Directly owned real estate
Real estate is one of the most popular alternative investments held in a self-directed retirement account. From residential rentals to commercial properties and raw land, these tangible assets can offer steady income, long-term growth, and powerful diversification.
Investing in real estate through a retirement account offers unique opportunities for portfolio diversification, potential income generation, and long-term growth—all within a tax-advantaged framework.
Diversification: Incorporate tangible assets into your retirement portfolio, reducing reliance on traditional securities.
Income Generation: Potential to earn rental income, which grows tax-deferred or tax-free, depending on your retirement account type.
Appreciation Potential: Real estate investments may appreciate over time, contributing to the growth of your retirement savings.
Invest in single-family homes, multi-family units, or condominiums for rental income or capital appreciation.
Considerations:
All income generated must return to the retirement account, and expenses must be paid from the retirement account.
Personal use of the property by the retirement account owner or disqualified persons is prohibited.
Invest in office buildings, retail spaces, or industrial properties to diversify your portfolio.
Considerations:
Potential for higher rental income compared to residential properties.
Requires thorough market research and understanding of commercial lease agreements.
Acquire undeveloped land (raw) or land with utilities and services (improved) for future development or resale.
Considerations:
Typically low maintenance with minimal expenses.
Potential for significant appreciation over time.
Use your retirement account funds to issue loans secured by real estate, earning interest income.
Considerations:
The retirement account receives interest payments, which grow tax-deferred or tax-free.
Due diligence is essential to assess borrower creditworthiness.
Self-directed retirement accounts allow you to purchase real estate either with cash already in your account or through non-recourse financing. The chart below highlights the key features and considerations of each funding method.
| Funding type | Key features | Considerations |
|---|---|---|
| Direct purchase (all cash) |
Key features:
• Retirement account pays full purchase price from cash |
Considerations:
• Requires sufficient cash in the retirement account |
| Non-recourse loan (financed) |
Key features:
• Loan secured only by the property |
Considerations:
• May trigger UDFI tax |
STRATA Trust Company does not provide tax, legal, or lending advice. STRATA works with non-recourse lenders like North American Savings Bank and First Western Federal Savings Bank that are familiar with this form of lending. Investors should consult with qualified professionals to determine how these options may apply to their individual situation.
STRATA’s online application makes it easy to choose your retirement account type, enter your info, and upload documents—all in one secure session. Most accounts are opened in under 10 minutes.
Transfer an existing IRA, roll over a 401(k), or make a new contribution—all processed securely with STRATA. Most funding is completed in just a few days.
Choose from real estate, private equity, debt, or metals. STRATA reviews for custodial eligibility and confirms next steps—helping you invest with confidence.
Planning is key to a smooth property purchase.
Real estate essentials
Review permitted propery types and complete a preliminary prohibited transaction self-check before opening and funding your STRATA account.
Complete STRATA’s Earnest Money Deposit Authorization form; funds must come from the retirement account. Using personal funds will disqualify the transaction.
The contract must list the retirement account as the buyer: STRATA Trust Company, Custodian FBO [Accountholder Name]. The accountholder cannot be listed personally, and the contract cannot later be reassigned or amended to name the retirement account.
Review all transaction documents, then sign where indicated to acknowledge that you have read and approved them before submitting them to STRATA for processing. STRATA will execute documents in its custodial capacity, where applicable. You may submit contracts and post-closing documents to the email below.
As the retirement account owner, you are responsible for ensuring compliance with all IRS regulations regarding your real estate investment.
Key responsibilities:
Annual Valuation: Obtain and report the property's fair market value (FMV) or good faith estimate (GFE) annually for IRS Form 5498 reporting.
Expense management: All property-related expenses must be paid from the retirement account.
Income management: All income generated must return to the retirement account.
Penalty warning: A prohibited transaction may cause your retirement account to lose its tax-advantaged status, resulting in immediate taxes and potential penalties.
You cannot personally benefit from assets held in your retirement account, such as using retirement account-owned property for personal purposes.
You cannot lend money to, borrow from, or do business with close family members, business partners, or companies where you have a controlling interest.
All investments must be paid for through the retirement account. Using personal accounts or outside funds is not permitted. In addition, all income and expenses related to the investment must flow through the retirement account.
STRATA helps you every step of the way. Explore frequently asked questions or reach out to talk to a member of our Client Services Team.
Based on customer sentiment, our clients report that STRATA makes self-directed investing simpler, more responsive, and more supportive at every step.
Simple, stress-free processes – “STRATA makes complicated transactions easy to handle.”
Quick, responsive support – “When I reach out, I get answers fast.”
Confidence in every step – “I feel supported and secure managing my IRA.”
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