Most investors know they can hold stocks, bonds, and mutual funds in their retirement accounts. But fewer realize that a Self-Directed IRA opens the door to something far more tangible: real estate.
And we’re not just talking about Real Estate Investment Trusts (REITs). With the right custodian, your IRA can hold a wide range of real estate assets that go well beyond Wall Street. Here’s a closer look at the possibilities.
Residential Properties
Single-family homes are one of the most common real estate investments inside IRAs. Many investors purchase these properties to generate rental income or to benefit from long-term appreciation. Duplexes, triplexes, and multi-family properties also qualify, offering the potential for steady cash flow.
Example: An investor uses their IRA to purchase a rental home in a college town, generating consistent income each semester from student tenants.
Commercial Properties
Your IRA can invest in office buildings, retail spaces, warehouses, or industrial facilities. These investments often require more capital but can produce substantial returns through lease agreements and long-term appreciation.
Example: An IRA purchases a small warehouse, leasing it to a local business under a multi-year contract.
Raw Land
Undeveloped land may not generate income right away, but it can appreciate over time. Some investors also lease raw land for farming, billboard space, or other specialized uses.
Example: An IRA acquires several acres of land outside a growing city, anticipating rezoning and future development.
Vacation Rentals
Short-term rentals in high-demand destinations can be held in an IRA, provided they’re operated strictly as investments. Remember: neither you nor your family can use the property personally—it must remain an arm’s-length investment.
Example: An IRA owns a condo in a beach town that is rented out exclusively on a short-term rental platform.
Real Estate Investment Trusts (REITs) — Public and Private
While most brokerage accounts only allow publicly traded REITs, Self-Directed IRAs expand your options. You can invest in non-traded or private REITs, gaining exposure to professionally managed real estate portfolios.
Example: An investor allocates part of their IRA to a non-traded REIT focused on multifamily developments in emerging markets.
Notes Secured by Real Estate
Your IRA doesn’t have to own the property itself—it can own the debt. Purchasing mortgage notes or investing in private lending secured by real estate is another way to diversify.
Example: An IRA provides a loan to a real estate investor, secured by a first-position mortgage on the property.
Special Use Properties and Rights
Self-Directed IRAs can also invest in properties with unique income opportunities: farmland, mineral rights, oil and gas interests, or timberland. These assets may not be for everyone, but they demonstrate the flexibility IRAs provide.
Example: An IRA invests in a timber property, generating periodic income from harvested lumber.
Key Considerations
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No personal use: You and your family cannot live in, vacation in, or personally benefit from IRA-owned property.
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Custodian required: All transactions must flow through your IRA custodian.
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Due diligence matters: Just because your IRA can hold an asset doesn’t mean it should—research and risk management are essential.
The Bottom Line
A Self-Directed IRA allows you to move beyond Wall Street and put your retirement savings to work in real estate you understand. Whether it’s a rental property, raw land, or even private lending, the flexibility is yours—so long as you follow IRS rules and keep compliance in mind.