How to Use Your IRA for Investing in Real Estate

If you’ve been diligently stashing away funds in your IRA, you might be surprised to learn you can do more with that money than let it sit in mutual funds and stocks. In fact, you can use your IRA for real estate investing, and if you’re someone who prefers tangible assets over Wall Street rollercoasters, this could be a game-changer.

Let’s walk through how it works, what you need to know, and how to decide if it’s the right move for you. No hype. No jargon. Just solid insight from folks who live and breathe this stuff every day.

 Because here at Wisco Real Estate, we believe your money should work as hard as you do.

What is a Self-Directed IRA?

You can’t buy real estate with your regular IRA from your typical brokerage account. To invest in real estate, you’ll need what’s called a Self-Directed IRA (SDIRA). It’s not a new type of IRA; it’s just a traditional or Roth IRA that gives you more control over your investments.

With an SDIRA, you’re allowed to hold alternative assets like:

• Real estate (residential or commercial)
  
• Private placements
  
• Promissory notes
  
• Tax liens
  
• Even crypto 

A custodian still oversees the account, but you get to call more of the shots.

Why Use an IRA to Invest in Real Estate?

There are a few key reasons investors choose to put real estate inside a self-directed IRA:

Tax Advantages

If your SDIRA is set up as a traditional account, your investments grow tax-deferred. If it’s set up as a Roth, they grow tax-free. Either way, Uncle Sam isn’t taking a cut each year while your property appreciates or your syndication kicks off returns.

Diversification

Putting real estate in your IRA lets you diversify beyond the stock market. That can help reduce risk and smooth out returns over time.

Passive Income in Retirement

Real estate inside your IRA can continue generating income long after you’ve retired, without the market volatility or stress of active management.

How to Use Your IRA for Investing in Real Estate

Okay, so how do you actually do this? It’s not as complicated as it sounds, but there are a few key steps.

Step 1: Open a Self-Directed IRA

You’ll need to work with a custodian who specializes in SDIRAs. Not all brokerages allow real estate investments, so you’ll want to choose one that does.

Step 2: Fund the Account

You can fund your new SDIRA by:

• Rolling over an existing 401(k) or traditional IRA
  
• Making annual contributions (up to IRS limits)
  
• Transferring funds from another IRA custodian
  

Step 3: Find a Deal That Fits

Once the funds are in place, you can start identifying the right investment. This could be:

• A rental property
  
• A private real estate fund
  
• A share in a multi-family syndication
  

Note: The IRA, not you personally, will own the asset. That’s important when it comes to keeping everything compliant.

Step 4: Let Your IRA Work for You

All income and expenses related to the property go in and out of the IRA. That means no commingling with personal funds, and no writing checks from your checking account for repairs or upgrades.

The good news? A good team (like Wisco and your custodian) will help you keep it all buttoned up.

Rules to Know (So You Don’t Get Burned)

This isn’t a free-for-all. The IRS has rules, and breaking them, even by accident, can lead to taxes, penalties, and a real mess. Here are a few of the big ones:

No Self-Dealing

You (or certain family members) can’t live in, vacation in, or personally benefit from the real estate your IRA owns. It must be strictly for investment purposes.

No “Sweat Equity”

You can’t go fix the roof yourself or mow the lawn. All services must be hired out and paid for by the IRA. Remember: it’s your IRA’s property, not yours.

Watch for UBIT

If your IRA invests in leveraged real estate (aka uses a loan), it may trigger Unrelated Business Income Tax (UBIT). Not always a dealbreaker, but something to plan around with your CPA.

Real-World Example

A client of ours rolled over an old 401(k) from a job he left years ago and used it to buy into a multi-family syndication. The cash flow stays inside his Roth IRA, growing tax-free. The deal is projected to double in value over five years, and he won’t owe a dime in capital gains when it sells.

He’s not swinging a hammer or screening tenants. He’s just using his retirement dollars to build future income. Smart.

Is Using Your IRA for Real Estate Right for You?

If you have retirement funds sitting in an account you barely look at, especially if you’re not excited about your returns, it’s worth considering.

It might be a good fit if you:

• Want more control over how your retirement funds are invested
  
• Prefer tangible, cash-flowing assets over Wall Street
  
• Are interested in passive real estate investments (like syndications)
  
• Have a long-term strategy and tax planning in mind
  

At Wisco, we help our investors walk through the real-world steps of using their IRA to invest in real estate, without the jargon or stress.

Let’s Talk Strategy

Thinking about using your IRA for investing in real estate? We’d love to help you explore your options.

From walking you through your first self-directed IRA to helping you evaluate real estate deals that qualify, we’ll make sure you’re set up for success, without breaking the rules or overcomplicating the process.

Reach out today. Let’s put your retirement dollars to work in a way that makes sense for you.