Real estate investment

Using Self Directed IRA’s
to Passively Invest in Real Estate

Real estate investing is considered one of the safest ways to utilize your money. There is a plethora of information available on the internet that guides individuals on different aspects of passively investing in real estate. The passive investment modes enable you to generate income while going about your regular daily business.

As of late, a great emphasis has been placed on the tax benefits to real estate investing. When it comes to investing after retirement, there are several strategies that offer huge investment potential. One such example is the use of a self-directed Individual Retirement Accounts (IRA’s) to invest in commercial real estate.

Through a self-directed IRA, you can take your retirement account and turn it into an account from which you can control the investments you make. The owner must involve a company to take care of their investments and with this approach, can stand to save a lot of money on fees while diversifying their own investment portfolio.

Real estate investment

Rules of Using Self-Directed IRAs

Before we get into ways of investing through self-directed IRAs, here are some important rules for you to understand.

Avoid prohibited transactions. It’s important that you understand what comes under a prohibited transaction as stated by the IRS. Getting into one unintentionally can cause you major tax penalties and immediate distribution of assets. The property you purchase must have a unique title stating the IRA as the holder.

Self-Dealing. It is important to note that the owner of the self-directed IRA can’t hold any asset in their name. The rules also disallow disqualified persons to hold or benefit from the property. The investments need to be for business purposes only.

Use of Cash. Since self-directed IRA’s prohibit the use of personal financing i.e. mortgage, you will have to use cash to purchase the property.

Reaping Benefits. As an investor, you are not allowed to cash-in the benefits on the investment you made unless you retire. This also means that you can’t use your property for personal benefits until you cross the retirement age.

Being a Landlord. The rules of a self-directed IRA require that all the benefits and expenses be kept in the IRA. Even if you are not able to find tenants for your investment, you will have to pay for the recurring costs by yourself.

Through a better understanding of the rules and regulations, you will be able to judge if this type of investing is right for you.

How to Invest in Real Estate Through a Self-Directed IRA?

Investing through a self-directed IRA can reap a ton of benefits. Here are some ways you can use your self-directed IRA to invest in commercial real estate.

1. Purchasing Real Estate

Through this account, once you find the right property to invest in, you can ask your custodian to make an offer on your behalf. Once the property is purchased, your equity or ownership percentage will be kept in the name of your IRA and you will receive the tax benefits associated with this account. In order to move forward, you will need to create an LLC for your IRA account and the property it is investing in.

2. Managing your Investment Through Your Custodian

As is evident in this blog post, investing through a self-directed IRA is a form of passive real estate investing. Your property will be managed by your custodian (an entity such as a bank, credit union, trust company or an entity that is licensed and regulated as a non-bank custodian). There are no restrictions on the type of property you can buy or invest in, that’s why you can use your custodian to manage an existing rental property. The custodian will then hire a property management company and pay them from your company.

3. Real Estate Wholesaling

If the property is sold through a self-directed IRA, there will be no tax on capital gains. Benefiting from tax-deference is also an advantage of using this type of account. Rental income distributions start penalty-free at the age 59.5 and become mandatory by 70.5 years.

Final Words

Carefully planning your retirement is important. There are several opportunities out there that will help you create wealth for your leisure days. But before you step into the world of real estate investing, make sure you know what you are doing. In such scenarios, it’s important to have professionals by your side. With their guidance, you can unlock the true potential of commercial real estate investing passively through self-directed IRAs.

For more information, or to set up your own self-directed IRA to invest passively in commercial real estate, contact the experts at MarketSpace Capital by emailing



Can you buy real estate with your IRA?

After you have exhausted your contributions, you can withdraw $10,000 from the account or convert money from another account to pay a 10% penalty for a home purchase. You’ll owe income taxes on earnings if it has been less than five years since your first Roth IRA contribution. An alternative would be investing your self-directed IRA with a Sponsor such as MarketSpace Capital. Investing with MarketSpace will allow for a passive investment vehicle with competitive returns when compared with traditional retirement portfolios.

About Us

MarketSpace Capital, LLC is a Houston, Texas-based private equity real estate development firm focused on ground up developments and value-add investments throughout the United States.

Contact Us

Find Us


9100 Southwest Freeway, Suite 201 Houston, Texas 77074

Satellite Office

8215 Westchester, Suite 300 Dallas, Texas 75225

Disclaimer: *For sold properties, actual sales price is reported. For active investments, the Estimated Current Value is based on the Managing Member’s estimate of current value. Recent acquisitions are generally valued at the acquisition price. Values may be internally prepared. This web-page/website is for informational purposes only and is qualified in its entirety by reference to the Confidential Private Placement Memorandum (as modified or supplemented from time to time, the “Memorandum”) of any offering of MarketSpace Capital.