Self-Directed IRAs and Real Estate Investment

One popular application of funds in a Pacific Premier Trust self-directed IRA has been direct or indirect investments in real estate.

When it comes to real estate investing with your IRA, you can invest in property for long-term appreciation, rental income, or a short-term flip. Your IRA can even benefit from real estate without owning the property itself by using self-directed IRA funds to purchase notes secured by mortgages and trust deeds.

What Type of Real Estate Can I Hold in a Pacific Premier Trust Account?

With a Pacific Premier Trust self-directed IRA, you are free to invest in almost any form of domestic real estate — from condominiums and office complexes to farmland and boat slips. You can invest in:

  • Homes, apartments, and condominiums
  • Commercial properties such as retail stores, hotels, and office complexes
  • Notes secured by trust deeds and mortgages
  • Raw land and lots

Key Differences of Holding Real Estate in an IRA

Purchasing and maintaining real estate in an IRA differs from traditional property investments in a few important ways.

The property’s buyer is the IRA, not the IRA owner individually.
That's why paperwork must flow through an IRA custodian like Pacific Premier Trust to ensure proper vesting.

All expenses and revenue must go through the IRA.
Expenses must be paid by the IRA and any revenue must come into the IRA.

If your IRA uses leverage (mortgage) to purchase real estate, it is important you understand there may be a tax filing requirement and tax liability for your IRA if the property generates income.

Income in excess of $1,000 generated by leveraged real property held by your IRA is considered unrelated debt financed income (UDFI), which subjects the IRA to a unrelated business income tax (UBIT) filing and payment requirement. For more, see UBIT and UDFI tax considerations.

You cannot use the property for personal reasons.
The property must be treated as an investment, not for the immediate benefit of you, your business or family. Doing so may result in prohibited transaction pursuant to Internal Revenue Code Section 4975, which may disqualify your IRA and results in penalties and tax consequences. Please review IRS Publication 590-A for more information on prohibited transactions.

Maintenance and repairs must be done by a third party.
If the IRA owner participates in any “sweat equity” activities – even something as minor as changing a light bulb — there could be significant penalties (i.e., prohibited transaction).


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Note: Pacific Premier Trust performs the duties of an independent retirement custodian, and, as such, does not provide investment advice, sell investments, or offer any tax or legal advice. Pacific Premier Trust is not affiliated with any investment, investment sponsor or investment advisor. Potential clients are advised to perform their own due diligence in choosing an attorney, tax advisor, or any investment opportunity. Alternative investments are not FDIC insured and are subject to risk, including loss of principal. This information is for general purposes only and is not intended as an individual recommendation or to be a substitute for specific individualized tax, legal, or investment planning advice.


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