A Self-Directed Individual Retirement Account (SDIRA) is an IRA that requires the account owner to make investment decisions and investments on behalf of the retirement plan. IRS regulations require that either a qualified trustee, or custodian hold the IRA assets on behalf of the IRA owner.

Self-directed IRA accounts are typically not limited to a select group of asset types (e.g., stocks, bonds, and mutual funds), and most self-directed IRA custodians will permit their clients to engage in the following: real estate, mortgages, franchises, partnerships, private equity and tax liens.


If your self directed IRA purchases real estate you should be aware of  the following:

1. You cannot use the property for a personal residence, second home or vacation home. This means your self directed IRA can hold raw land, rental properties, condos, commercial property, fixer-uppers and foreign property.

2. The IRA can buy debt-financed property but the debt must be non-recourse to the IRA and the IRA may have to pay UBIT (unrelated business income tax) on the profits from the debt-financed property.

The taxes are paid on the profits. Also, in reference to a debt- financed property, the owner of the self directed IRA is not and cannot guarantee the loan.

There are 4 ways to buy real estate in an IRA:
1. Wholesale property
2. Purchase an option on real estate
3. Purchase property
4. Be a partner with other IRA or non-IRA investors.

Contact your Montello Wealth Financial Consultant Your Montello Wealth Financial Consultant can assist you in understanding the Self Directed IRA.

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