If you’ve ever thought about putting your retirement money to work in real estate, that could be a great move. Many Springfield investors are exploring alternative ways to grow their nest egg, especially in a market where traditional investments can feel unpredictable. The good news? Yes, you can use your IRA to invest in real estate, but not without dealing with a very specific set of rules. Does this strategy make sense for your long-term retirement plan?
You’ll Need a Self-Directed IRA (SDIRA)
This isn’t something you can do with a standard IRA through a typical brokerage. To invest in real estate, you need what’s called a Self-Directed IRA (SDIRA)—a retirement account that lets you hold alternative assets like property, private placements, and more.
SDIRAs are governed by stricter IRS rules. You’ll need to work with a custodian that knows the complexities of real estate transactions, and you’ll have to follow their process at every step. Some essentials include:
- The SDIRA—not you—owns the property.
- All income (like rent checks) must go directly into the IRA.
- Every expense (repairs, taxes, insurance) must be paid from the IRA—not your personal funds.
Avoid “Self-Dealing” at All Costs
Real estate investing through an SDIRA comes with clear boundaries. If you violate them, you risk disqualifying your IRA altogether. Some of the most common pitfalls are:
- No Personal Use: You cannot stay in the property, not even for a weekend.
- No DIY Repairs: You’re not allowed to mow the lawn or swing a hammer. All labor must be paid third-party work.
- No Transactions With Disqualified Persons: This includes your spouse, children, parents, and any entities they control.
Think of the SDIRA as its own legal identity. You’re directing the strategy—but you’re not allowed to benefit from it personally until retirement.
How to Fund and Structure the Deal
There’s more than one way to buy real estate inside an IRA:
- Cash-Only: Easiest and cleanest route—your IRA buys the property outright.
- Non-Recourse Loan: Your IRA borrows money, but the lender can only go after the property—not other IRA assets—if there’s a default. Income from these deals may be subject to special taxes (UDFI).
- Partnerships: Your IRA can co-invest with others, but ownership percentages must match contribution proportions precisely.
If you’re not sure what’s right for you, speak with an advisor who understands both real estate and retirement accounts. At LaTour Asset Management, we help Springfield clients know these options inside and out—one wrong move could be costly.
Want a Hands-Off Option?
If the idea of property management and IRS rules makes you nervous, that’s okay. You can still gain real estate exposure through traditional IRAs:
- REITs (Real Estate Investment Trusts): Generally, these are professionally managed portfolios of income-producing properties.
- Real Estate ETFs or Mutual Funds: These are broad, diversified, and easy to buy and sell.
These indirect strategies carry fewer rules (and often fewer headaches).
Your Retirement, Your Strategy—We’re Here to Help
Using your IRA to invest in real estate can be a smart move—but it isn’t for everyone. The tax benefits are real, but so are the risks. That’s why our team at LaTour Asset Management in Springfield takes time to understand your big picture before making any recommendations.
If you’re curious whether real estate belongs in your retirement portfolio, let’s talk. Reach out to our Springfield office today at (877) 888-5724 and get expert advice you can count on.
