Investing in Real Estate Using a Checkbook Control SDIRA or Solo 401(k)
A comprehensive Guide to investing in Real Estate using a Checkbook Control Self-Directed Retirement Account
A Checkbook Control Self-Directed IRA or Solo 401(k) is a structure that allows the retirement account holder to directly write checks or send wires to make investments without needing custodian approval for each transaction.
Instead of every investment going through the custodian, the retirement account owns an investment entity:
Account Type Investment Entity Self-Directed IRAIRA-owned LLC, Solo 401(k)Trust / Plan account (often no LLC needed)
The retirement funds are deposited into the entity bank account, and the investor (acting as manager or trustee) can make investments directly.
This structure is commonly called “checkbook control.”
Real estate transactions often require speed, flexibility, and multiple payments, which traditional custodians are not designed to handle.
Real estate deals often move quickly.
Without checkbook control:
• You must submit paperwork to the custodian
• Wait for review and approval
• Wait for the custodian to wire funds
That process can take days or weeks.
With checkbook control:
• You write a check or send a wire immediately
• You can secure deals faster than competing buyers.
Reduced Custodian Transaction Fees
Traditional SDIRA custodians charge fees for:
• Each investment
• Each check request
• Each wire transfer
• Each asset held
Real estate deals can require many transactions:
• earnest money
• contractor payments
• property taxes
• insurance
• closing costs
• repairs
Checkbook control removes most of those fees.
Easier Property Management
Owning property inside a retirement account requires that all income and expenses flow through the retirement account.
With checkbook control:
Rental income goes directly to the LLC or SoloK account.
Expenses can be paid immediately:
• repairs
• maintenance
• property taxes
• insurance
• utilities
Access more types of deals
Many real estate opportunities require quick capital commitments, which custodians struggle to accommodate.
Examples include:
• wholesaler deals
• auctions
• private placements
• syndications
• crowdfunding opportunities
Checkbook control allows participation in deals that might otherwise be impossible.
Real Estate Investments That Work Well With Checkbook Control:
Rental Properties
One of the most common uses.
The retirement account buys property and collects rent.
Benefits
• rental income grows tax-deferred or tax-free
• long-term appreciation
• inflation hedge
How it works
- IRA or SoloK funds the LLC or trust
- Entity purchases property
- Title is held by the retirement entity
- Rent goes back to the retirement account
Important rule:
The property cannot be used personally by the account holder or family.
Fix and Flips
A retirement account can purchase distressed property, renovate it, and sell it for profit.
Why Checkbook Control matters
Flips involve frequent payments:
• contractors
• permits
• materials
• inspections
Waiting for custodian approval on every expense would be extremely inefficient.
Real Estate Partnerships
Retirement funds can partner with:
• other investors
• private equity funds
• real estate operators
Example:
Investor contributes $200k from their SDIRA to a real estate partnership acquiring a multifamily building.
Ownership is held by the IRA entity.
Real Estate Syndicatins
Many investors use SDIRAs or SoloKs to invest in:
• apartment complexes
• commercial developments
• large multi-family deals
These are typically passive investments where a sponsor manages the project.
Benefits include:
• diversification
• passive income
• access to institutional-scale deals
Short-Term Lending / Hard Money Loans
Real estate investors frequently lend retirement funds to other investors.
Example:
An IRA LLC lends $150,000 to a house flipper.
Terms:
• 10–12% interest
• 6–12 month loan
• secured by property lien
All interest returns to the retirement account.
Real Estate Wholesaling Assignments
Some investors use checkbook control to purchase properties from wholesalers quickly.
Example:
Wholesaler assigns contract.
Investor’s Solo 401(k) writes earnest money immediately.
Without checkbook control, these deals are often missed.
Real Estate Crowdfunding
Checkbook control works very well with crowdfunding platforms that accept retirement investors.
Typical investments include:
• multifamily projects
• development deals
• commercial properties
Investors can deploy funds faster and manage capital calls easily.
Tax Liens and Tax Deeds
Retirement accounts can purchase:
• tax liens
• tax deed properties
Many of these opportunities require fast payments, making checkbook control ideal.
SoloK vs SDIRA
Both can invest in real estate, but Solo 401(k)s have advantages.
Because of the UDFI exemption, Solo 401(k)s are often the preferred structure for investors using leverage.
IRA Rules
Prohibited Transactions
Certain activities are not allowed.
The retirement account cannot benefit the owner personally.
Examples:
❌ Living in the property
❌ Vacation use
❌ Renting to family
❌ Personally performing repairs
Disqualified Persons
The account cannot transact with:
• yourself
• spouse
• parents
• grandparents
• children
• grandchildren
• businesses owned by those people
All expenses must come from the retirement account.
You cannot mix personal funds.
Example:
❌ Paying for repairs personally
✔ Paying from the IRA LLC or SoloK account
All Income must return to the retirement account
Rent checks, loan payments, or sale proceeds must go directly back to the retirement account.
Real estate can be purchased with:
Financing Real Estate in Retirement Accounts
Cash:
Most common.
Non-Recourse Loan
The lender’s only collateral is the property.
Personal guarantees are not allowed.
Important tax rule:
• SDIRAs may owe tax on leveraged income
• Solo 401(k)s are exempt from this tax.
Example Real Estate Investment Using a Checkbook Control SDIRA
Investor rolls over $250,000 into an SDIRA.
Structure:
SDIRA → IRA LLC → Bank Account
Investment:
• Purchase rental property for $200k
• Spend $30k on renovations
• Rent for $1,800/month
All income flows back to the LLC and grows tax-deferred.
Example using Solo 401(k)
Investor rolls over $400k into a Solo 401(k).
Purchase:
• $1M multifamily property
• $400k retirement funds
• $600k non-recourse loan
Rental income flows into the SoloK without UDFI tax.
Risks to Understand
Real estate inside retirement accounts still carries normal risks:
• property market fluctuations
• vacancy
• maintenance costs
• liquidity limitations
In addition, investors must stay compliant with IRS rules.
Why investors prefer checkbook control:
Checkbook control gives retirement investors:
• faster deal execution
• lower fees
• easier property management
• broader investment opportunities
• greater control over their capital
For active real estate investors, it is often the difference between participating in deals and missing them entirely.
What our clients says about us
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.
