A self-directed IRA can allow an investor to hold certain alternative assets, including investment real estate, within a retirement account. Any income or gains generally remain within the IRA and receive the tax treatment applicable to that account.
A qualified custodian administers the account, while the IRA—not the individual investor—purchases and owns the property. Income and expenses must generally flow through the IRA, and the property cannot be used for the account owner’s personal benefit.
Self-directed IRAs are subject to strict rules. The IRS identifies potential prohibited transactions such as:
A prohibited transaction can create serious tax consequences and may cause the account to lose its IRA status. Review the IRS guidance on prohibited transactions.
Financing an IRA-owned property can be complex. The loan may need to be nonrecourse, and income associated with debt-financed property may be subject to unrelated business income tax. Investors should consult an experienced custodian, tax advisor, and attorney before purchasing or financing a property.
CoreVest offers business-purpose financing for residential investment properties. Acceptable ownership structures and borrower eligibility vary by loan program and transaction.
This article is provided for informational purposes only and does not constitute legal, tax, retirement, investment, financial, or lending advice. Self-directed IRA transactions involve complex rules and potential tax consequences. Consult qualified legal, tax, and retirement professionals before proceeding. All loans are subject to underwriting, credit approval, eligibility requirements, and applicable terms and conditions.
CoreVest Finance | NMLS #1627183
