Top 3 Ways to Invest Into Real Estate
Using a Self-Directed Account

A Self-Directed IRA is a powerful tool in your investing arsenal and there are many ways to use one to invest. Many investors use Self-Directed accounts to invest into real estate and a common question is “What are the ways I can invest into real estate using my account?” While there are many ways to invest, there are 3 investment options that are used the most often to complete a real estate transaction:


1.) Purchasing Real Estate Outright

The most common method of Self-Directed Real Estate Investing is for an IRA to take title directly to a piece of real estate. In this situation, the IRA is listed as the sole owner of the property. All documentation from the purchase, including the offer, lists the IRA as the buyer of the property. Everything thereafter, from the purchase agreement to the HUD-1 all the way to the Deed will reflect the IRA as the owner. This method is typically used when you plan to rehab or use the property for rental income.


2.) Private Lending

When you’re new to real estate investing, it might feel cumbersome to take your first deal all the way to the finish line. There can often be timing and contractor issues, which may leave you feeling as though you don’t have the experience or edge that a seasoned investor would. One way to invest into real estate with little to no experience is to simply lend money from your IRA or 401k. You do this using a note and mortgage or deed of trust, and your IRA receives a return on investment via interest payments. Your IRA, believe it or not, can be the lender and lienholder on a real estate deal. This is a great way to start investing and earning easy returns, while allowing a more experienced investor to handle the heavy lifting required to complete the purchase. Doing so allows you and your IRA to still be involved, all while growing your retirement account in a tax-free or tax-deferred manner.


3.) Real Estate Syndication

Many investors, especially those dealing in apartment buildings or commercial real estate, will use syndication as a tool to bring together and pool funds from many investors. Typically, a private entity (such as an LLC) is formed and units or shares are sold to various investors so that a larger real estate deal can be completed. Your IRA or 401k would purchase units or shares in this type of entity and the entity then purchases the property, allowing your Self-Directed account to be involved in a larger deal as part owner.


There are many ways to invest into real estate, but these top three should give you a starting point to begin using your Self-Directed accounts to build your wealth. As always, please give our office a call if you would like to establish a new account or make an investment using your account.


Article by:

Matthew A. Tillack

Sales Manager/National Speaker



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