Four Benefits of Rehabbing A Home Using A Self-Directed IRA

Home Renovation

Investors all know that there are serious profits to be made with rehabbing real estate investment deals; but, have you ever thought of using your Self-Directed Retirement Account to finance your real estate deal?

Kurt Jacobson at RentFinder said:

“When it comes to rehabbing homes, doing it in a self-directed retirement account can offer a number of benefits and make the financial aspect of home flipping all the more lucrative. So long as you already have at least some money built up in your retirement account, you’ll be able to use this strategy to the fullest.”

Here are just a few of the advantages of flipping a home in a self-directed retirement account.


Purchasing a home that needs some love and affection, giving it that needed TLC, and then selling it for a profit can be both personally and financially rewarding. However, the financial rewards of flipping homes are oftentimes diminished due to taxes. Luckily, there are some legal strategies that you can employ when engaging in rehabbing or “home flipping” so that you can enjoy the fruits of your labor completely tax-free. One such method is doing the project using a self-directed Roth IRA, as all gains are tax-free – or if you have a regular IRA, gains are tax-deferred until distribution is taken. This means that you are saving a huge portion of your profits instead of sending them directly to Uncle Sam.


A self-directed IRA that has checkbook control means that flipping homes or performing real estate transactions really is as easy as writing a check. Normally, IRA transactions can be complicated with paperwork and custodial approval. A self-directed IRA with checkbook control – attained by forming an LLC that is owned by the retirement account – becomes straightforward, saving you time and preventing hours of stress and frustration. It shouldn’t require a degree in finance to be able to manage your own!


When you choose to manage your own self-directed IRA LLC, you have more independence in controlling your own financial decisions. This basically means that you can purchase a home with your self-directed IRA and pay for the improvements you wish to make on it all on your own. If you don’t happen to have enough money in your IRA to cover the full costs of purchase and rehab for a specific property that is available, a hard money non-recourse loan is always an option as well. Having the authority to make real estate investment decisions without requiring the red tape of an IRA custodian really does provide a feeling of satisfaction, independence and control over your own financial destiny.


A traditional self-directed IRA that requires custodian consent also requires a high level of custodian fees. By creating a self-directed IRA LLC with checkbook control, you can completely eliminate these fees. Not only does this mean that you can flip a home in your IRA and save even more money, but it also means you won’t have to pay somebody else to do something that you are perfectly capable of achieving yourself.

While the Self Directed IRA LLC isn’t for everyone, it’s an awesome tool for those that have the inclination to invest in real estate and are looking for a better return for their IRA.

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    1. ruby

      for a self directed ira can i use the llc i all ready have and can i use it for rehab only because i dont have enough to buy a house

      • Jordan Sheppherd

        Hi Ruby,

        If you’re talking about an LLC that you already have, that you personally own, then the answer is no. You won’t be able to use that LLC with your IRA, because essentially you’d have to sell the LLC’s ownership to your own IRA, which is prohibited. As the IRA owner, you are prohibited from dealing with your own IRA. If you’re short on funds, you might consider either having your IRA get a loan to buy the property, or partner up with another investor. Hope that helps.

    2. Andrea Heintzelman

      This was an excellent piece on clarifying how to use money already in ones Traditional IRA, Roth IRA, or Self-Directed, Check Book IRA to invest in real estate. I had this very question last week when I was wanting to know if I could use current IRA funds sitting in my Traditional IRA to build a new house on some vacant land I own in that account. My understanding was “yes” I could, but I would have to go through my custodian to direct the funds to the builder. While that will cost me custodial fees for any and all transactions, I can at least defer taxes on the sale of the property until I take a distribution from the account. However, I like the idea of using a self-directed check book Traditional IRA or Roth IRA to do the same thing, thus avoiding the custodial fees.

      • SK

        To my understanding, building a house with your IRA money on land you own personally is self dealing, and is a prohibited transaction. Please consult a retirement tax attorney before you take the step, otherwise your IRA may become taxable immediately.

        • Jordan Sheppherd

          Hey Suresh,

          You’re right, but if you read her comment carefully, you’ll see that the vacant land is owned by her account; her Traditional IRA. In her case, there wouldn’t be any issues of self-dealing, because she doesn’t own the land – her IRA does.

    3. Don Rosenthal

      First of all, you have extremely informative articles and I look forward to each of them.
      My question is, can I use the same LLC for both my ROTH and Traditional IRA’s?

      • Jordan Sheppherd

        Hey Don,

        Sure, its possible to set up one LLC, so that the Traditional and the Roth IRA each own a portion of the one entity. A few things will change, such as the LLC will be treated as a partnership for tax reporting purposes, so it will have to file a 1065 return and K-1s to each IRA each year. You’d also have some figuring to do if either IRA were to add funds to the LLC at a later date, and also some figuring when it comes time to make distributions. Give us a call and I can go through it in more detail.

    4. Dale Sleep

      First of all, a serious thank you for information to help clear up several points of confusion over the years.
      To be clear, one cannot do the work themselves, but need to use contractors for the rehab work to be done, correct?

      • Jordan Sheppherd

        Thanks, Dale; I’m glad the article was helpful.

        You are correct – the LLC should hire and pay contractors to do any work on the rehab.