Use Your Self-Directed IRA as a Hard Money Lender for Fix & Flip Investments

Published on April 7, 2026

Real estate is among the most popular types of alternative assets allowed in a self-directed IRA (SDIRA), including fix-and-flip investments.

But did you know you can use a self-directed IRA as a hard money lender for other people’s fix-and-flip properties? Here’s how that investment works.

Fix-and-flip real estate at a glance

Many real estate investors make money on fix-and-flip projects. They buy distressed properties and renovate them (the fix), then sell them for a profit (the flip). Rundown houses and those heading for or already in foreclosure are typical fix-and-flip properties but this sector could also include commercial properties, such as small mix-used buildings with retail on street level and some apartments above that have fallen into disrepair or are in distressed neighborhoods.

The fix-and-flip market can be quite lucrative for savvy investors who understand how to increase the property’s value efficiently and turn it over quickly.

Hard money lending explained

Hard money loans are different from bank loans. These are private loans that offer quick access to capital—usually at a higher interest rate—for the real estate investor to finance the property renovations.

Hard money loans bypass the lengthy approval process that traditional financial institutions require. Unlike bank reviews of the borrower’s credit, income, debt, cash reserves, and more, the checklist for vetting a fix-and-flip investment with a hard money loan is typically more streamlined. Plus, the property’s condition and renovation needs inform a bank’s financing decision. This is less of an issue with a hard money loan for a home with a heavy rehab lift.

Instead, a hard money lender—including a SDIRA account owner—looks at the property’s market value (before and after renovations), reviews the renovation project, and assesses the borrower’s exit strategy to repay the loan. The borrower’s credit worthiness typically takes a back seat to the property’s after-repair value (ARV). Strong ARV ensures that the loan’s principal and interest are protected by the real estate asset.

Fix-and-flip investors like to work with hard money lenders because these transactions can close in around two weeks (or shorter time frames), helping them secure time-sensitive investment opportunities. Self-directed investors get to generate tax-advantage returns for their retirement account as private lenders.

Hard money lending with a self-directed IRA

The IRA account owner has the flexibility to structure the loan around both the purchase and rehabilitation budgets, giving the borrower a single source of funding for the project.  This flexibility and the convenience of quick, short-term financing enable the self-directed investor to charge higher interest rates as well.

Due diligence prior to making the hard money loan should include vetting the borrower’s reliability, the feasibility of the real estate project, and the property valuation.

Steps for hard money lending through a self-directed IRA:

• Establish loan requirements, such as the borrower’s acceptable credit score and the down payment percentage of the loan that you expect; the latter will determine how much of the purchase and/or rehab price the SDIRA loan will cover.
• Evaluate the property’s current value, condition, and renovation needs and costs to derive a loan-to-value ratio, which is the amount the SDIRA is financing compared to the property’s appraised value. The higher the down payment, the lower the loan-to-value ratio, which reduces the lender’s risk.
• Based on the renovation plans, research similar “comp” properties to derive an appropriate after-repair value and ensure the property will provide a strong return on investment when it is sold.

Once the terms are accepted by both parties, send the investment instructions to your SDIRA administrator to execute the transaction.

When the renovations are complete and the fix-and-flip investor sells the property, the hard money loan is repaid to the IRA, with interest and any points if applicable. And, given the short-term nature of these loans (usually six to 12 months), the self-directed IRA can make multiple hard money loans a year and earn more interest income.

As with any investment in a SDIRA, the account is the legal owner of the investment (no self-dealing allowed), which avoids a prohibited transaction and maintains the account’s tax-advantaged status. The transaction may be done with any self-directed retirement account: Traditional and Roth IRAs, SEP and SIMPLE IRAs, and solo 401(k)s.

Direct fix-and-flip real estate investments

You may be the fix-and-flip investor yourself, in which case your SDIRA funds the project directly, from purchase through renovation. The IRA makes back its investment when the once-distressed property is sold, with the account reaping the profit after renovation and other expenses.

NOTE: If the IRA owner is the investor, a third-party contractor must be hired to make all repairs, since the owner is a disqualified person; working on the property in that way would put the IRA’s tax-advantaged status in jeopardy.

Since SDIRAs can include all types of real estate investments, you may also want to invest in vacation property, farmland, multifamily properties, and more. At Next Generation Trust Company, we offer webinars on various aspects of including real estate as an alternative asset within a self-directed retirement plan (including mortgage notes), which you’ll find here.