and understand.
  • Investment properties can potentially yield a cash stream as well as market appreciation.
  • You have strategic control over the properties that your retirement account owns.
  • You can apply your knowledge and expertise pertaining to the real estate market.
  • You can buy, sell and exchange properties without tax consequence.

Real Estate IRA - Important Things to know

  • An IRAis its own financial and legal entity, and it is separate from your personal finances.
  • As a separate legal entity, your IRA has it's own name:
                New Direction IRA, Inc FBO (client name) IRA
  • The IRA is the owner of the real estate, not the IRA holder. Therefore, purchase and maintenance costs are paid by the IRA and all income (e.g. rent) goes back to the IRA.
  • All legal documents related to an IRA-owned asset must be in the name of the IRA, not your personal name. 
  • For the documents associated with your IRA's real estate acquisition to be complete and legal, they need to be signed by New Direction IRA (as the administrator for that account).

IRS Prohibited Transactions for Real Estate in an IRA

  • Neither the IRA holder nor any disqualified person (learn more) to the IRA may live in or use the property. 
  • You cannot work on the property yourself, for free or for pay. "Sweat equity" is not allowed. Any remodeling, repair, improvement, and even maintenance must be performed by a paid third party company at market rate.
  • Your IRA cannot purchase a property from you or any disqualified person. Similarly, you (or a disqualified person) cannot sell the IRA's property to yourself. This scenario constitutes self-dealing, which is not permitted.
  • Neither you nor a disqualified person can guarantee a loan for an IRA property. This scenario constitutes self-dealing, which is not permitted.
  • If you are a real estate agent and involved in the transaction, you CAN NOT take a commission
self directed ira
Self Directed IRA educational videos - Real Estate in IRA
Real Estate IRA

Introduction to Real Estate IRA Basics

The majority of retirement investors are unaware that IRAs can directly invest in real estate. Join us for an eye-opening introduction into the world of self-directed IRAs. Learn how an IRA can participate in real estate and the rules associated with that participation. We will discuss the types of real estate assets that are available to these accounts as well as how an IRA can invest without having the full purchase price of a property.

Step by Step Guide to Acquire Real Estate in an IRA

Step 1 – Open and Fund your IRA – It takes New Direction IRA 2 business days to open your account once your application is in the office.  Then you will fund the account with a rollover, transfer, and/or contribution.  This may take several weeks; so, plan for that in your timetable.

Step 2 – Find a property and make an offer – The offer needs to be made in the name of the IRA (as it is the buyer) and earnest money needs to come from the IRA or a non-disqualified person.  Do not use your personal funds to pay the earnest money.

Step 3 – Work with your New Direction Client Representative and Acquisitions Specialist to assemble the paperwork for the purchase.  Closing documents should be in our office 3 business days before the closing date.

Leveraging Real Estate in an IRA

An IRA may acquire a loan to purchase property but it must be a non-recourse loan (the lender is acknowledging, in the case of default, their only avenue for remuneration is the property itself). Not all lending institutions and banks offer these types of loans, but several do exist. Also, a non-recourse loan can come from a private lender.

When an IRA purchases real estate using a non-recourse loan, the debt financed portion of the property's profits may be subject to UBIT. Similarly, if an IRA-owned property is sold while a percentage of ownership is still debt financed, the profits derived from the debt financed percentage may subject to UBIT. UBIT is paid by the IRA and does not affect the IRA holder's personal taxes. Learn more

Property Management of Real Estate in an IRA

After your IRA has successfully purchased real estate, the IRA holder makes the management decisions. That may include the hiring of a property manager (or other non-disqualified person or entity) to handle the day-to-day cash flow and operations, or you may choose to work directly with New Direction to have vendors and other bills paid. You are allowed to make decisions for your IRA-held asset, but there are limitations that the IRS imposes.

Income generated by the IRA-owned real estate must go back into the IRA.  Rent checks are made out to the IRA (or the management company if there is one), not the IRA holder.

You can not pay for any property related expenses with your personal funds on behalf of the IRA. All expenses are paid from the IRA. 

As the IRA holder, you have the ability to choose tenants, plumbers, repairmen, etc. for your IRA-owned property

Maintenance and Improvements cannot be performed by the IRA holder or any disqualified person.

Possible structures for the purchase of Real Estate with Your IRA 

As mentioned above, there are several ways to have real estate in your IRA:

Hold title to Real Estate. A real estate contract is written between the IRA (New Direction IRA, Inc FBO (client name) IRA) and the seller. Funds from the IRA are sent to closing for the purchase, and the IRA takes title to the property directly.

Tenants-in-Common with a partner entity. This is one of the ways that an IRA can participate in a real estate asset without necessarily having the entire purchase price.  The partner can be a person (even a disqualified person), an IRA, a company, or other entity.

Private Equity in an entity (like an LLC, LP, C-corp., etc.) that then invests in real estate.  The asset in your IRA in this case is shares of a private company or private equity in that company.  However, the financial return of the investment is based on the performance of the real estate as well as the terms of the agreement with the company.

Loan money to a borrower who uses Real Estate as collateral. You can think of your IRA as a mortgage lender. Your IRA can lend money to non-disqualified persons and secure the note with real estate holdings and/or other assets if you like.  You and the borrower decide on the term, collateral, and the rate. 

Learn about New Direction IRA Real Estate Fees.

What Is An IRA What is Self Directed IRA IRA Contribution IRA Distribution Traditional IRA Roth IRA SEP IRA SIMPLE IRA 401(k)
HSA Coverdell

Real Estate in IRA

Gold in IRA Loans From IRA Private Equity Stocks In IRA Single Member LLC Self Directed IRA FAQ
Self Directed IRA Help Self Directed IRA Articles Self Directed IRA Events Self Directed IRA News UBIT / UBTI Self Directed IRA Benefits IRA Forms IRA Blog IRA Education
-© 2014 New Direction IRA Inc. - Privacy Policy | Terms of Use | 877-742-1270

#RealEstateIra