Invest In Real Estate With Your IRA
A Modern Guide to Self-Directed IRAs: Unlocking Alternative Investments for Retirement
Many Americans today are confronting mounting concerns over retirement readiness. According to a 2023 report by the National Institute on Retirement Security (NIRS), roughly 57% of working-age Americans do not have any retirement account assets. Additionally, a study from PwC revealed that one in four American adults have no retirement savings at all, and even among those nearing retirement age, over 25% have less than $50,000 saved. These findings underscore the critical need for more effective, diversified, and accessible retirement strategies.
Additionally, a 2023 study by Lincoln Financial Group revealed that over 60% of retirees regret not preparing better, particularly in terms of starting earlier and investing more. Notably, 85% showed interest in investment strategies that reduce exposure to market volatility. This trend is prompting many to explore beyond the traditional 401(k), often leading to a powerful but lesser-known vehicle: the self-directed IRA (SDIRA).
What Is a Self-Directed IRA (SDIRA)?
Unlike standard IRAs that typically hold stocks, bonds, and mutual funds, SDIRAs allow for a broader spectrum of investment types, including alternative assets. While SDIRAs are still classified as either Traditional, Roth, SEP, or SIMPLE IRAs, the term “self-directed” refers to how investments are managed—you make the choices.
SDIRAs are administered by specialized custodians who permit alternative holdings. These custodians do not offer investment advice but are essential for handling paperwork and IRS compliance. You retain control over the investment strategy.
Standard IRA Types Compatible with Self-Direction
Traditional IRA: Contributions may be tax-deductible, and taxes are paid upon distribution. Useful for those expecting lower taxes in retirement.
Roth IRA: Contributions are made with after-tax dollars, but qualified distributions are tax-free. Ideal for those expecting to be in a higher tax bracket later.
SEP IRA: Geared toward business owners and self-employed individuals, these offer higher contribution limits.
SIMPLE IRA: Designed for small businesses with fewer than 100 employees. Both employers and employees can contribute.
SDIRAs are administered by specialized custodians who permit alternative holdings. These custodians do not offer investment advice but are essential for handling paperwork and IRS compliance. You retain control over the investment strategy.
Who Typically Uses SDIRAs?
SDIRAs are available to any investor who meets the criteria for a Traditional or Roth IRA. However, users must be actively involved in their account management. Originally more accessible to accredited investors, regulatory and technological advances have now broadened access to a larger pool of individual investors.
Consider the case of “Mark,” a 55-year-old W-2 executive at a Fortune 500 company. Earning a high six-figure income, Mark has already maxed out his 401(k) contributions and is looking for new ways to diversify his retirement portfolio. He’s concerned about market volatility and is interested in gaining exposure to commercial real estate. By opening an SDIRA, Mark can invest passively in a real estate syndication project, gaining access to private market opportunities that align with his long-term goals—all while preserving tax advantages.
This type of investor—high-earning, financially literate, and focused on strategic retirement planning—is an ideal candidate for an SDIRA. are available to any investor who meets the criteria for a Traditional or Roth IRA. However, users must be actively involved in their account management. Originally more accessible to accredited investors, regulatory and technological advances have now broadened access to a larger pool of individual investors.
Pros and Cons of SDIRAs
Advantages:
Full investment control
Access to alternative assets
Portfolio diversification
Tax-deferred or tax-free growth
Potential for tax deductions
Challenges:
No advice from custodians
Complex IRS rules
Limited liquidity of assets
Due diligence required
Risk of prohibited transactions
What Are Prohibited Transactions?
Prohibited transactions involve improper use of IRA assets by the owner, their beneficiaries, or other disqualified persons (e.g., fiduciaries). Examples include personal use of property owned by the IRA or lending money to disqualified individuals. These can result in penalties or disqualification of the IRA,
What Are Alternative Assets?
These are non-traditional investments not typically allowed in standard IRAs:
Private equity or debt: Investment in startups, small businesses, or private funds
Marketplace lending: Peer-to-peer loans through online platforms
Real estate: Includes residential, commercial, rental, raw land, and pre-construction properties
Commodities futures: Contracts to buy/sell energy, agriculture, or metals at a future date
Hedge funds: Pooled funds with specific strategies for high-net-worth individuals
Real Estate in SDIRAs
Real estate is one of the most common asset classes held in SDIRAs, and it can be particularly valuable for investors seeking passive income and long-term appreciation. With an SDIRA, investors can allocate retirement funds toward commercial real estate projects—such as multifamily apartment complexes, retail centers, industrial warehouses, or office buildings—through direct ownership or passive syndication.
For example, a passive investor might use their SDIRA to participate in a real estate syndication that acquires a stabilized Class B multifamily property in a growing Sun Belt market. These projects can deliver consistent cash flow and potential equity upside, while providing insulation from stock market volatility.
Other commercial real estate investment strategies that can be pursued within an SDIRA include:
Net lease retail centers (e.g., national brand tenants with long-term leases)
Ground-up development of medical office buildings
Diversified commercial REITs focusing on logistics or data centers
Value-add strategies in underperforming office assets
These opportunities not only offer potential tax-advantaged returns but also align with the investment goals of high-earning professionals seeking steady income and asset-backed growth as they prepare for retirement. estate is one of the most common asset classes held in SDIRAs. You can invest in:
Rental properties
Multi-family units
Farmland
Commercial buildings
Residential developments
Undeveloped land
Opening a Self-Directed IRA
To open an SDIRA:
Choose a qualified custodian who offers SDIRA accounts
Submit required documentation
Fund the account via:
Contributions
Transfers from existing IRAs
Rollovers from 401(k) or similar plans
How Our Firm Supports SDIRAs
At Blue Arrow Capital, we specialize in helping high-earning professionals approaching retirement diversify their portfolios through passive investments in commercial real estate using self-directed IRAs. Our platform seamlessly connects investors with vetted syndication opportunities and private market deals—all within the tax-advantaged structure of an SDIRA.
Unlike traditional custodians that limit you to public securities, our firm partners with a qualified third-party SDIRA custodian that enables access to a broader universe of alternative assets. We walk you through the process of account setup, help coordinate transfers or rollovers from existing retirement plans, and provide transparency every step of the way.
While we are not a custodian ourselves and do not offer financial or tax advice, our role is to make it simple for you to unlock the power of passive real estate investing through your retirement account.
Let us help you invest smarter for the next chapter of life—on your terms.
