Using a self-managed IRA to buy real estate for rentals

[Marc Oglesby]

Do you have guidance on setting up a self-managed IRA to purchase real estate for rental investments?

[Doreen Chaisson]

The RE that is purchased must be for the strict purpose of growing the IRA. It' can't be a property you or any disqualified parties ( your spouse, parents, children) already own, have ever owned, live in or plan to live in. The down payment comes from the IRA, as does final purchase cost. You can combine your personal money with your IRA $, or funds from other investors, and you'd each have a percentage ownership as tenants-in-common.

Any expenses related to the IRA-owned property must be paid by the IRA, proportional to its ownership. The same holds true for income generated by the property. The IRA owner is prohibited from making any repairs or doing any maintenance work on the property - that is considered sweat equity, an illegal contribution to your IRA. Outside vendors need to be hired to do these kinds of things (mow the lawn, paint, make repairs, etc).

I hope this helps cover the basics!