The short answer
Yes, a retirement account can own rental property. You need either a self-directed IRA, held by a custodian that accepts real estate, or a Solo 401(k) whose plan documents allow it. The account owns the property, the account pays every expense, and every dollar of rent goes back into the account. You, your spouse, your parents, and your children cannot use the property or do business with it.
Key points
- Most mainstream brokerage accounts do not hold physical real estate. You need a provider that does.
- The property is titled to the account, or to an LLC the account owns, never to you personally.
- All expenses are paid from the account and all income returns to it. Never use personal money, even temporarily.
- No personal use and no deals with "disqualified persons," which include your spouse, parents, children, and grandchildren.
- Do not do the repairs yourself, and do not pay your own company to manage the property.
- Loans must be non-recourse, with no personal guarantee. Financing inside an IRA can create a tax called UDFI.
Can I buy rental property with my retirement account?
Yes. The tax code allows IRAs and qualified retirement plans to hold real estate. What limits most people is their provider. Standard accounts at large brokerage firms are generally set up for stocks, bonds, and funds, so buying a house requires one of two account types:
- Self-directed IRA: an IRA held by a custodian or trustee that agrees to hold alternative assets like real estate. It can be a Traditional or a Roth IRA.
- Solo 401(k): a 401(k) plan for a business owner with no eligible employees other than a spouse. Its plan documents must permit real estate investments.
"Self-directed" describes what the provider allows. It is not a separate kind of account in the tax code, and the normal IRA and 401(k) rules still apply.
What is the difference between a self-directed IRA and a Solo 401(k)?
| Self-directed IRA | Solo 401(k) | |
|---|---|---|
| Who can open one | Anyone with an IRA, including rollovers from old employer plans | Self-employed people and business owners with no eligible employees other than a spouse |
| Who signs and pays | The custodian processes each transaction, unless the IRA owns an LLC that you manage | You can act as plan trustee if the plan documents allow, subject to strict fiduciary rules |
| Financing tax | Income from a mortgaged property can be subject to UDFI tax | A conditional exception can remove UDFI tax on real estate acquisition debt |
| If a rule is broken | The entire IRA is generally treated as distributed | Different consequences, including excise taxes; ask your CPA |
Who is eligible for a Solo 401(k)?
A Solo 401(k), which the IRS calls a one-participant 401(k), generally covers a business owner alone, or a business owner and a spouse who works in the business. You need self-employment or business income to contribute.
If you have eligible employees, they generally must be covered, and the plan is no longer a one-participant plan. Since 2025, part-time employees who work at least 500 hours in each of two consecutive years can become eligible. If you have staff, ask your CPA or plan provider before relying on a Solo 401(k).
What is "checkbook control"?
Some investors have their IRA form an LLC that they manage, or serve as trustee of their own Solo 401(k). That lets them sign contracts and pay bills directly instead of waiting on a custodian for every transaction.
It is faster, but the responsibility shifts to you. Checkbook control is not an exemption from any rule. One wrong payment, a personal guarantee, or mixing personal money can be a prohibited transaction. Most problems in this area come from well-meaning owners who moved money the wrong way.
How does title work?
The property is owned by the account, never by you personally.
- Self-directed IRA: title is typically held in the custodian's name for the benefit of your IRA, in the exact format your custodian requires.
- IRA-owned LLC or Solo 401(k): title is held in the exact legal name of the LLC or the plan's trust.
The purchase contract, earnest money, and closing documents should be in the account's or the LLC's name from the start. Ask your custodian or plan provider for their required wording before you sign anything.
What are the rules that protect the account?
These rules come from Section 4975 of the Internal Revenue Code, which defines prohibited transactions.
No personal use
You and other disqualified persons cannot live in, vacation in, store things at, or otherwise use the property, even if you pay market rent.
No deals with disqualified persons
Disqualified persons include you, your spouse, your parents and grandparents, your children and grandchildren and their spouses, and businesses or trusts that any of these people own 50 percent or more of. The account cannot buy from, sell to, lend to, or rent to them. Siblings are not on the list by relationship alone, but any arrangement that indirectly benefits you can still be a problem.
Do not do the work yourself
The safe rule is to hire every repair, turnover, and improvement out to an unrelated vendor and pay them from the account. Doing the work yourself raises prohibited-service and self-dealing issues, even if you are not paid.
All money moves through the account
Every expense, including taxes, insurance, repairs, HOA dues, and management fees, is paid from the account. Every dollar of rent and sale proceeds goes back to the account. Paying a bill with your personal card and getting reimbursed later can itself be a prohibited transaction.
Financing must be non-recourse
The account can borrow to buy property, but the loan must be non-recourse, meaning the lender can look only to the property, with no personal guarantee from you or any other disqualified person.
Do not hire your own company
If you own a property management, construction, or real estate company, the account generally cannot pay it for services, even at market rates. An independent, unrelated manager is the clean approach.
What taxes can still apply?
A retirement account is tax-advantaged, not tax-free in every case.
- Financed property in an IRA: the share of income tied to the mortgage can be subject to UDFI (unrelated debt-financed income) tax. A Solo 401(k) may qualify for an exception on real estate acquisition debt, but the exception has conditions.
- Flipping: frequent buying and selling can be treated as running a business inside the account, which can be taxed as unrelated business income.
- Filing: generally, $1,000 or more of gross unrelated business income requires the account to file Form 990-T. A Solo 401(k) generally files Form 5500-EZ once plan assets reach $250,000.
- No personal write-offs: depreciation, repairs, and losses belong to the account. You cannot deduct them on your personal return.
What happens when required minimum distributions start?
For Traditional accounts, required minimum distributions generally begin at age 73, or at age 75 for people born in 1960 or later. Roth IRAs have no required distributions during the owner's lifetime.
If the account does not hold enough cash, a distribution can be made "in kind," for example by transferring a share of the property, which takes planning. Your custodian also needs a supportable fair market value for the property every year. Plan for liquidity well before distributions begin.
Do I need a 1031 exchange inside an IRA?
Usually not, because a sale inside the account generally does not create current income tax. Financed IRA property can be an exception. Our 1031 exchange guide covers exchanges for property you own outside a retirement account.
How Silver Trust Property Management helps
We are a licensed Texas real estate brokerage and an independent property manager, which is exactly the role these rules call for.
What we do
- Help you find and compare rental properties in San Antonio and the surrounding areas, with rent estimates and expected operating costs.
- Coordinate the purchase with your custodian or plan trustee so contracts and title are in the account's name.
- Set up management with the account, or the account's LLC, as the owner of record: rent goes to the account, expenses are paid from the account, and statements go to you and your custodian as needed.
- Hire independent, licensed vendors for all work, so there is no sweat equity and no related-party work.
What we never do
- Recommend a specific custodian or plan provider, or tell you which account type to choose.
- Bill you personally for expenses of an account-owned property.
- Give tax or legal advice, or tell you whether a transaction is permitted.
Checklist before you buy
- Talk to your CPA or tax attorney about the account type, financing, and UDFI.
- Open and fund the account with a provider that accepts real estate, and ask about transaction timelines and fees.
- Get the provider's exact title and contract wording before you make an offer.
- Make sure the account has cash for reserves, repairs, and vacancy. You cannot add personal money later outside normal contribution rules.
- Line up an independent property manager and vendors before closing.
Frequently asked questions
Can I live in a rental property owned by my IRA?
No. You and other disqualified persons cannot live in or use property owned by your IRA, even if you pay market rent.
Can my IRA rent the property to my son or daughter?
No. Children and grandchildren are disqualified persons, so the account cannot rent to them. The same applies to your spouse and parents.
Can my IRA or Solo 401(k) get a mortgage?
Yes, but the loan must be non-recourse with no personal guarantee. In an IRA, the share of income tied to the loan can be subject to UDFI tax. Talk to your CPA before you finance.
Can a Roth IRA own rental property?
Yes. A self-directed IRA can be a Roth IRA. The same prohibited-transaction rules apply, and qualified distributions can be tax-free.
Can I use money from an old employer's 401(k)?
Often, yes. Many investors roll an old employer plan into a self-directed IRA, or into a Solo 401(k) if they are eligible. Ask your plan provider and CPA how to move the money without creating a taxable distribution.
Sources
- Internal Revenue Code Section 4975: prohibited transactions (Cornell Law School)
- Internal Revenue Code Section 514: unrelated debt-financed income (Cornell Law School)
- IRS Publication 590-A, Contributions to IRAs (IRS)
- IRS Publication 590-B, Distributions from IRAs (IRS)
- IRS Publication 598, Tax on Unrelated Business Income (IRS)
- IRS One-Participant 401(k) Plans (IRS)
Important: This guide is general education about how these transactions work. It is not tax, legal, financial, or investment advice, and it is not a recommendation to buy, sell, or exchange any property or to open any account. Tax rules change and every situation is different. Before you act, speak with a qualified CPA or tax attorney, and for retirement accounts, your custodian or plan provider. Silver Trust Property Management is a licensed Texas real estate brokerage. We are not a tax advisor, qualified intermediary, or retirement account custodian.
Last reviewed October 2026.