Stocks, bonds, and mutual funds are no longer the only options in a retirement account. There’s been increasing number of investors diversifying their portfolios with Self-Directed IRA’s (SDIRA’s) use them to purchase homes and get involved in real estate related investments.
The market continues to support that shift. Investment Company Institute (ICI) data show that U.S. IRA assets totaled approximately $19.2 trillion at the end of 2025, and total U.S. retirement assets exceeded $39 trillion at the beginning of 2026. That’s a lot of potential capital that’s waiting to be tapped into.
The brokers and lending partners who understand self-directed IRA transactions, along with how account owners can finance these purchases, will be better positioned to take advantage of this shift and close more specialized deals as more retirement capital flows into alternative investments.
A Self-Directed IRA is a program that allows retirement account owners to invest in alternative assets – real estate, private placements, precious metals, private lending – instead of restricting the account to stocks, bonds and mutual funds. The IRS allows this structure, but most account owners don't even know these programs exist since they can be more complicated and have stricter regulations than investing in conventional assets.
The underlying tax structure mirrors traditional retirement accounts:
An SDIRA is an investment tool for retirement account owners to stay involved in assets they already know, but still receive the tax benefits of a retirement account.
With a self-directed IRA, you can finance real estate, but you should know that the loans come in both recourse & non-recourse varieties. Because the only collateral for the lender is the property itself, and under IRS rules, the account owner is prohibited from personally guaranteeing the loan in the event of default.
This means many lenders will offer “Limited Recourse” options, where the guaranty only applies in the event of specific, fraudulent acts. For non-recourse financing, lenders will generally demand larger down payments, or in other words, the programs will have lower LTV caps.
Underwriting for the financing of real estate in a self-directed IRA is based on the financial strength of the investment property and not on the investor’s personal income.
Lenders typically evaluate:
Usually, personal income and debt-to-income ratios play a much smaller role, because the loan can’t depend on a personal guarantee.
If an SDIRA borrows funds to purchase real estate, a portion of the income generated from the borrowed funds may be subject to Unrelated Business Income Tax (UBIT) under the Unrelated Debt-Financed Income (UDFI) rules.
There is nothing wrong with leverage, but investors should be aware of potential tax implications before closing. If financing is involved, brokers should recommend that clients consult a qualified tax professional.
An SDIRA must act as a self-directed investment entity. Disqualified persons include the account owner, spouses, children, relatives, or entities controlled by any of the above. The investment cannot involve with disqualified persons. More specifically:
Breaking these rules can threaten the tax-advantaged status of the account, so brokers need to educate clients on these regulations before the transaction begins.
Key differences brokers should understand:
Brokers can help keep SDIRA transactions on track by focusing on these key areas:
RCN Capital helps brokers finance a wide range of investment property transactions, including eligible purchases through an SDIRA. Discover the RCN Capital Broker Program and see how the right lending partner can help you close more investor deals with confidence.
Q: Can a self-directed IRA use financing to purchase an investment property?
A: Yes. SDIRAs may utilize non-recourse loans to acquire real estate. The key thing to remember is the loan has to be non-recourse, meaning the lender can look only to the property for collateral, not the account owner’s personal assets.
Q: What is a prohibited transaction in the context of SDIRA real estate investing?
A: A prohibited transaction is when an SDIRA engages in a transaction with a “disqualified person,” which includes the account owner, their spouse, parents, children, and any entity they control.
Q: What is UBIT and how does it affect SDIRA real estate investments?
A: When an SDIRA uses debt financing to buy a property, income from borrowed funds may be subject to Unrelated Business Income Tax (UBIT) — specifically UDFI (Unrelated Debt-Financed Income).
Q: What titling is required when an SDIRA purchases investment property?
A: The property must be titled in the name of the IRA—not in the name of the individual investor. The custodian will provide you with the exact language for the title, which typically appears as follows: “Custodian Name FBO [Investor Name] IRA [Account Number]”.
Q: Can an SDIRA investor manage the property or perform repairs themselves?
A: No. The account owner and any disqualified person may not provide services for the IRA-owned property or receive compensation from the account. All property services must be done through third parties and paid for with IRA money.