Using a Self-Directed IRA to Purchase Real Estate

5 Replies

Is there a way to use a self-directed IRA to purchase real estate I already own? If not, can I purchase an ownership interest in the LLC that holds the real estate through a self-directed IRA? Thanks in advance!

@Matthew Stapleford

No, this is what is called a prohibited transaction. I am pretty sure that I have heard just about every way to try and skirt these rules but there really isn't one. The common schemes to avoid the letter of the law but still violate the spirit of the law have been identified by the IRS and are also illegal. While this might be a bit of a let down, I will share that our most successful clients tend to invest into real estate both outside and inside of their self-directed IRA's and 401k's. The property that you own outside of your retirement account can generate income for you in the short term while properties inside of your retirement account generate earnings on a tax-advantaged basis that you can benefit from later on. I think it is a winning combination.