free and clear property

Hi all;
I bought a property with my self directed IRA and it is a solid rental with excellent cash flow. Roughly 75-80% undervalued. What is the best way to utilize this in the future? Hold and rent, and/or sell it in the future or near future, or is there a way to borrow against it for other purchases, or to use it as collateral for future purchases? I appreciate any advice. Thanks!


You may want to reconsider your investment strategy. By holding a rental property in your IRA, you lose some of the tax benefits of rental property ownership and the long term capital gain tax treatment when the property is sold.

Why not use your IRA to rehab and flip properties? Since your IRA is tax deferred, you have all the profit from your flips to reinvest in the next properties.

Leverage cannot be used in an IRA without paying Unrelated Business Income Tax.

If you are doing any work on the property (maintenance, selecting tenants, staging vacancies, collecting rent, etc.) you have committed a prohibited transaction and the IRS will consider your IRA distributed. The value of the IRA on Jan 1 of the year of the violation will be added to your income plus you will owe interest and penalties. The same thing applies to flips. You have to outsource the entire project to someone who is not disqualified to avoid a prohibited transaction.

Thanks for the advice! Would utilizing and paying a property manager to do all of those things take care of that requirement? I appreciate the advice.


Exactly. Let IRA do the thing for you. Enjoy tax exemption. Reinvest. Dave T is absolutely right.

You can use a PM as long as you or other disqualified individuals don’t have a controlling interest. You can also use a sibling, but not your parents or children.