Real Estate IRA Investments

Self Directed IRA accounts that focus heavily on real estate investments are frequently referred to as “Real Estate IRAs.”  With a Real Estate IRA, your retirement funds can invest in all kinds of real estate and real estate-related assets.

Real Estate Crowdfunding

Due to recent changes in SEC guidelines, both accredited and unaccredited self directed IRA investors are now able to invest in smaller “crowdfunded” real estate investment projects.  Unlike large funds that pool hundreds or thousands of real estate assets and hundreds of millions of dollars in investor capital together, crowdfunding allows investors to participate in a single project as small as a residential house or single commercial building, up to small collections of properties.  Crowdfunding allows self directed investors to get intimate with their investments by seeing exactly what is happening with the project that they have chosen to fund, and they often even get to know the other investors that are co-funding the same project.

Commercial Real Estate

Commercial real estate typically includes office buildings, retail storefronts, mixed use (usually commercial and residential), industrial, etc.  Your IRA does not have to have enough cash to fund these investments completely as you may qualify for a non-recourse bank or credit union loan (loan products are offered by some lending institutions specifically for self directed IRA investors), or you may be able to partner with other funding sources.

Residential Real Estate

Residential real estate may be a great choice for you if you want to invest in wholesale or retail real estate strategies like “quick flips” or “fix and flips.”  You may also want to benefit from the rental income gained by building a portfolio of single family homes, apartment buildings, and more!  Be sure to thoroughly understand the IRA rules around prohibited transactions when purchasing real estate in your IRA to avoid penalties.

Some things to keep in mind when making direct real estate investments:

  • The real estate becomes an asset of your IRA.  This means your IRA owns it the real estate.  You do not own it, personally, nor can you use it for personal reasons.
  • All income and expenses generated by the property must go directly into and out of the IRA.

Mortgage Notes

Be a private real estate lender with your IRA funds and help others purchase new properties.  The terms of the loan, including interest rate and length of the loan, are determined by the agreement between you and the borrower.  Depending on the state in which the collateral property for your loan exists, your IRA will hold a Note secured by either a mortgage or a Deed of Trust.

Option to Purchase Agreements

Your self directed IRA can buy the option to purchase real estate, rather than purchasing the real estate itself. This strategy allows investors to benefit from the cash flow and potential appreciation of real estate without some of the risks of ownership.  An option contract can be executed at any time and the property can be purchased by your IRA, or you can sell the option out of your IRA without ever taking ownership of the property.

REO Properties

REO stands for “Real Estate Owned” and refers to bank owned property, typically by way of foreclosure.  You can find deep discounts in real estate by purchasing distressed pre-foreclosure and bank-owned properties in your IRA.

Foreign Real Estate

Investing your IRA in off-shore real estate can be very similar to purchasing property in the United States.  When looking offshore, be sure to do your research thoroughly and choose wisely.  Remember, real estate acquired by your IRA cannot be used for personal reasons, so consult your tax adviser before buying that tropical getaway in your IRA!

The choices for real estate IRA investments that are allowable within an IRA are nearly endless.  Explore the investment options section for more information.


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