Can my IRA Plan Purchase Foreign Real Estate?
Investing in real estate outside of the United States is entirely possible with a self-directed IRA.
For outside of the United States is entirely possible with a self-directed IRA. For some investors, this can be a smart way to diversify their retirement savings and tap into a specific network or the experience they may have in a foreign market.
While there are plenty of opportunities for profit in foreign countries, there are some complexities to this type of investing that you should fully understand before using your IRA funds on a beachfront property in a tropical paradise.
Paradise Not Found
Let’s get this out of the way first: Your IRA owned property needs to be a good investment that will provide long-term benefits.
Why? Because you will never sit on the veranda, sip a cool beverage and enjoy the IRA property personally. IRS rules prohibit any kind of self-dealing between you or other disqualified persons and the IRA.
You can’t visit for a weekend and stay in your IRA-owned property, even if you pay market rent. Any investment property owned by your IRA must be exclusively for the benefit of the IRA. The property needs to be a better mix of risk and reward than any other investment you may make with the IRA.
What About My Future Retirement Home?
The second most popular question we receive about foreign real estate is “Can I purchase a property now with my IRA, and then take it out of my IRA to use personally when I retire?”
Technically speaking, this is possible. However, it makes little financial sense.
You may not purchase a property from your IRA. The only way you can take a property out of your IRA is to distribute the property in-kind from the IRA to yourself. This is a taxable event in a tax-deferred IRA or 401(k).
The appraised value of the property at the time of distribution will determine the taxable amount, and will be added to any other income you have in the year of the distribution. The result will be a very large tax bill at a likely very high tax rate.
Any gain in value the IRA experienced over the time you held the property is not sheltered, but simply increases your tax burden when you choose to distribute the property. You would be better off simply investing the IRA in some other asset that produces good returns.
When the time comes to retire and have a personal residence or second home in some other land, you can distribute some portion of the IRA to acquire a property at that time. If financing is available, you may be able to distribute a fraction of the property cost, and then take smaller distributions over a period of years to pay off the property.
These smaller IRA distributions over time will be at a lower marginal rate than a large lump sum distribution in a single year.
With a Roth IRA, there is no tax cost to distributing the property. As such, purchasing a property many years in advance of your intended use can potentially work out.
This approach is generally only beneficial if the property produces good annual returns during the period from purchase to distribution. In that case, you’re not only acquiring a property for future use, but also maximizing the value of tax-free growth in the Roth IRA.
Purchasing your dream vacation or a second home with your self-directed IRA is not a reality. However, there are many reasons why foreign real estate can be a means to grow your retirement savings.
Geographic Diversification
One of the key benefits of a self-directed IRA or Solo 401(k) is the ability to be truly diversified with your retirement savings. Investing in real estate as well as conventional publicly-traded assets is a popular form of diversification for many investors. Your portfolio can be further diversified in real estate by having property in a foreign country.
There are many rapidly developing markets around the world — some of which many operate at much lower value thresholds than similar markets in the United States. The ability to be in the path of growth is very possible.
Different countries may have different overall economic cycles relative to the U.S. as well. While the U.S. real estate market is currently very strong but potentially headed into a leveling off period, other parts of the world are at the beginning of a growth curve.
Beyond the US Dollar
Another form of diversification associated with foreign real estate is the ability to hold assets not correlated to the U.S. dollar.
Local Expertise
Many of the investors we work with who are interested in foreign real estate have specific knowledge about the market in which they plan to invest. They may be from another country originally, or have family there. Perhaps they served in the military or lived abroad as part of a corporate career.
Success in most all real estate investing comes from understanding a local market, so this kind of local expertise can be very valuable.
Types of Foreign Real Estate
As is the case when investing in real estate domestically, most any kind of foreign real estate can be held in a self-directed retirement plan. We have clients investing in resort condos as short-term rentals, commercial properties, plantations, and a variety of other opportunities.
How to Take Title?
While IRS rules allow for IRA or 401(K) plans to own foreign real estate, taking title to real estate in a foreign country can have its own challenges.
A handful of countries will allow for a U.S. based entity such as an IRA-owned LLC or Solo 401(k) trust to hold title to real property. In most countries, however, direct foreign ownership is not possible.
In these cases, it may be necessary to form an in-country entity such as a corporation or trust to vest title to the property. The U.S. based retirement plan entity will then be the shareholder or beneficiary of the foreign vehicle. The foreign entity is then used to hold title and operate the property in-country.
You will need to work with legal counsel in the foreign country to establish such an entity if necessary. This can add considerably to the time it takes to get IRA capital into a position to execute a transaction, so plan accordingly.
In-Country Taxation
Income produced by a foreign real estate investment will be tax-sheltered to your self-directed IRA or 401(K) plan in the United States. The use of retirement funds does not exempt the transaction from any foreign taxes, however.
You will want to be sure to understand if there is any taxation at the federal or local level in the country where you will be investing. This would be true for both operating income such as from a rental or gains on the sale of property.
The Checkbook Control Advantage
A Checkbook IRA or Solo 401(k) provides significant advantages when it comes to investing in a foreign country. Very few self-directed custodians will even process foreign investments. Those that do generally have longer than normal processing times and significant additional fees for foreign transactions.
With a checkbook self-directed plan, you eliminate the custodial layer for all investment transactions. You have full control over the entire process, and can work directly with your foreign counsel and counterparties to ensure the completion of your transaction.
Investing in foreign real estate introduces additional layers of risk and complexity. In the right situations, there can be very profitable opportunities that will help you to better grow your retirement savings, but success in this type of investing really does require a lot of things to align properly.
Be sure to perform considerable diligence on any opportunity as well as the logistics involved in executing the purchase and operating a foreign property within your self-directed retirement plan. If you find there’s an opportunity for returns that outperform what you may be able to do domestically, then an investment in a foreign land may make sense.
Choosing a proficient property manager for your foreign IRA property is another important consideration. Learn more about vetting a property manager for your IRA property »
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.
