What Kinds of Real Estate Can You Buy with an SDIRA?

With an SDIRA, you can buy and hold property, fix-and-flip properties, or even create a private mortgage, which is what our investors

With an SDIRA, you can buy and hold property, fix-and-flip properties, or even lend on a private mortgage.
With an SDIRA, you can buy and hold property, fix-and-flip properties, or even lend on a private mortgage.

use when they invest as private investors for our property rehab opportunities.

Of course, all of the proceeds from these investments have to go back into your IRA, as well.

 

Rules to Investing in Real Estate from IRA

If you don’t mind, I wanted to take a second to talk about what you can and can’t do in-regards to investing in real estate from an IRA account.

You Can’t Mix Funds on Investments

If you’re going to use your IRA to buy a piece of real estate, ALL of the money used to buy that house has to come from your IRA.

 

Proceeds Have to Go Back into the IRA

Regardless of whether it’s rental income, or interest from a private mortgage that ends up paid-off from a private lending agreement, the money you make has to go back into the IRA.

 

You Can’t Own the Property You’re Buying

The IRS has strict stipulations that dictate whom you can buy or sell real estate to using funds from your IRA.
The IRS has strict stipulations that dictate whom you can buy or sell real estate to using funds from your IRA.

That’s considered “self-dealing” by the IRS.

The IRA owns the property technically, not you.

 

All Expenses Must be Paid by IRA

All expenses associated with the property you buy have to come from the IRA itself.

This includes property management fees, taxes, condo association fees, maintenance, EVERYTHING.

 

You Can’t Buy OR Sell to a Disqualified Person

According to Internal Revenue Code Section 4975, selling to a “disqualified person” is considered “self-dealing” as well, and will get you

in-trouble with the IRS in a heartbeat.

Here are the people the IRS considers disqualified:

  • Your Parents
  • Your Children
  • Your Grand and Great-Grandchildren (including their spouses)
  • Your Grand and Great-Grandparents
  • Your Spouse
  • Yourself, or any fiduciaries of the SDIRA
  • Any business entity, service provider, or fiduciary that owns 50% of or more (either indirectly or directly)
  • Anyone that provides a service to the IRA, like a CPA or custodian/administrator of the IRA

For a complete list of people you can’t buy from or sell to, check out this page at IRS.gov.

Next: More on What You Can/Can’t Invest In, How to Move to a Self-Directed IRA, and More…