I've set up a self directed checkbook LLC IRA. So I am now able to invest my IRA retirement monies into real estate. There certainly are many stringent specific rules that are applicable. Such as you cannot stay in the property itself, or have any family members benefit from it. My question is once you hit retirement age, how is the property extracted from the IRA ? If you buy a $500,000 property that appreciates to 1 million, you would be paying income tax on the $1 million I presume. How would the fair market value of the real estate be assessed? Would you be able to buy it out of the IRA before retirement ? Does anyone else do this￼ ?
Investing your IRA in a property you wish to use personally in the future typically does not make sense.
You do not invest your IRA in a particular stock because you want to have that stock personally in retirement. You choose any investment for your IRA exclusively with the idea of best growing the value of the IRA and creating income you can use in retirement.
To take a property held by your IRA requires having the property formally appraised. The property is then distributed in-kind from the IRA to you personally. This is the only way you can acquire the property, you may not purchase it from your IRA. The appraised value of the property determines the amount of the taxable distribution. In your case, you would be paying taxes on $1M all at once. Ouch!
You can ask the IRS/DOL for a prohibited transaction exemption and possibly buy the property from your IRA.
However I agree with @Brian Eastman not a good idea to buy it to retire in it. That may even be prohibited.