Alternative Investments

Self-Directed IRA Investment Options for Beginning Real Estate Investors

Using a Self-Directed IRA to invest in retirement opens up an intriguing possibility: using real estate to establish a cash flow in your nest egg. But it does not just happen overnight, either. Investing in real estate requires diligence, discipline, and a discerning eye. The good news is that you can use a Self-Directed IRA to get the most out of your real estate investment strategies—especially if you know the ins and outs of your options within a self-directed account.

Where should you start? Beginning real estate investors will likely want to stick to the following investment classes as they begin to navigate the waters of real estate retirement investing:

Self-Directed IRA Investment Option #1: Single-Family Rentals

One of the most popular types of real estate investing is the single-family rental. Essentially, you would own a house and rent it out to one person—or group of people.

According to statistics from Freddie Mac, there are some 43 million rental households in the U.S.—and only 18 million of those live in multi-family homes. That means that single-family units are actually the overwhelming favorite amongst renters and investors. It’s a tried-and-true formula that beginning real estate investors cannot afford to ignore.

Beginning real estate investors might also find this type of investment more amenable to their lifestyle because they are used to considering the value of single-family homes. For many of us, it’s the primary type of real estate we will ever invest in, even if we do not use Self-Directed IRAs or turn our homes into rentals. This gives the average investor some degree of experience with single-family homes from the start.

Option #2: Multi-Family Rentals

Here’s where it can get a little tricky—but only if you do not know the limitations of a Self-Directed IRA. One frequent real estate investment strategy is to purchase a multi-family home such as a duplex and rent one of the units to help pay for the mortgage. Meanwhile, the owner can live in the other unit, essentially rent-free, if the cash flow is present.

The Self-Directed IRA would not allow such an arrangement. Because you would not be allowed to personally stay in the investment property you hold in an IRA, you would not be able to use a multi-family rental in this manner—however, you can still use it as a rental property and rent out both units, which for many people accomplishes the same thing.

Option #3: Home Flipping

If you are not experienced with home flipping, it might not be the most prudent idea to jump directly into the deep end of the pool just yet. But home flipping takes advantage of most peoples’ experience with buying and selling homes.

Home flipping, however, is a unique skill. It will require that you do plenty of research and take your time when you search for great properties. After all, the idea that “the profit is made on the purchase” applies to real estate—if you cannot find a good deal, then no amount of elbow grease is going to make you a savvy investor.

No matter what options you choose to get started in Self-Directed IRA real estate investing, there are ways to break into it without stepping over your own shoes. But it does require work and diligence to make sure that you understand the ins and outs—as well as the limitations of the Self-Directed IRA itself.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at