Real Estate IRA LLC

What Is a Real Estate IRA LLC?

A real estate IRA LLC is typically used in one of two ways: as a single-member LLC for one individual’s IRA (also referred to as “a checkbook IRA”) or as a multi-member entity for several investors to pool their funds together. Those with multiple members often partner their funds to acquire larger investments.

You do not have to form an LLC to invest in real estate with your IRA, and many people do not use an LLC to hold investment property. However, those who do use an LLC have immediate access to funds, can complete transactions quickly in competitive markets, and may avoid some administrative costs incurred by a typical self-directed IRA.

Checkbook control of your IRA funds

When the only member (owner) of the LLC is an IRA, this structure is also known as a checkbook IRA. The manager of the LLC opens a bank account for the entity, and the IRA funds that bank account. This gives individuals direct access to and control over their retirement funds. The ability to write checks makes it easier to manage and pay expenses to maintain the assets in the account.

Two story yellow townhomes

Pen sitting on top of a checkbook IRA LLC checkbook

Of special consideration

  • The same regulations that govern IRAs apply to these LLCs.
  • IRA owners must avoid prohibited transactions and dealings with disqualified persons to comply with IRS guidelines.
  • IRA owners are prohibited from commingling non-IRA funds within the LLC and from taking any compensation for managing the LLC.
  • Real estate IRA LLC transactions require a great deal of accounting and IRA owners are responsible for keeping complete and accurate records.
  • Forming an LLC creates an additional cost and entails a supplementary set of rules that must be followed.
  • As of January 1, 2024, a Beneficial Owner Information (BOI) report must be filed by the beneficial owners of most LLCs, corporations, or other entities owned by retirement plans.

Advanta IRA strongly encourages individuals considering this type of set-up to consult with your attorney, CPA or other financial professional to determine if using an IRA LLC is right for you.

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