A self-directed IRA or real estate IRA gives you the freedom to invest in real estate related vehicles such as raw land, rental properties (single-family and multi-unit), commercial property, mortgage notes, tax liens, and more. Many investors find investing in real estate attractive because it is fairly easy to navigate and the investment is secured by a tangible piece of property. Midland IRA helps clients maximize the wealth-building potential of self-directed retirement accounts by providing premier educational programs and outstanding, personal client service. While we can give you no advice in making investments, we hold seminars that include a cutting-edge curriculum designed to make self-direction easy and empowering. We frequently host live webinars as well as workshops and other events about acquiring real estate in your IRA. Visit our event calendar for upcoming dates.

Watch this video on how to invest in real estate using a self-directed IRA

Can I invest a self-directed IRA in real estate? Where can I learn about using my funds to invest in real estate?

Yes! Since the inception of IRAs in 1974, real estate has been a viable option and a popular investment choice. A self-directed IRA or real estate IRA gives you the freedom to invest in real estate related vehicles such as raw land, rental properties (single-family and multi-unit), commercial property, mortgage notes, tax liens, and more. Many investors find investing in real estate attractive because it is fairly easy to navigate and the investment is secured by a tangible piece of property.

Midland IRA helps clients maximize the wealth-building potential of self-directed retirement accounts by providing premier educational programs and outstanding, personal client service. While we can give you no advice in making investments, we hold seminars that include a cutting-edge curriculum designed to make self-direction easy and empowering. We frequently host live webinars as well as workshops and other events about acquiring real estate in your IRA. Visit our event calendar for upcoming dates.

How long have IRAs been able to own real estate?

IRAs were created in 1974 and ever since their creation they have been able to own real estate, as well as other investments. However, many banks and brokerages do not allow their clients to hold real estate in an IRA.

How is the investment titled?

The buyer of the property is the IRA, a separate entity than the IRA holder. All of the real estate closing documents are titled in the name of the IRA.

How does it work once the IRA owns the property?

The IRA is the owner, therefore any proceeds generated from the property must be paid to the IRA. For example, if you lease your property the rent payments will be deposited into the IRA, tax-free. Conversely, any expense generated by this property must be paid for by the IRA. For example, property taxes, improvement costs, and HOA fees would all be paid for from the cash inside the IRA.

What are the limitations?

While the IRA is the owner of the property, the IRA holder and/or their disqualified parties may not use or otherwise occupy the property. The IRA-owned real estate must be treated as an investment while it remains inside the IRA.

What are the financing options? Do all the funds need to come from the IRA?

IRAs can purchase in three ways. They can buy 100 percent of the property; they can be a partner with other people, entities or even IRAs; or they can obtain non-recourse loans.

If I own real estate in my Midland IRA, how are rental income and expenses handled?

All expenses and rental income flow through the IRA account. With rental income, your tenant would make the rent check payable to your IRA and send it directly to Midland IRA. When expenses for the property are incurred, you would contact us and instruct us to cut a check from your IRA account for a particular invoice.

Can I use my self-directed IRA to buy a second home?

No. You and most family members are prohibited from using any asset owned by your IRA. It must be a passive investment per IRA Section 4975.

Can I perform repairs on property owned by my IRA?

No. You must pay for any services through your self-directed IRA, and you are disqualified from receiving any income or personal benefit from your IRA, as are other disqualified person(s) and entities. You are unable to make repairs yourself for no pay, because that would be considered contributing “sweat equity.” Sweat equity is difficult to quantify, but also not allowed because all contributions towards an IRA must be in cash. You are able to choose contractors to be paid through your IRA to perform maintenance and repairs as needed.

What happens if my self-directed real estate IRA does not have enough money to pay for unexpected expenses?

If your self-directed real estate IRA does not have enough money to pay unexpected expenses, there are several options.

  1. Make an annual contribution if you are eligible.
  2. Take on a partner who is not a disqualified person.
  3. Get a non-recourse loan. Unrelated Debt-Financed Income (UDIT) tax may apply.

If my self-directed IRA can’t buy the property or other investment outright, can I partner my IRA with my personal funds? Who else can I partner with?

If your IRA cannot afford the investment you are interested in, you have several options:

  1. Partner your IRA’s funds with your personal funds. For example, your IRA can own 50 percent and you personally can own 50 percent, which would make you tenants in common.
  2. Partner IRA funds with funds you personally guarantee, like a home equity line of credit.
  3. Your IRA may also partner with someone else’s personal or IRA funds. Please note: The disqualified persons rule may not apply here since you are not transacting with the individual. Therefore, it is possible to partner with your spouse, parent, or child.