• Ryan McKenna

How to Invest in Real Estate With a Self-Directed IRA

Updated: Aug 8, 2019

A growing number of retirement savers are becoming aware that they can choose investments other than the traditional offerings of stocks, bonds, mutual funds, ETFs and CDs within an Individual Retirement Account (IRA). Self-Directed IRAs offering non-traditional investments have increased in popularity in recent years and are somewhat more accessible for investors compared to 1974 when the IRA was first introduced. These Self-Directed IRAs allow you to invest in real estate, precious metals, notes, tax lien certificates, private placements and many more investment options.

Investing in real estate through a Self-Directed IRA can be a great way to diversify your retirement account. Traditional and Roth IRAs can be converted into Self-Directed IRAs, where the individual has more control over what to do with the cash and still has the tax deferred benefits that an IRA offers. 401(k) plans work a little differently; if the individual is still employed by the company that sponsors the 401(k) plan, he or she can't move the money around. If it's an old 401(k), a rollover is completely possible. In fact, that's what I did for my first two multifamily investments, having rolled over a traditional IRA to a Self-Directed IRA. The process was fairly easy and straightforward and allowed me the opportunity to begin investing in multifamily syndication deals as a limited partner. 

One of the biggest differences when converting over your IRA to a Self-Directed IRA is that it requires you to hire someone to act as the trustee or custodian of the account while you act as the director, deciding what to invest the account funds in. There are many custodians to choose from so I've listed a few companies below that I'm familiar with. It's always best to do your own due diligence so find a custodian you feel most comfortable with.

Midland IRA

Advanta IRA

IRA Services Trust Company

Real Estate Self-Directed IRA Advantages:

There are many advantages to using an IRA to buy real estate. If you're a successful real estate investor, or if you're just looking to diversify your retirement portfolio, imagine the possibilities of not paying taxes on the profits of your next investment. It’s possible with the combination of tax-advantages in an IRA and real estate investments. After your next real estate transaction, you could defer paying taxes on the profits for years, or never pay taxes depending on the account, if you use a self-directed IRA.

Investment Control: The account owner is the one who makes every single investment decision and ultimately determines how, where and when to invest the retirement funds.

True Investing Diversity: With a self-directed IRA you can diversify beyond the market into real property. You don’t have to be limited to stocks or mutual funds that hold real estate investments – you can own the actual property in your retirement account.

Tax Advantages = Lasting Wealth: Investing over time in a tax-advantage account like a Self-Directed IRA (tax-deferred/tax-free profits, plus the possibility of large tax deductions) can have a tremendous effect on future wealth.

Secure Hard-Earned Assets: Self-Directed IRAs are afforded protection under federal bankruptcy laws to ensure assets are secure.

Provide Wealth for Your Future Generations: Certain Self-Directed IRAs allow the passing of assets to beneficiaries after death with little or no tax, allowing you to stretch wealth over generations.

Using an IRA to buy real estate can seem intimidating, but it doesn’t have to be. These powerful tax-advantaged accounts can offer needed diversification and big profits for your retirement portfolio.


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