Investor Insights Blog|Self-Directed Real Estate Investing 101: What You Need to Know About Investing in Real Estate with Your Retirement Account
Real Estate
Many investors are surprised to learn it is possible to invest in real estate using their IRAs.
Using self-directed IRAs and other retirement accounts, you can hold a variety of assets including commercial property, residential property, raw land, tax liens, promissory notes, private entities, and more.
Many investors open self-directed accounts to diversify their portfolios with alternative investments, within a tax-advantaged environment.
Though some investors may not have heard of the concept, self-directed investing is nothing new. Since IRAs were introduced in 1974, the IRS has only listed a handful of items that are not permitted in an IRA. (See IRS Publication 590 for the list.)
If nearly any investment is allowed in an IRA, why haven’t you heard of it before? It could be because many IRA providers don’t offer this type of account. You must open an account with a custodian that’s qualified to offer self-directed accounts.
[Related: Questions to ask a custodian]
People are often surprised to learn there are several retirement plans available to self-directed investors. The most common accounts are the Traditional IRA and the Roth IRA.
Other accounts that can be self-directed include:
Here are the general steps to an IRA real estate investment:
Video: Self-Directed IRA Real Estate Investing
The IRS provides guidelines regarding self-directed investments:
IRS rules state that you and the investment must be at arm’s length. In other words, you cannot directly benefit from a piece of property or other asset owned by your retirement account.
Your retirement account is designed to provide for your retirement and is not intended to benefit you now. You cannot receive a direct or indirect benefit from the property purchase. It’s considered an “indirect benefit” if your IRA is engaged in transactions that, in some way, can benefit you personally.
A few examples include:
Additionally, IRS rules state that a self-directed retirement account may not buy an investment from, sell it to, or otherwise be involved with a “disqualified person.”
Who is a “disqualified person?” A disqualified person includes you as the account holder, service providers of the IRA, fiduciaries, family members of lineal ascent or descent (parents, grandparents, children, or grandchildren), and entities of which 50 percent or more is owned directly or indirectly by a disqualified person.
Video: Real Estate IRA Rules and Regulations
Whenever making an investment decision, please consult with tax, legal, and accounting professionals. Read more about real estate IRA rules or refer to the IRS for more information: Internal Revenue Code 4975 and IRS Publication 590.
Access the guide to discover more about the self-directed real estate investing process, including:
Can my IRA purchase real estate that I currently own?
Am I restricted to only purchasing residential property with my IRA?
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© 2023 Equity Trust®. All rights reserved.
Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional. Equity Institutional services institutional clients of Equity Trust Company. Brokerage Services Available Through ETC Brokerage Services, Member SIPC, and FINRA. *Founded in 1974 | Self-Directed IRA Custodian since 1983. The predecessor business to Equity Trust Company was established in 1974 and the IRS approved as a custodian in 1983. **Assets under custody as of 1/31/2023. 1ici.org, total assets in IRAs as of 12/2022
Terms of UsePrivacy PolicySite Map
© 2023 Equity Trust®. All rights reserved.
Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional. Equity Institutional services institutional clients of Equity Trust Company. Brokerage Services Available Through ETC Brokerage Services, Member SIPC, and FINRA. *Founded in 1974 | Self-Directed IRA Custodian since 1983. The predecessor business to Equity Trust Company was established in 1974 and the IRS approved as a custodian in 1983. **Assets under custody as of 1/31/2023. 1ici.org, total assets in IRAs as of 12/2022
You are leaving trustetc.com to enter the ETC Brokerage Services (Member FINRA/SIPC) website (etcbrokerage.com), the registered broker-dealer affiliate of Equity Trust Company. ETC Brokerage Services provides access to brokerage and investment products which ARE NOT FDIC insured. ETC Brokerage does not provide investment advice or recommendations as to any investment. All investments are selected and made solely by self-directed account owners.
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