3 Tips to Know When Buying Real Estate with Your Self-Directed IRA

By May 3, 2016 Blog 3 Comments
Real Estate Self Directed IRA Preferred Trust Company

One of the most beneficial aspects of buying real estate with your IRA are the tax benefits. Investors have been purchasing real estate with their SD IRA’s for decades and using the real estate as a tax-deferred investment growth vehicle. Preferred Trust Company provides three important tips for understanding the benefits of owning real estate through a self-directed IRA:

  • When you purchase real estate through your self-directed IRA, all expenses associated with the property purchase must come directly from your IRA. This protects your investment from any unnecessary taxation.  An Investment Authorization and Direction form must be completed (along with other applicable documents related to the purchase) and submitted to Preferred Trust Company prior to the release of funds for the purchase. Subsequently any expenses related to the property will require and Investment Expense Authorization form and the supporting invoice.
  • Preferred Trust Company allows you to purchase real estate using your self-directed IRA anywhere in the United States. For example, an account owner residing in California can purchase real estate in Texas or Delaware with their Preferred Trust Company IRA; this allows you the freedom to diversify your investments in the markets that best suit your financial goals.
  • Real Estate can be purchased to “fix and flip” or as an income producing rental property. All proceeds from the sale of the property or monthly rental income generated must go directly back to your IRA at Preferred Trust Company in order for it to remain a qualified investment and retain its tax-deferred status.


  • Luke Smith says:

    I never would have thought of using an IRA to buy real estate! I always thought that any use of funds in an IRA before retirement would incur tax penalties, so using it in an alternate investment strategy is a novel concept for me. I am sure that it would be important to work closely with a real estate agent who had done something similar before to make sure you were within the bounds of the law.

  • My parents want to buy a real estate property for retirement. It was discussed here that it will be beneficial to have a preferred trusted company. Moreover, it will be best to have professionals when planning to buy a real estate property.

    • Izzy says:

      Hello Mariah, when you say your parents want to buy a real estate property for retirement, are you meaning for them to live in OR for them to use as an income producing property for their retirement? If you are asking if they can buy a property with their IRA and use it as their primary residence, then no, they cannot do that. Benefiting personally from any asset owned by your IRA is prohibited by the IRS. It’s called self-dealing. Furthermore, you can’t let any of your lineal relatives benefit from the asset either; this includes your parents, grandparents, children, grandchildren, spouse and fiduciaries. None of you can live in or lease or vacation in real estate owned by your IRA.

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