Rental Real Estate Investment Education for IRA Investors

Is a rental real estate investment the best option for your self-directed IRA? The answer depends on each IRA investor’s unique circumstance. While some rental real estate investors appreciate they can “touch” their investment, others are stressed by the amount of responsibility that comes with being a landlord. Rental real estate investment education begins with understanding some of the finer points of the transaction before jumping in with both feet. Asking yourself some of the following questions can help you to gain a better understanding of whether or not rental real estate investing within a self-directed IRA is right for you.

What is my investment time horizon?

Rental real estate is usually considered a long-term investment.  Unlike traditional stocks and bonds, rental real estate as an investment comes with maintenance expenses, taxes, and operating costs that can erode short-term returns.

Does my IRA contain enough liquidity after I make my rental real estate investment?

While real estate has the potential to increase in value over time and provide a steady income, certain economic times can make it difficult to rent or sell. Proper rental real estate education encourages investors to look beyond the initial property purchase price and take into account post-closing expenses when calculating necessary self-directed IRA account liquidity, especially if you are nearing the age when Required Minimum Distributions would be necessary.  As all expenses need to be paid directly by the IRA, cash shortfalls should be avoided.

Do I fully understand the local rental real estate market I intend to purchase from?

Local rental real estate values often fluctuate. Rental real estate investment education for IRA investors often depends on local economic indicators of the specific region an intended investment is located.

Am I prepared to become a more ‘hands off’ landlord?

Many rental real estate investors like the idea and/or the cost saving aspects of performing their own property maintenance and management. When buying a property inside an IRA you are limited in the kind of services you can provide. While you can still make managerial decisions (who to rent to, what color to paint the walls), you cannot provide any goods or services to the property per the prohibited transactions rules set forth by the IRS.

If you are considering rental real estate investments within your self-directed retirement plan, there is no right or wrong answer because it depends on your unique situation. Making time for real estate investment education can help you get started as a real estate investor or help you decide that type of investment isn’t suitable for you. It is always prudent to consult with your trusted tax, legal, and financial advisors to discuss all of your investment options before making a decision. If you’d like to learn more about real estate IRA investing, please contact the New Direction Trust Company at or 877-742-1270 for free consultation and links to great learning resources.