Ideas for Finding Real Estate Investments for Your IRA

Ideas for Finding Real Estate Investments for Your IRA

So you want to purchase real estate in your IRA account? Most people do not even know that you can do this. Yes, you can, and for the right person, it can be an excellent investment. Why buy real estate in your retirement account? I would say there are three reasons. First, diversification away from stocks and bonds gives your portfolio an asset that traditionally holds its value over time and has the opportunity to appreciate. Secondly, you understand and want to be involved in the management of the rental property. Real estate is not like a stock. It requires love and care to make it grow. Third, the opportunity for the annual income and the gain on sale to be tax-free. All gains inside an IRA account are tax-free.

The first thing you need if you want to purchase real estate in an IRA is to understand what a Self-Directed IRA is. Ordinary IRA custodians (like the big brokerage houses) are not interested or equipped to hold real estate in your IRA. They don’t offer real estate as an IRA option because

  1. They don’t know how to generate revenue from an asset that they do not sell
  2. They don’t want to deal with administrative burdens such as closings, tax bills, insurance, rental agreements, and annual valuations (which custodians are required to report to the IRS annually).

To own real estate inside your IRA, you must have a “self-directed” IRA so that your investment choices are not limited to certain asset classes. Midland Trust Company is a perfect choice with a long history of reasonable fees and excellent service.

What are the different types of real estate you can buy in your Self-Directed IRA?

  1. Rental Real Estate – The most common real estate investment in a Self-Directed IRA is rental real estate. The most common types of rental properties include single-family homes, commercial properties, and condominiums.
  2. Raw Land – Many investors believe in the appreciation of good real estate and the low maintenance of raw land. This can also include leased farmland that generates cash flow.

Where do you get started finding a real estate deal? Well, there are many ways to locate or evaluate real estate opportunities, but they all require hard work. I am going to tell you a rule I learned 20 years ago that has always held true, I need to give credit to Jeff Tumberello, a local SWFL Real Estate investor, who I heard it from. The gain on the real estate is made when you purchase the property, not when you sell it. The moral of the story being, don’t overpay for the property; if you don’t get the right deal upfront, it can take years to make it up. I am not saying that is the only way to make money on a real estate investment, but it sure helps to get started by not overpaying.

So how do you find the deals? There is no right way to find real estate deals. Remember, you are looking for a property that has great potential to appreciate and cash flow. This can be a rehab flip or a long-term rental property with great potential. I am not trying to be sarcastic, but you probably won’t find it on under “new developments.”

Let me tell you how I have seen the best investors find real estate investments for your IRA.

  1. Join a REIA Club (Real Estate Investment Association). There are national groups and local groups. Surround yourself with like-minded people looking for deals and to share the knowledge they have learned. There are many types of Real Estate Groups, one place to look them up is
  2. Ask friends and acquaintances if they know of anyone interested in selling because you may be interested in buying. Without a real estate broker, you automatically save 5-6% of the purchase price. As mentioned before, the money is made on the purchase.
  3. Scour Craigslist and look for the oldest listing on Zillow and You are not looking for a beautiful house; you are looking for a property that will make you money. Also, follow up on a real estate deal that fell through. A contract may have fallen through because the roof was bad, but that may not scare you because your cousin in the roofing business.
  4. Have friends that are Realtors; they know of deals before they even hit the market. Realtors and a real estate office may have a pocket listing. A pocket listing is a property that the seller wants to get rid of but has not listed it on the local MLS.

One last tip, be good at math. I would recommend knowing a couple of easy calculations. How to calculate capital gains? Taxable gains are sometimes different than book gains. Understand the concept of basis; Basis is the tax term for Cost plus additions less depreciation. Second, know how to calculate an income statement for rental property. A rental property may have a mortgage payment, and typically an income statement, you do not deduct loan principal. I would learn how to run a cash flow statement. You need to know when you are making and losing money.

Finally, (I know I said the last tip above), know a good banker, preferably a community banker. A Community banker can make the deal so much easier, plus they can be a trusted source when you need advice on whether that property cashflows. FYI, most properties purchased in Self-Directed IRAs are cash purchases and do not use a mortgage.

For more information on how to set up a real estate IRA, check out Midland Trust’s Real Estate page. Buying real estate is not hard, but it does take hard work to stay on top of your investment. I always like the Warren Buffet philosophy; while you may not make money on every investment, make sure you do not lose money. It can be hard to recover lost money.

Midland Trust Resources for Self-Directed IRA Investments:

  1. Real Estate IRAs
  2. Types of IRA Accounts
  3. How to Handle Income and Expenses

Happy real estate hunting.

Dave Owens

President & CEO of Midland Trust Company

Loan Money Like a Bank

Loan Money Like a Bank

Wouldn’t it be nice to be a bank and lend money out for a 30-year mortgage at a fixed rate of return secured by the property itself? While there are many steps and hurdles to become a bank before you can begin accepting other people’s deposits into a checking or savings account, there is nothing stopping you from loaning your own money.

We are not talking about giving your friend $20 and collecting 10% interest as they pay you back in a week, although you could do that. There is a more formal process for treating your savings as a bank would and lending money out to people. Welcome to the world of Notes, and more specifically, Promissory Notes.

A promissory note is a written promise to pay someone. This is a common tool in the financial services industry and if you’ve taken out a loan of any kind, you’ve almost certainly signed one. A Note can be either unsecured or secured. An unsecured note carries more risk because there is no security if the borrower fails to pay; it can be very difficult to collect from them. A secured note, on the other hand, is secured by collateral (a house, car, raw land, or assets from a business). For example, if you loan someone money to pay for a property, you can draft a secured note and have the house as collateral. This means, should the borrower fail to make payments, you can legally own the property so you can be made whole.


  1. The date of the promissory note should be at the top
  2. The amount of the note
    • The amount of the loan should be written numerically, as well as in words (similarly to how you would write a check).
  3. A description of the terms
    • There should be a written description saying how the borrower is going to repay the loan. This could be monthly, quarterly, annually, or even in a balloon payment (one lump sum).
    • You will also want to state when the first payment is due by writing out the month, day, and year.
    • Finally, indicate when the last day and month for the final note payment is due.
  4. State if the note is secured or unsecured
    • If the loan is unsecured, state this in the note and be specific.
    • If the note is secured, provide details on the security instrument.
  5. Include the name of both the lender and borrower of the note and make it clear which person is which
  6. Provide specific details on where each payment should be made
    • This could be either check delivery instructions indicating your name and address to mail the check to or, ACH/Wire delivery instructions if they will be sending funds directly to your bank account.
  7. Print, sign, and date
    • The borrower(s) should print, sign, and date with their legal name. If there are multiple borrowers, each one should have a line to print, sign, and date. The lender may also sign, though this is not required to make the note legally binding.


It can be very frustrating when someone doesn’t abide by the written note agreement, whether it be inconsistent payments, late payments, or no payments. If you find yourself in this situation you may want to consider:

  • Reaching out to your borrower in a format that may be retained (email or digital chat).
  • Sending a formal notice by email and mail to the borrower. If there is no response to the letter, send a follow-up letter.
  • Hire a collection agency.
  • Take them to court.

Did you know you can loan money from your IRA account? Learn more here.

If you have questions or would like more information about money lending with an IRA account, contact Midland at (239) 333-1032 or visit

MIDLAND TRUST IS NOT A FIDUCIARY: Midland’s role as the custodian of self-directed retirement accounts is non-discretionary and/or administrative in nature. The account holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account. Midland has no responsibility or involvement in selecting or evaluating any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee, endorsement, or certification of any investments.

Extensions for 1031 Exchanges Have Been Issued by the IRS

IRS Issues Extensions for 1031 Exchange Deadlines

Taxpayers involved in a 1031 exchange finally have the answer they have been waiting for regarding extensions for 1031 deadlines.

On April 9, 2020, the IRS Issued Notice 2020-23, an update to Notice 2020-18, “Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic.”

Taxpayers currently engaged in a 1031 exchange with a 45-Day Exchange Period or 180-Day Exchange Period deadline between April 1 and July 15, 2020, will have an automatic extension to July 15th. Unfortunately, this notice does not provide extensions for anyone whose 45-Day or 180-Day deadline was in February or March.

The Federation of Exchange Accommodators (FEA) and the National Association of Realtors (NAR) will continue working tirelessly to seek additional relief for those taxpayers not covered by these extensions.

We will keep you informed of any developments as they are released. Please contact Midland 1031 if we can help you or your clients in any way.

We are here to help. Stay Safe.