Using Self-Directed IRAs to Buy Investment Real Estate

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This is a book retelling of “Be in the Top 1%” by Bob Helms (Chapter 8). I’m sharing the key ideas in my own words, with my own commentary mixed in.

The Best-Kept Secret in Real Estate Investing

Bob Helms calls self-directed IRAs one of the “best-kept secrets in America.” And honestly, after reading this chapter, I think he’s right.

Here’s the thing: you can use your IRA to buy investment properties. Not stocks. Not mutual funds. Actual real estate. And this has been allowed since 1975, when the first IRA account was opened. Over 40 years of this option existing, and most people have no idea it’s possible.

Why don’t more people know about this? Because the big Wall Street firms (Fidelity, Schwab, Merrill Lynch) have zero incentive to tell you. They make money when you buy stocks, bonds, and mutual funds. They don’t make commissions when you go buy a rental property with your IRA funds. So they use what Bob calls the “FUD principle”: Fear, Uncertainty, and Doubt. They make it sound scary and complicated so you’ll keep your money with them.

But here’s what’s wild. There’s over $7 trillion sitting in IRA accounts across the country. If even a fraction of that money moved into real estate, we’d be talking about hundreds of billions in potential agent commissions. That’s a massive opportunity that almost nobody is tapping into.

What Is a Self-Directed IRA?

A regular IRA is typically held by a financial institution that limits your investment options to their products. A self-directed IRA (SDIRA) lets you, the account holder, decide where your money goes. That includes real estate, private loans, tax lien certificates, and more.

To set one up, you need an IRA custodian who allows non-traditional investments. Not every custodian does this. The big brokerage firms generally don’t. You need to find a custodian that specializes in self-directed accounts.

The custodian doesn’t give you investment advice. They handle the paperwork, execute transactions on your behalf, keep records, and file reports. You make the decisions. They make sure the mechanics are handled correctly.

Bob features a contribution from Glen Mather, CEO of NuView IRA, who breaks down how this all works in practice. The chapter basically becomes a mini-course on SDIRAs.

The Rules You Need to Know

The IRS has rules around what you can and can’t do with IRA-owned real estate. And that’s why I think Bob is right to say this stuff is important. The rules aren’t super complicated, but you need to understand them.

Disqualified People (DPs)

The IRS has a list of people who can’t do business with your IRA. They call them “disqualified people.” This includes:

• You (the account holder) and your fiduciary
• Your spouse and ex-spouse
• Your parents, children, and their spouses (lineal ascendants and descendants)
• Service providers to the plan (CPAs, financial advisors)
• Employers whose employees are covered by the plan

Prohibited Transactions

These disqualified people can’t:

• Buy, sell, exchange, or lease IRA-owned assets
• Lend money to the IRA or use personal credit to get a loan for the IRA
• Provide services, goods, or facilities to or from the IRA
• Transfer or use IRA-owned assets for personal benefit

Real-World Examples of What You Can’t Do

This is where the chapter gets really helpful. Bob and Glen give specific examples that make the rules click:

• You can’t buy an office building with your IRA and then use it for your own business. You’re a disqualified person. You can’t benefit personally from IRA assets.
• You can’t ask a bank to loan money to your IRA using your vacation home as collateral. Personal credit can’t be used for IRA transactions.
• You can’t buy a property with your IRA and then have your own management company manage it. An entity you own can’t provide services to your IRA.
• You can’t buy a beach condo with your IRA and stay in it one week a year, even at market rate. You’re a disqualified person. You can’t lease IRA-owned assets. Period.

The basic idea: the IRS wants arms-length transactions. No insider deals. No personal benefit until you take a distribution in retirement. If something feels like you’d be personally benefiting from the IRA asset before retirement, it’s probably prohibited.

How the Purchase Actually Works

The mechanics of buying real estate with an SDIRA are straightforward once you understand them:

1. Open a self-directed IRA account and fund it (there’s a 7-day rescission period before you can invest)
2. Fill out a purchase authorization form and submit to your custodian
3. Provide the purchase contract to your custodian. They sign on behalf of the IRA once you’ve initialed it
4. Escrow info goes to the custodian, who signs settlement documents
5. IRA funds are transferred to the escrow agent

After the purchase, all rental income goes back into the IRA. All property expenses (taxes, HOA fees, maintenance) are paid out of the IRA. The custodian handles these transactions at your direction.

One important detail: the property title must be in the IRA’s name from the start. It looks something like “NuView IRA, FBO Susan Heyward, Roth IRA.” You can’t put a contract in your personal name and then transfer it to the IRA.

Financing Gets Tricky

Here’s the problem with using leverage (loans) on IRA purchases. Since you can’t use personal credit to guarantee a loan for your IRA, you need a non-recourse loan. That’s a loan secured only by the property itself, not by your personal assets. Most banks don’t like these because they carry more risk for the lender.

Bob suggests two practical solutions:

1. Seller financing. The seller might be motivated to offer terms because it could mean a higher sale price, faster close, or tax advantages for them.
2. Private lenders. Other people’s IRAs can actually be a source of non-recourse loans. One person’s IRA lends to another person’s IRA. Everyone stays within the rules.

And yes, IRAs can partner with other investors. Joint ventures, LLCs, limited partnerships, tenancies in common: all of these structures work with IRA funds.

The Opportunity for Real Estate Agents

This is where Bob gets really excited, and I think he’s onto something important. Most real estate agents don’t know anything about SDIRAs. And that’s a huge missed opportunity.

If you’re an agent who understands how self-directed IRAs work, you instantly set yourself apart. You don’t need to become an IRA custodian or give tax advice. You just need to know the basics and have a relationship with a custodian who can guide your clients through the process.

Bob’s suggestion: put it on your website, add it to your newsletter, mention it on your business card. Something as simple as “You may be able to use your IRA to purchase investment real estate, ask me how” can start conversations that lead to deals.

He shares a quick story about a guy named Les who learned about SDIRAs five years before and ended up buying three rental properties through his IRA, all through the same agent. His wife bought another one. And Les became a walking advertisement for both self-directed IRAs and his agent.

My Take

This chapter is eye-opening. The fact that this option has existed for over four decades and most people still don’t know about it says everything about how Wall Street controls the narrative around retirement investing.

Is it for everyone? No. The rules around disqualified people and prohibited transactions are real, and violating them can mean penalties and taxes. You need to work with a tax professional and a good custodian.

But for real estate investors who already understand the market, using retirement funds to buy properties instead of feeding them into the stock market is worth serious consideration. And for agents, learning this stuff is a competitive advantage that barely anyone has.

Next: Preparing to Become a Successful Real Estate Agent

This is part of a series retelling the book “Be in the Top 1%: A Real Estate Agent’s Guide to Getting Rich in the Investment Property Niche” by Bob Helms (Robert P. Helms). ISBN: 978-0-9983125-9-0, published 2018.