Can I Buy Real Estate with a Self-Directed IRA, and How Does That Work?

Let’s face facts: real estate is one of the most popular investments around. Global real estate is $379 trillion, according to a 2024 estimate…and that’s from a few years back. So, if you’re wondering “Can I buy real estate with a Self-Directed IRA,” let’s address those questions right now.

Can You Really Buy Property in a Self-Directed IRA

Yes. A Self-Directed IRA lets you hold real estate directly within the account. That includes single-family homes, multi-unit rentals, commercial buildings, land, and even vacation rentals…as long as they’re purely investments. Once the IRA is funded, you work with your administrator to process the purchase. The property title is held in the name of the IRA, not your own.

Who Pays for Expenses and Collects Income

All income and expenses have to flow through the IRA itself. That means property taxes, maintenance, insurance, and repairs are paid from IRA funds. Rental income, on the other hand, is deposited back into the IRA, where it grows tax-deferred or tax-free. You can’t pay out of pocket for a repair and reimburse yourself later; everything must stay within the account.

Can You Live in or Manage the Property Yourself

No. The IRS considers that a “prohibited transaction.” You can’t live in the property, rent it to family members, or perform physical work on it yourself. Even mowing the lawn or painting a wall could be considered “self-dealing.” The property has to operate as a true investment, managed at arm’s length through third parties like contractors or property managers.

How Does Financing Work

You can use financing, but it must be a non-recourse loan—meaning the lender can only claim the property itself as collateral, not your personal assets. Traditional mortgages don’t qualify because they require personal guarantees. Non-recourse loans usually come with stricter terms, but they’re the only compliant option when using an IRA.

How Are Taxes Handled

Rental income and gains from a sale generally stay tax-deferred inside a Traditional Self-Directed IRA, or tax-free if it’s a Roth. However, if you use debt financing, part of your profits may be subject to something called Unrelated Business Income Tax (UBIT). Your administrator can help you understand whether it applies in your situation.

What Happens When You Sell the Property in Your Self-Directed IRA

When your IRA sells the property, all proceeds go directly back into the IRA. You can reinvest those funds into another property or a different asset class entirely. You don’t personally pocket the profits until you take a retirement distribution. This keeps your gains shielded under the same tax advantages that make IRAs so powerful.

How Do You Keep Everything Compliant in a Self-Directed IRA

The simplest way? Work closely with a qualified Self-Directed IRA administrator. They handle the paperwork, recordkeeping, and IRS reporting so you can focus on the investment itself. Their role is to ensure every transaction stays within IRS rules—because one prohibited move can disqualify the entire account.

Why Do Investors Choose Real Estate for Their IRAs

Real estate adds a sense of stability to a retirement portfolio. Unlike stocks, it’s a tangible asset with steady income potential. Investors like that they can understand it, check on it, and control their own strategy. When managed properly, it can generate long-term growth while offering a buffer against inflation and market volatility.

Interested in learning more about Self-Directed IRAs?  Contact us at 866-7500-IRA (472) for a free consultation or download our free guide.