Directly owned real estate
Real estate is one of the most popular alternative investments held in a self-directed IRA. 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 self-directed IRA (SDIRA) 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 IRA 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 IRA, and expenses must be paid from the IRA.
Personal use of the property by the IRA 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 IRA funds to issue loans secured by real estate, earning interest income.
Considerations:
The IRA receives interest payments, which grow tax-deferred or tax-free.
Due diligence is essential to assess borrower creditworthiness.
Self-directed IRAs 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:
• IRA pays full purchase price from cash |
Considerations:
• Requires sufficient cash in the IRA |
| 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 IRA 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 eligibility and confirms next steps—helping you invest with confidence.
Planning ahead is key to a smooth SDIRA property purchase. Start with STRATA’s Prohibited Transaction Self-Check, then open and fund your IRA early to help prevent closing delays.
Real estate essentials
Complete a preliminary prohibited transaction self-check before opening and funding your STRATA account. This guide covers common prohibited transaction examples, disqualified person definitions, step-by-step account opening, and key steps to effectively manage your investment.
The contract must list the IRA as the buyer: STRATA Trust Company, Custodian FBO [Accountholder Name] IRA [Account #]. The accountholder cannot be listed personally, and the contract cannot later be reassigned or amended to name the IRA.
Complete STRATA’s Earnest Money Deposit Authorization form; funds must come from the IRA. Using personal funds will disqualify the transaction.
Mark “Read & Approved” on each page that requires a signature or initial. STRATA will then sign as custodian of the IRA. You may submit contracts and post-closing documents to the email below.
As the IRA 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 IRA.
Income management: All income generated must return to the IRA.
Penalty warning: Engaging in prohibited transactions can cause the entire IRA to be treated as fully distributed, triggering immediate taxes and potential penalties.
You cannot personally benefit from your IRA investments, such as using an IRA-owned property for personal use.
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 IRA. Using personal accounts or outside funds is not permitted. In addition, all income and expenses related to the investment must flow through the IRA.
STRATA helps you every step of the way. Explore frequently asked questions or reach out to talk to an SDIRA Specialist
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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