Supercharge Your Retirement Investing

with a Self-Directed Real Estate IRA

What Is a Self-Directed Real Estate IRA?

A Self-Directed Real Estate IRA is a supercharged IRA that enables you to invest your retirement money directly into real estate such as multi-family, commercial, raw land, fix-and-flips, tax liens, and more. It has the same tax benefits as a standard IRA and can be set up as Self-Directed Traditional IRA, Self-Directed Roth IRA, Self-Directed SIMPLE IRA, or Self-Directed SEP IRA.

If you’re looking to invest in real estate with a Self-Directed Real Estate IRA, you’re in the right place! We can help you learn:

          • What benefits does a Real Estate IRA offer?
          • What types of properties can I invest in with a Real Estate IRA?
          • What are the Real Estate IRA rules?
          • How to buy real estate with a Self-Directed Real Estate IRA?

Real Estate IRAs at a Glance

Real Estate icon to show that you can invest in a variety of properties with a Real Estate IRA

Invest in a Variety of Properties

A Real Estate IRA is another name for a Self-Directed IRA that’s used to invest in real estate. This includes multi-family, commercial, fix-and-flips, residential, raw land, tax liens, crowdfunding opportunities, and more.

Hand holding a bag of money to show that you can receive generally stable returns when you invest in real estate with a Real Estate IRA.

Receive Generally Stable Returns

Some benefits of investing in real estate with retirement funds include high growth potential, generally stable returns, and retirement portfolio diversification.

Person with an idea lightbulb near their head to show that it is important to conduct due diligence before investing in alternative assets with a Self-Directed IRA.

Understand the Rules

Self-directed real estate investors must follow rules regarding titling, handling income and expenses, financing, and paying applicable taxes.

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Simple Set Up

Madison Trust has a simple, three-step set up process to invest in real estate with a Self-Directed IRA: open an account, fund your account, and place your investment.

Real Estate IRA Rules

Titling Your Investment Property

When your IRA purchases real estate, the title is held in the name of the custodian for the benefit of your IRA: “Madison Trust Company Custodian FBO [Your Name] [Your Madison Trust Account Number].

Income and Expenses

All income and expenses related to your real estate investment must flow to/from your Self-Directed Real Estate IRA. Income and expenses related to your IRA-owned property are handled by your IRA custodian, not by you as the account holder.

For example, account holders instruct Madison Trust to pay bills, such as property taxes and insurance, via an Expense Payment Request. Account holders deposit real estate income, such as rental payments, directly into their Real Estate IRA by submitting a Deposit Information Form. As another option, an account holder can hire a management company to handle the property's income and expenses.

Financing with a Non-Recourse Loan

You can obtain financing for an IRA investment; however, you must structure the loan as a non-recourse loan. This means that the loan is backed exclusively by property, not by your personal guarantee (as the IRA holder). The lender’s sole recourse in the case of default is the property.

You cannot personally guarantee a loan issued to your IRA. Doing so would benefit the IRA and constitute a prohibited transaction. Additionally, the loan must be issued by a non-disqualified entity.

Investment Structure

Although many investors choose to own real estate directly through their IRA, others choose to invest with real estate companies such as LLCs or real estate funds. In such cases, the IRA takes an ownership interest as an entity, rather than in a real property. For more information, visit our page about investing IRA funds in a private placement.

UBIT (Unrelated Business Income Tax)

Unrelated Business Income Tax applies when a tax-advantaged entity such as an IRA earns “ordinary” income. In real estate, this can take the form of income from multiple short-term property flips. Passive investments, such as rental income, interest income, and dividend income do not incur this tax. It is best to reach out to an accountant or tax administrator before placing an “active” real estate investment to learn whether the tax may apply.

Another tax that may apply is Unrelated Debt Financed Income. When an IRA procures a loan for an investment, then the earnings from the financed portion are subject to UDFI.

When either UBIT or UDFI are due, it is the account holder’s responsibility to prepare Form 990-T. The form then is signed by Madison Trust in its capacity as IRA custodian, and then filed with the IRS by the account holder.

Prohibited Transactions

An IRA may transact with third parties but may not transact with close family members or closely held entities, known as disqualified persons. In essence, IRS Self-Directed IRA prohibited transactions do not limit WHAT an IRA can invest in, but rather WHO an IRA can transact with.

In addition, when you invest with a Self-Directed Real Estate IRA, only your IRA benefits from the investment, not you or another disqualified person. The following are considered disqualified persons to your IRA:

          • You (the Self-Directed Real Estate IRA account holder)
          • Parents
          • Grandparents
          • Spouse
          • Children
          • Children’s Spouses
          • Grandchildren
          • Grandchildren’s Spouses
          • The fiduciary of the Self-Directed IRA and anyone else that provides services to the account (e.g.,                            accountant or financial advisor).
          • An entity (e.g., corporation, partnership, LLC) that is owned 50% or more, singularly or collectively by                      disqualified persons.
          • All officers, directors, highly compensated employees, and other owners of a disqualified entity.

These disqualified persons are not allowed to partake in the following:

          • Live on, rent, or use the investment property
          • Lease the property to any business you or they owe 50% or more of
          • Personally conduct repairs on the property
          • Hire a business you or they own 50% or more of to perform any repairs

For more details, visit Prohibited Transactions.
To learn more about purchasing real property with retirement funds, feel free to contact a Real Estate Self-Directed IRA Specialist
(800) 721-4900

How Real Estate IRAs Work

Madison Trust makes it easy to purchase property with retirement funds by having a streamlined real estate investment process. Typically, investors come to Madison Trust with all - or a portion of - their retirement funds and an investment in mind. Then, Madison Trust acts as the bridge connecting your retirement funds to the investment of your choice.

Refer to our How To Purchase Real Estate with Your IRA flowchart for more information, including the process for the earnest money and closing instructions.
Download Free Real Estate Investing Flowchart

How To Use a Self-Directed IRA for Real Estate

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Investor Standing Next To Phone and Plant Icon to show opening a Self-Directed IRA

Open a Self Directed Real Estate IRA

Open a Self-Directed Real Estate IRA with Madison Trust by completing our easy 
online application.
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Investor Standing Looking At Screen Icon to show funding a Self-Directed IRA

Fund Your Account

Fund your Self-Directed Real Estate IRA by transferring or rolling over all – or a portion of – your funds from an existing retirement account, such as an IRA or 401(k), or by making an initial contribution.
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Investor Standing Holding Check Icon to show placing an investment with a Self-Directed IRA.

Invest in the Property of Your Choice

Instruct Madison Trust to send your funds by writing a check or sending a wire directly to your chosen real estate investment.

Why Investors Choose Madison Trust 
for their Real Estate IRA

Incredible Client Support

Madison Trust seeks to give retirement investors an amazing experience. The first step in that experience is unparalleled customer service. You will always be able to speak to a live and knowledgeable representative.

Icon of a house to signify a real estate investment.

Self-Directed Real Estate IRA Expertise

Madison Trust has been a regulated trust company and industry leader since 2014. Together with our sister company, Broad Financial, we have 20,000+ clients across all 50 states and thousands of 5-star reviews.

Low Fees

Amongst the lowest in the industry, Madison Trust's flat-rate fees help ensure the profitability of your investments. We also allow you to skip the asset-based holding fees and manage as you see fit.

Ready to Build Wealth with a Real Estate IRA?

Schedule a free discovery call to speak with one of our friendly and knowledgeable 
Real Estate IRA Specialists. Schedule a FREE discovery call.

Ready to start investing in your future?

Reach out to our team, and we’ll answer any questions you may have.
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Corporate Headquarters:
Madison Trust Company
401 East 8th Street • Suite 200
Sioux Falls, SD 57103
Mailing Address:
Madison Administration Company
One Paragon Drive • Suite 275
Montvale, NJ 07645
Hours:
Monday - Thursday: 9:00AM - 6:00PM EST
Friday: 10:00AM - 4:00PM EST
Saturday/Sunday: Closed
Contact:
(800) 721-4900
[email protected]
F: 845-947-1212
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