Finding the Best Contractors for Your IRA Properties
Investing in requires working with contractors and tradespeople. Having the best possible contractors on your team is a real key to success.
Whether you need to fully rehab a newly acquired property or just have a little work done on an existing rental within your IRA portfolio, being able to count on a reliable contractor will help keep your projects moving forward and producing income.
The value of reliable and efficient contractors is often overlooked, but can be one of the most important pieces of successful real estate investing with your IRA or Solo 401(k) plan.
Finding quality contractors can be a challenge, however. Below are a few tips that may help you in your search.
Who Can’t Be a Contractor for Your IRA?
Of course, since we are talking about investing with a self-directed IRA or Solo 401(k), we need to keep IRS rules at the forefront. There are a handful of folks that can’t be a contractor and provide services to your retirement plan because they are viewed as disqualified persons.
No disqualified person can benefit from the plan or provide benefit to the plan. This means your plan cannot hire a disqualified person to perform services. Disqualified persons are also prohibited from providing services for free to the plan.
Number one on the list of disqualified persons is you as the IRA account holder. You may not work on your plan property. Period.
Other disqualified persons include:
- Your spouse
- Lineal antecedents; parents, grandparents, etc.
- Lineal descendants; children, grandchildren, etc.
- The spouse of a descendant.
- An entity such as a business or trust where one of the above family members has controlling interest.
- Fiduciaries and other persons/businesses providing services to your IRA or 401(k) such as a financial advisor.
As long as you avoid any of the above individuals or entities, anyone else is eligible to be hired by your plan for contracting work.
Seek Recommendations
The best way to source contractors is to get the recommendation of a trusted associate. While larger firms such as HVAC, plumbing, and electrical specialist may have the business infrastructure to advertise, most independent tradespeople focus on word of mouth networking to grow their business.
Speak with other property owners you may know and ask for referrals. Real estate agents and property managers will typically have a solid list of vetted service providers they can recommend. If you have access to a local real estate investor club, be sure to ask around for good contractors at meetings.
Another great source of referrals can be the contractors you already work with. For example, your carpet installer may know a great painter. Subcontractors tend to run into each other on various jobs, and will know who shows up when scheduled and delivers as promised.
This referral-based search will not only help you find independent contractors or smaller firms that may be easier to work with, but can also help you identify providers who have made other parties in your network happy with their services.
Licensing & Insurance
While IRS rules do not require that your IRA or Solo 401(k) hire licensed professionals, it’s foolish not to. As an owner of real estate, your IRA or 401(k) plan has a certain amount of liability exposure. As a responsible fiduciary for your plan, it’s important to make sure you limit your plan’s liability exposure by using properly licensed and insured contractors.
If a contractor is injured working on your property and they’re not properly insured, the resulting lawsuit could wipe out your retirement savings. Similarly, if shoddy work is performed on your property and a tenant or purchaser of a home sues, your plan could be exposed to that liability in ways that wouldn’t be the case with a properly licensed and insured contractor.
So before even asking about services and pricing, keep this item at the top of your priority checklist.
Responsiveness is Valuable
Finding a contractor who is responsive to your inquiries can be difficult. However, it is extremely important.
By nature, contractors and tradespersons are in the field performing their services throughout the day. Having your calls go to voicemail or texts ignored for a period of time is to be expected.
That being said, some contractors are good at managing their customer interface and getting back in a reasonable timeframe — even if it’s just a text letting you know when they’ll be able to call you back.
A large majority of contractors don’t always handle this part of their business well. In our modern age of mobile communications, low-cost virtual receptionists, and online scheduling tools, a lack of responsiveness isn’t acceptable.
Project turnaround time is one of the more critical pieces of meeting budgets and keeping your property profitable. Don’t let an unresponsive contractor leave you in the dark and sour your IRA property investments.
Be Prepared
Trying to find a plumber once you already have a leak is going to eliminate your ability to be selective. Start networking and building your list of contractors early.
Always use any suitable opportunity to update your list of resources based on referrals. Having contacts who you can reach out to when a need arises will be a huge benefit.
Vetting Contractors
Finding contractors who come with a recommendation and are responsive to your inquires is a critical first step. The next step is vetting those contractors for proper licensing, expertise, and cost.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
