28 Replies

I'm looking to use my IRA to invest in real estate. I'm looking for any advise from anyone who is doing this and which company are you using as the custodian. Thank you.

Hi Paula,

Who is your IRA with now? There are a hundred custodians out there and you have to do your research. I am using Accuplan and have so far been happy but it's been less than a year. Hopefully others will post their input as well.

Again, do your research on the different custodians you are considering and be patient. 

Best of luck!


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Hi Paula, I have spent 10 years working for custodians that will hold real estate as an asset in an IRA. I have educated many investors on the rules and regulations surrounding real estate investing in IRAs. I am currently an independent consultant and am happy to give you some information. Here are a couple of key points:

1. Real estate purchased by your IRA must be for investment purposes only, meaning you (or a direct relative) cannot use the property your IRA has purchased. Also, you cannot use IRA funds to purchase a property you currently own or a any direct relative may own (parents, spouse or your children and their spouses).

2.  There are a number of different ways to structure the investment depending on how much you have to invest.  I also suggest 'doing the math' first to determine initial cost of ownership and ongoing expenses related to the investment.

3. Any expense related to the property must be paid from IRA funds; also any income generated must go directly back to the IRA.

4.  Remember the Government created IRAs as an additional way to save for retirement therefore there are rules that deter the account owner from using those funds prior to retirement.

5. Internal Revenue Code states that an IRA must have a 'custodian' to report annually to the IRS on asset values in these accounts. The "Code" also describes who is able to act as a custodian and it is usually a bank or a company that is regulated by a state banking commission. There are many, many companies on the Internet who promote their services for self-directed investors: some are regulated custodians; others are administrators who must identify their custodian; yet others are "facilitators" helping investors set up certain structures prior to making a self-directed investment.

6. The concept of 'self-directed IRAs' and 'self-directed investing' really means that the IRA account owner is totally responsible for performing due diligence on the investment and service providers.

7. With that being said, I just want to reiterate that I am attempting only to educate you on the highlights of IRA investing in real estate. I am not promoting any investment strategy or products; not discussing any performance and giving no tax, legal or investment advice. I will be happy to provide references to various Government publications and try to answer any other questions you may have.

Hope this was helpful.

Hi Timothy,  Many people prefer to work with a local company.  Midland is an administrator and has been around for quite a while.  Good luck with your investing.  S.

@Sandra Reese I have question regarding IRA and partnership. Here is the scenario,

Person A and Person B are partner

Person A has a self-directed IRA which will contribute the 25% down payment

Person B has good credit and will loan the other 75% from non-recourse lender

Can Person A and Person B buy the investment property into an LLC and get the company under their name as 50/50 business owner? The LLC for asset and law-suit protection.

There is no doubt that SDIRAs are very flexible options and allow for a diverse set of investments, including real estate. The problem is that there is often confusion about SDIRA tax rules. Compounding the issue is that the majority of CPAs don’t understand the complexity associated with them.

But even though an SDIRA can invest in most things, certain investments can trigger immediate tax concerns. The two main issues for SDIRAs relate to income from a trade or business that is regularly carried on (this can be directly or indirectly) or income generated from debt-financed property. These issues are identified herein as: (1) unrelated business taxable income (“UBTI”); and (2) unrelated debt-financed income (“UDFI”).  Many investors have heard of UBTI, but many are not aware of UDFI. 

What this means in practice is that if your self-directed IRA acquires a single family home for $200,000 with a 50,000 down payment and obtains a $150,000 loan to finance the purchase, approximately 75% of the income generated by the property would be subject to UDFI. The UDFI calculation is actually a little more complex. It is calculated as the percentage of average acquisition indebtedness for a tax year divided by the property's average adjusted basis for the year (average debt/average basis).

Anyway, just make sure that you understand some of the tax issues before you jump in!

Rental Income going into a SDIRA (checkbook LLC) ......

I just purchased a rental property in my LLC (cash transaction - no financing). The LLC is a "single member" entity, therefore, I understand there is no 1065 filing reuirement (only multi-member LLC requires 1065 filing). However, rental income is $1400 per month. Do I need to file Form 990T to report rental income?? If so, I "assume" the rental income is tax deferred until distributions are received from the IRA custodian??

I appreciate any input.  Thanks!

@Donna Smolinski  

I hate to say it, but if the firm that setup your Checkbook IRA LLC did not make this clear to you, and is not available to easily answer this question for you, you used the wrong firm. You should not have to go to BP for basic support like this.

A single member LLC is disregarded for tax purposes, so no return is required.

A 990-T does not apply to passive rental income.  The trust taxes UBIT and UDFI apply only to trade or business activities (i.e. flipping houses) or the use of leverage, respectively.

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Thank you for your quick response. 

Actually, the firm that set up my LLC "DID" say what you stated above, however, in past years I was given some bad advice from a licensed "CPA" which cost me about $11k in penalties. Of course I switched CPAs immediately after that, and I learned to be more pro-active in tax matters and self-educate as much as possible now, since even the professionals make errors, (especially in complex tax areas of SDIRA issues). The IRS tax codes are complex & can be confusing about the filing requirements for SDIRA entities. I thought BP was a good place for a little clarification and backup support. I'm sorry you feel that I shouldn't have to come to BP for support on this topic???

I've been using Equity Trust, and they are always responsive. You MUST do your research yourself though and be very careful of Tax Laws. I've still got questions on certain types of investments, but for now I'm just using Promissory Notes in my IRA to invest in a local builder. I am considering other ways to use those funds, but need to research first (i.e. I'll be posting here more).

 @Paula Schafer :

Hey Paula,

I can say I'm an expert in the SDIRA world, but I can't say I'm unbiased. I work for Provident Trust Group, just so you're fully informed.

The first thing you should do when looking for a custodian is decide what type of account you want to open, and what type of assets you want to invest in. For example if you want to roll over 401k pre tax funds, you would obviously want to open a traditional IRA. I'm going to assume that you're planning on investing in real estate, but be sure to be a little more specific. Things like tax liens and deeds can have different costs associated with them than purchasing a rental property will.

Next find some reputable passive custodians and do some online research. Unfortunately the world of self directed retirement accounts is not what you would call well known (2-3% of all retirement funds) so the sample size is going to be fairly small. Once you narrow that down to a few companies you are interested in, send them an information request, or give them a call to discuss how they operate, what assets they will allow you to hold, and what their fee structure is like. For example some custodians will have tiered pricing based on account value and how many assets are held under custody. Fortunately Provident Trust Group has a flat annual fee, which makes my job pretty easy. The other fees you are going to want to ask about are transactional fees. What do checks, ACHs, and wires cost, because remember you're going to have all your expenses paid for by the IRA which means you need to request monies out, unless you're looking at doing an IRA LLC which is a completely different conversation.

Then all you have to do is decide what the best fit for your situation is.

Let me know if you have any other questions, I'm always happy to help.


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Equity IRA is focused on educating and providing quality customer service to anyone interested in the self-directed space, they give free consultations.

Hi Paula,

I like using my IRA to buy small 1st position cash flow Mortgage Notes. Of course I enjoy the cash flow but I also enjoy the high returns and peace of mind that comes from knowing that my investment is safe under a blanket of protective equity.