Buy Real Estate with a Self Directed IRA

Jan 24, 2019

Buy Real Estate With a Self-Directed IRA

Real estate has long been an attractive investment opportunity, but it is not always easy to find the funds to acquire a piece of property. Fortunately, with some creative financing through a Self Directed IRA, anyone can be a land or property owner – and the returns can be significant if you’ve done your research!

A Self Directed IRA is similar to a traditional brokerage firm IRA (in that they possess the same legal structure and have the same contribution limits and tax advantages) but where Self Directed IRAs are really unique is that they enable individual investors to leverage non-traditional (alternative) investments – such as real estate.

Investors often choose Self Directed IRAs because they offer incredible flexibility and control and that’s highly important in the realm of real estate investing. Self Directed IRAs are unique in that they make it possible to invest in what are known as “hard assets” – assets that most people are familiar with (or at least more familiar with than stocks or bonds). This makes it a great solution for portfolio diversification.

The reason that most traditional IRA providers do not offer the ability to purchase real estate is simple – the banks and financial institutions that offer IRAs cannot profit from doing so (as they typically only generate revenue from transactions). Fortunately, special Self Directed IRA companies – such as The IRA Club – do allow their clients to make investments in alternative assets like real estate, and the payoff from investing a Self Directed IRA into real estate could be immense.

If an investor purchased a $100,000 property with retirement funds and sold their property later on for $300,000, the $200,000 of gain appreciation would generally be tax free. That’s substantially different if the property was purchased using personal resources (non-retirement funds) as the gains would be subject to federal income tax and state income tax as well.

There are, of course, several important rules that must be followed when using a Self Directed IRA to buy real estate. If a property is purchased in the wrong way, for example, then the funds within the IRA would be taxable. Some of the most important rules to consider include “no self-dealing” (or selling/buying to or from a person that is related to you), no improvements via “sweat equity,” and no benefits can be derived (such as living in the property or renting it to a family member) directly.

Buying real estate with a Self Directed IRA is growing in popularity but still underutilized by most investors. Investors looking to leverage their retirement accounts to invest in real estate should contact a qualified and knowledgeable team that currently handles transactions of this nature. If you’re interested in diversifying your investment portfolio and taking advantage of the tax benefits, contact The IRA Club today.


The IRA Club does not make investment recommendations. The IRA Club offers no investments, products or planning services. Always consult your attorney, your tax professional, your financial planner and any other qualified person before making any investment.