Rental Property

Investing in Rental Property

Rental property in a self-directed IRA includes residential homes, condos, townhomes, commercial buildings, and even foreign real estate. Rentals can provide steady, monthly income as well as the potential for property appreciation over the years. Your IRA owns the property and all income is deposited into the account on a tax-sheltered basis, which is the goal when investing for retirement.

You can partner your IRA’s funds with other individuals (or their IRAs) to invest in rentals. Income and expenses are determined based on the percent of ownership of each party. This works well if you have limited funds to invest or when investing in more lucrative assets with a group of investors.

A Few Rules & Guidelines

  • Relevant expenses must be paid by your IRA; be sure your plan has adequate funds to cover these after purchase.
  • Your IRA can hire a property manager who is not a disqualified person to receive rents, pay expenses, and screen tenants.
  •  A third, non-disqualified, party must perform maintenance and repairs; you are prohibited from doing these yourself.
  • Rental property in a self-directed IRA is for investment purposes only and cannot be used by you or any other disqualified person for any purpose.
  • You cannot purchase property from a disqualified person or entity.

Two story house with a red door

Standard apartment complex with parking lot

Tips for investing with your IRA

  • Do your research—inspect the property, review the property’s sales history, past owners, tenants, and current renters. Also understand any HOA or other restrictions.
  • If you are investing in foreign real estate, have a clear understanding of that country’s rules and regulations.
  • Your IRA can use a non-recourse loan to leverage investment buying power. These are more involved than conventional loans. Consult an appropriate professional to help you navigate the requirements.

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Invest for Success: Real Estate in Your IRA