Self Directed IRAs
Financial Planning Investing

Can Self Directed IRAs Own Real Estate Investments?

Can you hold real estate in your self directed IRA?

A self directed IRA can bring the potential to invest in residential and commercial properties. This may include land and mortgage notes, among other things. Let’s go over the basics of self directed IRAs, their advantages, and if self directed IRAs can own real estate investments.

What is a Self Directed IRA?

An IRA, or an individual retirement arrangement, allows individuals to make tax-deferred investments to ensure financial security upon retirement. A self direct IRA can hold many investments, which IRAs remain prohibited from. A trustee or a custodian administers the account. It is self directed through the account holder.

Traditional IRAs are limited to stocks, certificates of deposit, exchange traded funds or mutual funds, and bonds. While self directed IRAs require due diligence and greater initiative, they can invest in a broader array of assets, including the following: 

  • Real estate
  • Precious metals
  • Private placements
  • Tax lien certificates
  • Limited partnerships

Can they Own Real Estate Investments?

Self directed IRAs can get involved with real estate investments. Investors can purchase residential and commercial properties, including mobile homes and raw lands. Furthermore, self directed IRAs can move further into Opportunity Funds.

They can proceed as long as the self directed IRA follows the various Opportunity Zone investment requirements, which include being filed as a partnership organized for investing or as a corporation deferral income tax return, followed by filing Form 8896 from the IRS to qualify. Lastly, they must invest at least 90 percent of assets in QOZ businesses. They can use vacation homes, second homes, personal office buildings, or your children’s homes.

Real Estate IRA Advantages

Self directed IRAs can benefit greatly from real estate investment. They don’t limit investors to mutual funds, stocks, or bonds. These real estate investment opportunities allow for broad account diversification that protects from volatile, unpredictable stock market charges. Real estate investments can become tax deferred or tax free, depending on the account type.

Additionally, self directed IRA real estate investments allow for portfolio diversification not limited to specific geographical locations. Outside of Opportunity Zones, investors can purchase real estate properties in any country they desire.

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