Can I use my self-directed IRA to buy real estate?

Yes. A self-directed IRA can purchase real estate, but you cannot do it through a standard brokerage account. Fidelity, Vanguard, and Schwab don’t offer this, not because the law prohibits it, but because they’ve chosen not to support alternative assets. To buy real estate with IRA funds, you need to work with a specialized self-directed IRA real estate custodian.

Here’s how a purchase works. You open an account with a real estate IRA custodian and fund it through a rollover from a previous employer plan, a transfer from an existing IRA, or annual contributions. Once the account is funded, you identify a property you want the IRA to buy. It must come from an unrelated third party. You cannot buy from yourself, your spouse, your parents, your children, or any other disqualified person under IRC Section 4975.

You submit a Buy Direction Letter to your custodian. They review the paperwork, wire funds to the closing table, and take title in the custodian’s name “for benefit of” your IRA. Not your personal name. The IRA owns the property.

From that point, everything flows through the account. Rent goes in. Expenses come out. You cannot personally pay a property bill or receive a dollar of rental income. All repairs, management fees, property taxes, and insurance come from the IRA. You cannot personally use the property either.

The tax benefit is the core reason investors use this structure. In a traditional self-directed IRA, rental income and sale proceeds grow tax-deferred. In a self-directed Roth IRA, qualifying withdrawals are entirely tax-free. Over a 20 to 30-year hold, that shelter is worth a significant amount on even a single property.

Choosing the best self-directed IRA custodian for real estate matters more than most people realize upfront. Look for flat annual fees, direct experience processing real estate closings, and clear timelines for wiring funds.