It’s a little-known fact that investment real estate can be purchased with IRA retirement funds if special requirements and procedures are satisfied by your prospective clients – and you can act as their agent!
🏠 Step-by-Step: Buying Real Estate in an IRA
Step 1. Client Sets Up a Self-Directed IRA (SDIRA) with a custodian that allows and is familiar with handling real estate investments (not all do but there are a group that specialize in it) and funds the IRA via transfer, rollover, or new contributions. The account must have enough funds to cover the purchase (all cash, no financing) and ongoing costs (repairs, taxes, insurance).
Step 2. Client searches with you (as buyer’s agent) and finds an acceptable Property just as in a normal transaction. Important: The property must be strictly for investment (no personal use, no family use).
Step 3. Draft the Offer Correctly! The purchase contract must be in the IRA’s name, not the individual client’s name and the IRA Custodian executes the purchaser documents: Example: “XYZ Trust Company Custodian FBO John Smith IRA”. Important: Get specific instructions, in advance, from the IRA Custodian (company) as to how they purchaser’s name should be specified!
Step 4. Custodian Approval – Send the purchase agreement and related documents to the IRA Custodian for execution. The custodian reviews, approves, and signs. Earnest money deposit and escrow funds must come from the IRA, not from the client’s personal funds.
Step 5. Closing the Transaction – At settlement, all documents are signed by the custodian on behalf of the client’s IRA and title is recorded in the name of the IRA (not the individual client).
Step 6. Property Management & Income – All rent checks go into the IRA account. All expenses (repairs, insurance, HOA dues, taxes) must be paid out of the IRA. The client cannot pay personally and “reimburse” himself or herself — that’s a prohibited transaction. Normal rules and restrictions on receiving distributions from an IRA account apply but the tax advantages of tax-free accumulations apply.
Step 7. Ongoing Rules – No personal benefit: the client (and close family members) cannot live in, vacation in, or rent the property as tenants. No self-dealing: client cannot personally work on the property (repairs, renovations) and must hire third parties and pay via the IRA. The property stays in the IRA until you sell it or take a distribution.
✅ Summary: You (as buyer’s agent) play the same role as in a normal deal (finding property, negotiating, earning commission), but all paperwork and funds must flow through the IRA custodian. Think of the IRA as the buyer — not the client personally. You (as buyer’s agent) gets paid a commission as normal from the transaction but you cannot be the IRA owner, spouse, child, parent, or other “disqualified person.”
📌 Tip for the Agent: Think of the IRA as a separate legal buyer. Treat it just like you would a trust or LLC purchase, with all documents and funds tied to that entity.
Note: The prospective client should obtain the advice of their accountant, financial planner and/or attorney before deciding whether the purchase in their self-directed IRA is appropriate for them.
