Can My Property management comp manage my selfdirected IRA homes

Question

I have a property management company and have always used another mgmt company to manage my personal self directed IRA owned properties. Recently heard someone saying you could manage your own property under your property mgmt company. Im not sure if  this is true or not. I usually rather be safe than sorry. Especially with the IRS. but If it might be possible can someone point to to where I can confirm this?

Brian Eastman · Answer

Jim,

With a self-directed IRA that offers checkbook control, you can provide limited property management services for a handful of doors.

What the IRS prohibits is for you or a disqualified person to benefit from or provide benefit to the IRA.  Your personally owned property management company is a disqualified person.

For you as an individual acting as manager of an IRA owned LLC to execute a contract, pay expenses and receive income - on a limited basis - is not going to be considered "adding value through the provision of goods or services".  In a conventional IRA you can do considerable work to research publicly traded stocks and funds and push the buy/sell buttons on your account  dashboard.  The acts of putting capital to work and overseeing the investments of the IRA are not a problem.

If your IRA is big enough to hold 10+ doors even just pushing the paper around could require significant time and energy, and having a 3rd party property manager would be advised.  Keep in mind, there is no proscribed IRS threshold, so when I say 10 doors, that is a reference point for "now it is a lot of work".

You absolutely may not benefit such as by paying yourself, nor may you provide benefit to the IRA via sweat equity work on property, more involved actions like an eviction, etc.

To use your personally owned property management company, however, would be a clear violation.  The company cannot get paid, and for the company to provide its services for free would be viewed as a benefit to the IRA.

Nathan Gesner · Answer

Hmm...I would talk to a CPA (or three) for clarification. The IRS doesn't want you or "unqualified" people managing the investment. However, your company is not unqualified and it's not an individual. If your business is legit and licensed, I would consider that a qualified manager.

Again, that's my opinion based on some very incomplete guidance by the IRS. I would research it to be sure.

Jeffrey Dixon · Answer

Hi Jim,

You can not use your own property management company to handle real estate owned by your IRA. You are a prohibited party to your IRA assets and by extension, so is a company you own.

Tracy Streich · Answer

@Jim Carvajal I do not think you can manage your own properties within your Management company.   Even if it is an llc you can not have benefit from SDIRA property outside the IRA.   It has to be a completely unrelated entity managing the property and handling all funds.

Eamonn McElroy · Answer

@Nathan G.

Might want to read through IRC Sec 4975, particularly Sec 4975(e)(2)(G) therein...

Brian is the expert here, listen to him.

Nathan Gesner · Answer

Thanks for the specific reference. I've heard people argue this point and even read articles about it. This is the first time I saw something in black and white.

I wish people would refer to source material more often. Very helpful!

Jim Carvajal · Answer

@Brian Eastman Yes what you said definitely makes sense to me. Thank you. And I do not want any trouble with the IRS. learned that a long time ago.

Also thank you to everyone that has chimed in I am going to review the reference put in by @Eamonn McElroy.

Happy new Year!!

Jim Carvajal · Answer

Thank you Tracy. This is along the lines of what I am thinking which is why I wanted to ask in this group.

John Underwood · Answer

I agree with @Nathan G. that this shouldn't be an issue as long as you are not benefiting personally for this management by charging any fees.

Eamonn McElroy · Answer

You're a fiduciary as it relates to the plan.

Providing services to the plan, whether or not for compensation, is a prohibited transaction.

Can My Property management comp manage my selfdirected IRA homes

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