Getting a property out of a Self Directed IRA

6 Replies

I've been reading up on using self directed IRA's to finance real estate, and I haven't found an answer to this question. Once you buy a property in a SDIRA is there any way to get that property out of the IRA and still retain ownership? From what I've read you don't have much control over the property in the IRA, so are you essentially stuck with that forever?

Kyler, you can not retain ownership of the property owned by your IRA if you sell it. In other words IRS rules don't allow you to sell it to yourself because you are considered Disqualified Person

When you own property in an IRA you retain 100% control, but there are certain limitations that you need to be aware of. Here is what IRS has to say about it :

@Kyler Pace

If your IRA owns property, you may not use it or benefit from the property in any way.

You can take the property itself as a taxable distribution from the IRA to make it yours. This is generally not tax-favorable as you are taking a large chunk out of the IRA at once and will pay a high rate of tax. If you are under age 59 1/2, there is an additional 10% penalty.

Bottom line is that we strongly recommend against using IRA funds to purchase a house you wish to have personally in teh future. Focus on investing the money and getting good returns.

@Brian Eastman I was considering withdrawing a property out of a self directed IRA and adding it to my personal portfolio as the cares act removes the penalty for up to $100k. It sounds like you have to do pull the property out all at once, you can't take a percentage.

That being the case, if I bought this property years ago and currently have a non recourse loan, would I be taxed and penalized for the full value of the property if I pulled out of my IRA? Or would I only be taxed for the equity which could be paid over 5 years?

Also, do you have the full tax benefits of investment property restored when it's pulled out of an IRA (depreciation, etc.)? That would be the reason to pull it out; if I were to do it over again I would have pulled the money out of my IRA and purchased it directly.



@Bryce Carroll

You can distribute the entire property out, or your could potentially take the portion out which would create number of complications for you down the road. Simpler route would be to distribute the entire property, especially if you can take advantage of the CARES Act. 

You will be taxed on the net (current market value minus debt). 

Yes, once distributed you should be able to personally take advantage of depreciation. 

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