Could Your IRA's Property Manager Be a Disqualified Person?

Investing in real estate with your self-directed IRA or Solo 401(k)? 🚀🏡 It’s a smart way to build wealth while keeping those sweet tax advantages. But here’s the deal—IRS rules say you can’t personally manage your IRA-owned properties, which is why many investors hire a property manager to handle the day-to-day. This keeps everything hands-off and IRS-compliant while letting your investment do its thing.

Could Your Property Manager Be a Disqualified Person?

Under IRC 4975, some people are considered disqualified persons, meaning your IRA can’t do business with them. This includes you (the account holder), certain family members, and any business where you have significant ownership. It can also include service providers—like your property manager—if they have discretionary control over your IRA’s assets.

If your IRA hires a property manager and they don’t have decision-making authority over the account, they’re probably fine. If they do have that authority and, for example, your IRA lends them money, that could trigger a prohibited transaction under IRC 4975(c)(1)(B), which bans loans or extensions of credit to disqualified persons.

The Key Factor

It all comes down to whether your property manager meets the definition of a disqualified person. If they do, lending them money is a no-go. If they don’t, it might be allowed—but proceed with caution.

Next Steps

Not sure where your property manager stands? Reach out to your IRA custodian. You may also want to check in with a legal or tax pro to make sure everything stays compliant. And if your property manager is in the clear, be sure to document everything before making any moves!