Toll-Free (866) 447-6598

Real Estate IRA

What is a Real Estate IRA?

“Real estate IRA” is a term used to describe an IRA or 401(k) allowing real estate investment(s).  You can use a Traditional, Roth, SEP, SIMPLE IRA or even a Solo 401(k),

  • 10% Holdback on Brick & Mortar Real Estate Transactions

All expenses of IRA-owned assets must be paid for by the IRA.  Paying real estate related expenses personally can lead to a Prohibited Transaction.  The 10% holdback does not stop withdrawals and paying vendor bills. What it stops is new investments when you have real estate in the account. It is a red flag for us to look and ask the question as to how the account holder plans on keeping the property functional. The reserve funds are a way for us to make sure that you (account holder) can keep the property in good working order, pay taxes, repairs, etc.  A minimum deposit of $325 is insufficient for this purpose.  This holdback may be waived if the account holder has alternate qualified funding sources to keep the account in decent liquidity.

  • Excluded States for Brick & Mortar Real Estate only:

Because of a variety of issues, we have encountered with the following locations we will no longer accept transactions on physical real estate (buying property directly) in the following areas:  The State of Florida The State of South Carolina, The State of Maryland, The State of New York, Cook County, Chicago, Illinois, The State of Georgia.

With a real estate IRA, you can earn tax-free/tax-deferred returns on your real estate investments.

What Types of Real Estate IRA Investments are Allowed?

The following is a partial list:

  • Raw land
  • Single-family homes
  • Commercial property
  • Apartments
  • Duplexes
  • Condos/townhomes
  • Mobile homes
  • Real estate notes
  • Second mortgages
  • Partial notes
  • Real estate purchase options
  • Tax liens certificates

The following rules govern investments in a real estate IRA:

  • Your IRA Cannot Purchase Property Owned by You or a Disqualified Person
  • You Cannot Put Any of Your Own Money into the Deal
  • You Cannot Have “Indirect Benefits” from Property Owned by Your Self-Directed IRA
  • Real Estate IRA Investments Are Uniquely Titled
  • IRA Investments that Use Financing Must Pay UBIT
  • Real Estate IRA Expenses Must Be Paid from Your IRA
  • Real Estate IRA Income Must Return to Your IRA
  • For more information, see IRA Rules.

Attention:

uDirect IRA Services staff is working both from home and from our offices in response to COVID-19. Rest assured, we are fully operational and ready to help with your retirement needs.