Can you purchase a rental property with your IRA as a co-owner/partner?

Question

I've seen this mentioned recently but it didn't ever occur to me before because I thought that everything needed to be owned by the IRA and expenses come out of the IRA, etc. If I could purchase a property 50/50 with my IRA, it would be a lot easier to finance and would I be able to manage and do repairs myself through my 50% ownership? Has anybody done this or familiar enough to explain limitations and/or restrictions? Or am I totally off base with this?

Ashish Acharya · Answer

@Corey G. You're right to be cautious, partnering personally with your own IRA to co-own a rental property is considered a prohibited transaction by the IRS, and doing so could disqualify your IRA entirely.

Here’s why:

• Self-dealing rules under IRC §4975 prohibit you (as the IRA owner) and “disqualified persons” (your spouse, lineal family members, businesses you control) from transacting with the IRA in any way.
• That means you cannot co-invest with your IRA, manage a property owned by your IRA, or provide services (like repairs or labor), even if it's partial ownership.
• Even if your IRA owns just 50%, your involvement outside the IRA creates a conflict of interest, which triggers disqualification and taxes on the full IRA balance.

If you're interested in using your retirement funds, the correct route is to:

• Use a self-directed IRA (SDIRA) or Solo 401(k) to buy a property entirely within the retirement account.
• All expenses and income must flow through the IRA.
• You must remain hands-off, no managing tenants, repairs, or even signing checks.

Some investors structure partnerships between unrelated parties' IRAs (e.g., two separate SDIRAs or an IRA and an unrelated third party), but you personally cannot co-invest with your own IRA. To stay compliant, talk to a custodian experienced in SDIRAs and consult a tax attorney or CPA who specializes in self-directed accounts before moving forward.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Brett Synicky · Answer

@Corey G.

Good question.

Unfortunately, you and your immediate family are considered disqualified persons to your retirement plan. That means none of you can personally guarantee a loan used by the IRA or Solo 401(k)—any financing must be non-recourse.

Even if you plan to partner personally with your IRA, there are strict rules. It’s not as simple as just going 50/50. The IRS prohibits self-dealing, so if either party (you or your IRA) enables the other to make the investment—meaning one couldn’t do it without the other—it would be considered a prohibited transaction.

One possible structure is to set up a multi-member LLC, where you are one member and your IRA is another. However, this setup comes with added complexity:

• The LLC must file a Form 1065 partnership return, regardless of whether any taxes are due.
• Because you (a disqualified person) are a partial owner alongside your IRA, there's a higher risk of engaging in a prohibited transaction, which could lead to your entire IRA becoming disqualified.

The LLC must file a Form 1065 partnership return, regardless of whether any taxes are due.

Because you (a disqualified person) are a partial owner alongside your IRA, there's a higher risk of engaging in a prohibited transaction, which could lead to your entire IRA becoming disqualified.

To stay on the safe side, it's generally best to keep all retirement account investments at arm's length—meaning your IRA should not co-invest with disqualified persons.

Consult a tax-advisor who's well versed in this area before proceeding.

Aaron Zimmerman · Answer

Great commentary in this thread.

I would also add that real estate generally has tax advantages when holding not in an IRA. In a way, you're forgoing the tax benefits because you aren't fully taking advantage of depreciation.

In addition, if there's any income on the property within an Ira, you may be subject to unrelated debt financing income (UDFI) on the portion you borrowed.

For IRAs, generally note investing is more preferred from a tax perspective as you're sheltering income that would ordinarily be taxed as ordinary income.

Hope this helps add some context to your situation!

Dylan Brown · Answer

@Brett Synicky is spot on.  The best way this was ever explained to me when I was just starting (even before I was a CPA and I was just an investor) was that an IRA is meant to be a tax-advantaged retirement tool, but not a way to shelter tax on your own earned income.The theory here is that if you were to invest through an IRA but then render valuable services to the asset (i.e. significant repairs and renovations) you are performing a valuable service that you are receiving income for (in the form of forced property appreciation in this case) but you are receiving that value in a tax advantaged manner.  This type of potential abuse lead to the strict self-dealing rules that Brett mentioned above.   If it were not for that, then everyone would simply invest in small business via their IRA and then run that business and grow it tax free and then sell it tax free (wouldn't that be nice!)

Matthew Schumacher · Answer

When you co-invest with your IRA (say 50/50), everything—income, expenses, even improvements—has to be split proportionally between you and the IRA. The big catch is: you personally can’t provide services to the IRA-owned portion, including management or repairs, even if you’re only 50% owner. That would be considered a “prohibited transaction” and could disqualify the IRA.

It definitely can make financing easier, and people do structure deals this way—but it has to be done very carefully. Best move is to loop in a custodian that supports these types of deals and a tax/legal pro who knows the rules inside out.

Corey G. · Answer

Thanks, I read somewhere that it was possible to co-own a property with your own solo 401k by creating a 50/50 partnership and wondered if that applied the same way to SDIRAs. I'm guessing the self dealing rule is also the same for 401ks as it is for IRAs? I figured it was likely prohibited but you know the internet, people advising all sorts of stuff.

I've considered purchasing 100% of a property with the SDIRA and being totally hands off with it but I'm not sure that I would have enough funds to purchase a property cash and the loans from within the IRA seem tricky (the partnership would solve the funding issue because I could use my non retirement funds towards the purchase as well). Additionally, the Roth Ira tax advantages come later so you can't take the deductions for repairs/ supplies/ management from the current year rentals so it's hard to know if that would work out long term.

Can you purchase a rental property with your IRA as a co-owner/partner?

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