Self-Directed IRA and Solo 401(k) Real Estate Investing

Yes, with rules

Can you invest in real estate with a self-directed IRA?

A self-directed IRA can own real estate as long as a custodian that accepts alternative assets holds the account. That includes interests in private syndications and funds. The IRS keeps no list of approved investments, so no IRA investment is "IRS-approved," and IRAs can't hold collectibles.

The custodian doesn't check the deal either. An SEC and NASAA investor alert warns that self-directed IRA custodians don't evaluate the quality or legitimacy of what they hold. It also warns that fraudsters target these accounts.

Retirement money adds rules of its own to the usual private real estate risks. There are people the account can't deal with, a tax on debt-financed income, yearly valuations and required withdrawals. All of them attach to an asset you can't sell quickly.

How does a self-directed IRA for real estate work?

A self-directed IRA for real estate works like any IRA, except the custodian lets you choose investments outside stocks and funds. The usual sequence:

1. Open a self-directed IRA with a custodian that holds private real estate. Providers include Equity Trust, Entrust and IRA Financial, and Rocket Dollar offers self-directed IRAs and solo 401(k)s.
2. Fund it with a contribution or a transfer or rollover from another retirement account. The 2026 IRA contribution limit is $7,500, plus $1,100 if you are 50 or older.
3. Confirm the sponsor accepts IRA money, then direct the custodian to invest. The interest belongs to the IRA, not to you personally.
4. Distributions and sale proceeds go back into the IRA, and any tax the IRA itself owes is paid from IRA funds.

Losses and depreciation from the deal stay inside the account too. They don't reach your personal return the way they would if you invested in your own name, which the K-1s guide covers.

Which account

Can you use your 401(k) to invest in real estate?

Most employer 401(k) plans don't allow private real estate, so the 401(k) itself usually can't make the investment. Two routes are common. You can roll money from a former employer's plan into a self-directed IRA. If you are self-employed with no employees, you can open a solo 401(k) that permits alternative assets.

Self-directed IRA vs solo 401(k): which is better for real estate?

A solo 401(k) can be better for leveraged real estate because it may qualify for a debt-financed income tax exception that IRAs can't use. It is only open to business owners without common-law employees, though. The main differences for 2026:

The debt exception is the real difference. IRC 514(c)(9) exempts real property debt for "qualified organizations," a list that includes 401(a) plans such as a solo 401(k) but not IRAs. The exception has conditions. They include a fixed purchase price and no seller financing or leaseback to related parties. Through a partnership, the deal must also meet allocation rules.

A solo 401(k) in a typical syndication can still owe the tax if the partnership doesn't meet them, so ask the sponsor. Workers aged 60 to 63 get a higher 401(k) catch-up of $11,250 in 2026.

Rules that bite

What are prohibited transactions and disqualified persons?

A prohibited transaction is a deal between the IRA and a disqualified person, or a use of the account for your personal benefit. The tax code bans these under IRC 4975. Disqualified persons include you as the owner, your fiduciary, your spouse, your parents and other ancestors, your children and other lineal descendants, and their spouses. Examples the IRS gives:

• Borrowing money from the IRA.
• Selling your own property to the IRA.
• Using the IRA as security for a loan.
• Buying property with IRA money for personal use.

UBTI and UDFI

What triggers UBTI in an IRA?

UBTI (unrelated business taxable income) in an IRA is triggered mainly by borrowed money and by business income passed through a partnership. Rent from real property is generally excluded from UBTI, but two exceptions catch many syndications:

• Debt-financed income (UDFI). When a property has a loan, part of its income and gain is taxable (IRC 514). The taxable share equals average acquisition debt divided by average adjusted basis. That applies to the yearly income and to the gain at sale.
• Business income from a partnership flows through to the IRA as UBTI (IRC 512(c)). An energy working interest is an operating business, so it can create UBTI even without debt.

The K-1 flags these items with an IRA disclosure code (box 20, code AR). If the IRA has $1,000 or more of gross income from an unrelated business, the custodian files Form 990-T, due April 15. The IRA pays the tax at trust rates after a $1,000 specific deduction. Trust rates reach 37% above $16,000 of taxable income in 2026.

Can you invest in real estate with a Roth IRA?

A self-directed Roth IRA can hold the same real estate as a traditional one. It follows the same custodian, prohibited-transaction and UBTI rules. So a leveraged deal can create unrelated business income tax (UBIT) inside a Roth just as it can inside a traditional IRA. In both, depreciation and losses stay in the account and never reach your own return.

Later years

How do RMDs and valuations work for real estate in an IRA?

Required minimum distributions (RMDs) apply to real estate in an IRA the same way they apply to stocks. They start at age 73, or 75 if you were born in 1960 or later. Each year's amount is based on the December 31 balance of the year before. For a private real estate interest, that balance depends on a valuation.

• Valuations. Custodians must report the fair market value of hard-to-value assets, including LLC and partnership interests, on Form 5498 (boxes 15a and 15b). Ask the sponsor how often it values the interest and whether the figure is an appraisal or its own estimate.
• An RMD can be paid in kind by moving the LP interest itself out of the IRA at fair market value. You then owe income tax on that value without receiving cash.
• Each IRA's RMD is figured separately, but the total can come from any of your IRAs, so cash in another IRA can cover it. 401(k) RMDs must come from each plan.
• A missed RMD costs 25% of the shortfall, cut to 10% if corrected within two years.

Income in retirement

Is private real estate a good source of retirement income?

Private real estate can add income to a retirement portfolio, but it is not a steady paycheck. Distributions can be cut or paused, and most deals lock up money for years, as the guide on selling early explains.

That illiquidity matters more inside a retirement account, because RMDs come due every year whether or not the deal has paid out. The guide to real estate for retirement income compares syndications, REITs and bonds as income sources.

On Relli

Which syndication platforms allow IRA investing?

Whether a platform allows IRA investing usually depends on each offering's sponsor, since the IRA buys the interest from the sponsor's partnership or fund. On Relli, many sponsors accept self-directed IRAs, LLCs and trusts, and each sets its own rules, so ask on your call with the sponsor.

Some funds offer an individual feeder fund that an IRA can invest through. The guide to funds with IRA feeders explains how those structures work.

Most offerings on Relli are for accredited investors, and the sponsor confirms eligibility before you invest. The accredited investor guide covers whether an IRA counts toward accredited net worth. Debt platforms set their own IRA terms; see Groundfloor IRA investing for one example. See open offerings on Relli.

Ask first

What should you ask a sponsor before investing IRA money?

Ask a sponsor five things before your IRA invests, because each answer changes the tax or the paperwork:

1. Does the deal use debt? Have you estimated the debt-financed income tax for IRA investors, and do you help with Form 990-T?
2. How often do you provide a per-unit valuation for Form 5498, and is it an appraisal or your estimate?
3. If I need an RMD while the deal is still running, can units be distributed in kind and re-registered out of my IRA?
4. Are any sellers, lenders, property managers or co-investors connected to me or my family?
5. What share of past distributions came from operating cash flow versus reserves or return of capital, and have you ever paused them?