Real Estate Investing Through an IRA LLC
An IRA LLC can purchase rental properties, raw land, and commercial real estate with retirement funds. Learn how the structure works and what compliance rules apply to IRA-owned property.
Types of Real Estate the LLC Can Hold
An IRA LLC can hold a wide range of real property: single-family rentals, multifamily buildings, commercial spaces, raw land, and certain real estate-backed notes. Title is held in the name of the LLC, not the IRA owner personally.
How Real Estate Purchases Work Inside an IRA LLC
When an IRA owns an LLC, the LLC can use its funds to purchase real estate. Title to the property is typically held in the name of the LLC, not the individual. Any income generated by the property, such as rental income, flows back into the LLC’s bank account, and any expenses related to the property, such as repairs, taxes, or insurance, are paid from that same account.
Because the LLC has its own bank account with checkbook control, the manager can handle these transactions directly rather than routing them through a custodian.
Rules to Be Aware Of
Real estate held inside an IRA LLC is subject to the same prohibited transaction rules that apply to other IRA-owned assets. This generally means the property cannot be used personally by the IRA owner or certain family members, and transactions involving disqualified persons must be avoided. All expenses related to the property must be paid from the IRA LLC, and all income must flow back into it. Mixing personal and IRA funds in connection with the property can jeopardize the tax-advantaged status of the IRA.
Why Investors Choose This Structure
Real estate investors who are already experienced in evaluating and managing property often turn to the IRA LLC structure because it allows them to apply that same expertise inside a tax-advantaged retirement account, with more direct control over the transaction process than a traditional custodian-directed IRA.
Financing Considerations
If a property held inside an IRA LLC is financed rather than purchased outright, this can trigger additional tax considerations, such as Unrelated Debt-Financed Income (UDFI) tax. This is a complex area that typically requires guidance from a tax professional familiar with self-directed retirement accounts.
An IRA LLC can purchase rental properties, raw land, and commercial real estate with retirement funds. Learn how the structure works and what compliance rules apply to IRA-owned property.
Ready to build the right structure?
Whether you’re a retirement investor or building a business, we have the expertise to get it done correctly.