Self-Directed Real Estate IRA

How to Avoid Running Afoul of Self-Directed Real Estate IRA Investing Rules

If you’ve been to this site before, you’ve at least seen the rules about Self-Directed Real Estate IRA investing. You can’t rent your real estate property within an IRA to a grandparent or child. You can’t transact with disqualified persons. You can’t sell the real estate in your IRA to your business partner because this could be seen as yielding a personal benefit from an account that’s designed for long-term, tax-protected retirement benefits. That’s easy enough to understand.

But how do investors with a Self-Directed IRA avoid running afoul of these rules? After all, a Self-Directed IRA is a way for someone to achieve more financial freedom. And with that freedom comes the possibility of making one’s own decisions. That puts investors in an interesting position: they have the power and freedom to make their own real estate choices, but they might feel a bit underqualified to make those choices. Here’s how to navigate this world of Self-Directed IRA rules:

Stick to Some Basic Self-Directed Real Estate IRA Rules of Thumb

Let’s say that you opened a Self-Directed IRA, put a single-family property within it, and wanted to charge rent. What are the rules of thumb that will help serve you as you go about making this investment?

  • Don’t use the property. This means you, or any disqualified person (a spouse, a child, etc.) cannot use the property directly. What’s a good rule of thumb for avoiding this? You’ll be hiring a property manager to handle repairs and service the property. As we note on our Real Estate IRA page, “You are not permitted to manage, repair, nor service the property yourself.” The simplest way to avoid this is to get acquainted with the idea that any property you own within an IRA will be something that you can only work with indirectly via a property manager. Once you understand that, the rest of the process will seem much easier.
  • Don’t purchase the property from a disqualified person. If you purchase the property from yourself, or any other disqualified person, that constitutes a prohibited transaction. This means that you can’t purchase a property from someone like a parent or a partner in your business, for example. What’s a good rule of thumb for this? When you’re looking for properties to consider in your Self-Directed IRA, you might simply start with common listings. We at American IRA don’t make specific investment recommendations, but we can tell you that there are ways to avoid running afoul of the rules and making sure that you purchase from someone that you don’t know isn’t investment advice. It’s advice for staying within the rules.

Know the Limits of Your Self-Directed Real Estate IRA

When you know what you can and can’t do with real estate within an IRA, you’ll be able to move ahead with confidence. In other words, knowledge is power. You can take the tips above and those will get you far. But it’s also important that you understand some key points.

One of those key points? The Self-Directed IRA is the owner of the property. The legal documents will be vested in the name of your IRA, often American IRA LLC FBO Your Name IRA. This should tell you a lot about the process. You own the IRA that owns the property, but you can’t directly interfere with the property itself, because it has to remain a retirement asset for you.

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

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