Ready to Invest in Real Estate with a Self-Directed IRA? There are several investment avenues you can take.

Published on May 12, 2026

Real estate remains among the most popular alternative assets within self-directed IRAs. From vacation properties to farmland to office buildings, there are many types of real estate-related investments that can be included in these tax-advantaged retirement plans, in several ways.

Direct purchase of real estate

The investor opens a self-directed IRA (SDIRA) and the account purchases the asset directly. The property is deeded to the SDIRA and all income and expenses related to the asset flow through the retirement plan. This is a common route for investing in vacation (for rental only) and multifamily properties that are rented to others.

There are several expense considerations beyond the down payment, mortgage payments, and real estate taxes, depending on the type and location of the property. These may include utilities, upkeep (cleaning, landscaping), repairs and maintenance, and property management or rental agents.

An alternate way to invest directly in a property is to form a single member LLC for the purpose of buying real estate with the self-directed IRA as the sole member. This is a bit more complex and may be better suited for experienced investors. This arrangement benefits from frequent communication with the account custodian because there is a higher likelihood of prohibited transactions (which benefit the IRA owner or involve a disqualified person). Example of prohibited transactions are staying in the property, renting to a disqualified person, and/or doing work yourself on the property. Such transactions will endanger the IRA’s tax-advantaged status.

Real estate-related investments

Account owners can use their SDIRA to invest in other entities that engage in real estate purchases, mortgages, or hard money lending. These comprise various models:

• Private real estate investment trusts (REITs), companies that own, operate, or finance income-producing real estate. REITs often specialize in different sectors such as retail, health care, office, multifamily, and industrial properties.
• Real estate syndications, partnerships between a syndicator (sponsor) and investors. By partnering up, multiple investors combine resources, capital, and skills to purchase and manage or develop a large-scale property or properties that they could not do on their own. Syndicates are generally set up as limited partnerships or LLCs.
• Real estate private equity funds are actively managed funds, popular among high-net-worth and institutional investors. These funds may have specific strategies such as investing in distressed assets or real estate development.
• Tax liens and tax deeds that are purchased at auction from a municipality when an owner fails to pay property taxes.

Be the “banker”
Account owners can become private lenders by using IRA funds to provide a mortgage or hard money loan for someone else’s real estate purchase. Promissory notes (private notes) in the real estate realm are usually secured by tangible collateral. Terms are worked out by both parties (IRA/lender and borrower) and conveyed to the SDIRA administrator as part of the investment instructions.

Types of real estate investments allowed in a SDIRA

• Residential real estate can be a single-family home or homes, condos, mobile home parks, and rental properties. The IRA receives consistent passive cash flow with the potential for long-term appreciation.
• Commercial real estate runs the gamut from office buildings to retail strip centers and shopping malls to medical buildings and health care facilities, from mixed-use developments and apartment complexes to dormitories. This sector provides broad portfolio diversification and generally means longer lease terms and higher rents.
• Rehabs and distressed properties often inhabit the “fix and flip” arena. Investors provide capital to purchase the property, hire a contractor to renovate it, and then flip it for a profit (which goes to the IRA); or they may hold onto an apartment building, home, or commercial building and earn rental income after renovations are complete.
• Raw or undeveloped property may be farmland or vacant lots that can be developed in the future. This sector has lower upfront costs (since there is nothing yet developed there) with strong appreciation potential when sold for development. Investors can engage in land banking for cell tower installations, solar farms, and outdoor billboards as part of this category.

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‍As always, investors are wise to conduct their full due diligence about any type of real estate investment to research the investment’s viability and long-term potential for good ROI. While we always recommend that our clients consult with trusted legal, financial, or real estate professionals, our helpful team at Next Generation can answer questions about how to make real estate investments with a self-directed IRA or to clarify the types of investments these plans allow.

As part of our white glove service, our starter kits provide step-by-step instructions for opening and funding a new SDIRA and you’ll find other helpful, informative documents under the Forms tab on our website.