Can I manage my own self-directed IRA?
You can make your own investment decisions within a self-directed IRA, which is actually the defining feature of this type of account. The term self-directed means you are in control of choosing the investments. However, there are important distinctions between directing your investments and personally managing IRA-owned assets, particularly when it comes to real estate.
As the account holder, you direct your self-directed IRA custodian where to invest. You identify properties, negotiate deals, select private loans to fund, or choose which precious metals to purchase. The custodian then executes those instructions using IRA funds. This is the level of control that self-directed IRA investors exercise, and it is fully permitted under IRS rules.
Where self-management becomes restricted is in the hands-on operation of IRA assets. If your self-directed IRA owns a rental property, you cannot personally serve as the property manager and receive compensation for that work from the IRA. Paying yourself for services performed on an IRA asset constitutes a prohibited transaction. The property manager must be an unrelated third party.
You also cannot perform physical labor on IRA real estate, even voluntarily without compensation. Doing so is considered a contribution of services to the IRA, which violates the rules around sweat equity in self-directed IRAs.
One structure that gives investors closer to hands-on control is the self-directed IRA with checkbook control, often implemented through a self-directed IRA LLC. In this setup, your IRA owns an LLC and you serve as the manager of that LLC. You then write checks or wire funds directly from the LLC bank account to pay for investment expenses without waiting for custodian processing each time. This checkbook control self-directed IRA structure is popular among real estate investors because it speeds up transaction timelines. However, it still does not allow you to personally benefit from IRA assets or enter into self-directed IRA LLC prohibited transactions with disqualified persons.
BullioniteAssetGroup helps clients set up both standard and checkbook control self-directed IRA structures depending on their investment approach.
