What types of real estate can I hold in a Roth IRA?

Holding Real Estate in a Roth IRA

Yes, you can hold real estate in a Roth IRA, but not through traditional brokerage accounts. You need a self-directed Roth IRA (SDIRA) that allows alternative investments like real estate.

How Real Estate Works in SDIRAs

Real estate held in a Roth IRA must be purchased and owned directly by the IRA, not by you personally. The IRA becomes the legal owner, and all expenses (property taxes, maintenance, insurance) must be paid from IRA funds.

Required Appraisals

When you hold real estate in a Roth IRA, you need professional appraisals for:

• Initial purchase valuation
• Annual required minimum distributions (RMDs)
• Conversions between IRA types
• Required reporting to custodians

IRS Compliance Requirements

The IRS requires that real estate in IRAs be properly valued at fair market value by independent, qualified appraisers. This ensures accurate tax reporting and prevents prohibited transactions.

Prohibited Transactions

You cannot use property held in your Roth IRA for personal benefit, including living in it or renting to family members. All transactions must be at arm's length.