How to Use Your IRA to Invest in Real Estate

The Official Guide

For many smart investors, it’s the right choice to move those hard-earned IRA and 401(K) assets into a self-directed IRA — and use that IRA to invest in cash flow real estate.

It makes sense because:

Real estate has outperformed the stock market by approximately 100% since the year 2000.

And, with a self-directed IRA:

  1. You aren’t locked into the narrow choices and self-serving interests of your typical account custodians, such as mutual funds, banks, brokerages and life insurance companies.
  2. You can collect an unlimited amount of rental income — tax free (with a Roth IRA) or tax deferred.
  3. Your IRA ‘provider’ acts only as an independent administrator of the account, handling the investment transactions that you dictate.

Rules for Investors

Self-directed IRA investors are permitted to purchase a variety of real estate assets, including:

  1. Single-family homes
  2. Apartments
  3. Duplexes

Purchasing a rental property with your self-directed retirement account is really as easy as 1-2(-3):


  1. Convert your existing traditional/Roth IRA or employee 401(K) into an IRA custodial account.
  2. Purchase real estate under the IRA custodial account name.


  1. Open an IRA custodial account.
  2. Transfer cash from your existing IRA or 401(K) into the IRA custodial account.
  3. Purchase real estate under the IRA custodial account name.

We’ll connect you with a retirement expert to help you convert your IRA or 401(K) or open a new IRA custodial account.

Important Notes

  1. By using an IRA, you can move in and out of real estate as often as you like, provided you keep the sales proceeds in the IRA itself.
  2. Your traditional IRA allows you to defer taxes on profits generated by the IRA until you reach age 59.5; a Roth IRA is tax free. However, if you have profits attributed to leverage, that percentage of your profits will be subject to unrelated debt income tax (UDIT).
  3. You can buy or sell an unlimited number of investment properties within your IRA, tax deferred or tax free. However, especially if you’re ‘flipping’ properties, you should be aware of unrelated business income tax. If the IRS determines that you are a dealer in real estate, you will be judged to be operating a business within your IRA, which may generate a UBIT liability.
  4. You may be able to defer capital gains taxes using the ‘1031 exchange,’ whereby, per U.S. Tax Code section 1031, you postpone your tax bill by arranging for a deferred like-kind exchange. “This time-honored maneuver is one big reason that some real-estate investors have struck it rich.”

Free Consultation

Speak to our Director of Investments...