Frequently Asked Questions About Self-Directed Traditional IRAs

Self-Directed Real Estate Investing FAQs

Want to use retirement funds to put money towards real estate? It’s not as complicated as it sounds—in fact, it’s a popular choice for investors who use a Self-Directed IRA. But just because something is common doesn’t mean you’ll have it figured out at first blush. To that end, we’re going to share some of the most common real estate investing questions we receive—and the answers that will help you figure out what it means to use your retirement funds in an asset class like real estate.

Question: Can a Real Estate IRA borrow money?

Answer: This is one of the top questions because real estate is, of course, expensive. And investors need to know whether they can use leverage to make the investments they want to make.

The short answer is yes: you can borrow money within a Self-Directed IRA. This money you can then use to turn around and buy real estate within said IRA. However, there is one limitation you should be aware of. This financing has to be non-recourse financing, which means that in the event of nonpayment, the lender is not able to pursue anything else in repayment other than the underlying collateral. In other words, a Self-Directed IRA keeps your money separate from your personal property. This is vital as it relates to retirement investing but may sometimes limit your options when it comes to borrowing money, as lenders want to be assured of payment.

Question: Who manages the real estate?

Answer: When you learn that you can’t use the real estate property you hold in a Self-Directed IRA for your personal benefit, the question is: what can you do? You’ll work with a property manager who oversees the property. This helps you maintain a degree of separation between your personal assets and your retirement assets.

It’s then the property manager’s job to pay expenses, collect rental income, and move any profits to your IRA. And while using a property manager will cut into your profits, remember that these profits will then go to your IRA, and not your personal belongings. Because they go into the IRA, they are tax-free or tax deferred as the IRA collects them.

Question: Can I sell a piece of property within an IRA?

Answer: Yes. Just as you can buy and sell stocks and mutual funds within an ordinary IRA, you can sell a piece of real estate property within an IRA. You will have to avoid prohibited transactions here, which means avoiding selling to someone who is part of your lineal family, such as a parent or a child.

If you stick to the rules, however, you’d be surprised at all of the options available to you! You can indeed buy and sell real estate within an IRA—in fact, that’s one of the key benefits that encourages real estate investors to start using a Self-Directed IRA for their real estate investments. This tax protection helps you maximize the gains you can get from these investments and sales, ultimately building up a powerful portfolio that can help sustain you in retirement.

These are just a few of the questions some investors have when they begin considering using a Real Estate IRA. But they’re not the only ones. If you want to learn more about how to use a Self-Directed IRA to begin real estate investing for retirement, you can continue reading here at You can also reach out to us directly to see if we can answer any of your questions. Just dial our number at 866-7500-IRA and one of our friendly professionals will be happy to tell you what they can!