How to Invest in Real Estate Syndication with a Self-Directed IRA
By Michelle Clardie on 06/30/2025.
Reviewed by Josefin Gatsby
Savvy investors are using self-directed IRAs (SDIRAs) to access unique investment vehicles while maximizing the tax benefits on their retirement accounts.
As the popularity of real estate syndication increases, we’re seeing more demand for syndication investments to be held within self-directed IRAs. But there is a lot of confusion around how to invest in real estate syndication with an SDIRA.
In this article, we’ll demystify the process. We’ll explain:
What a self-directed IRA is and how it works,
Why so many investors use SDIRAs for real estate,
The types of real estate projects you can invest in with an SDIRA, and
How to invest in syndication with an SDIRA.
We’ll also provide answers to some of your most frequently asked questions on this topic.
Here’s everything you need to know about investing in syndication with a self-directed IRA.
What Is a Self-Directed IRA?
A self-directed IRA is a type of Individual Retirement Account that gives you a wider range of investment options to choose from (compared to traditional or Roth IRAs, which are generally limited to the stocks, bonds, and funds offered by the bank or brokerage managing the account).
To invest in alternative assets like real estate through an SDIRA, your account must be held with a custodian that permits non-traditional investments. These are often referred to as Alternative Asset IRA Custodians.
SDIRAs can be either traditional (in which contributions are pre-tax, and taxes are deferred until you make withdrawals from the account) or Roth (in which you use after-tax contributions to fund the account, but then get to make withdrawals tax-free in retirement). In either case, your SDIRA is a tax-advantaged account. Traditional accounts give you a tax break upfront, so your investment can grow faster, while Roth accounts provide a tax break on the back end, so you don’t have to pay income tax on amounts withdrawn during retirement.
How Do Self-Directed IRAs Work?
SDIRAs must be opened through a qualified custodian or trustee that allows alternative investments. The custodian handles the administration of the account, but they don’t offer financial advice.
As the account holder, you are responsible for conducting due diligence, choosing your investments, and making sure those investments comply with IRS rules.
This can create additional work for you, but it also provides opportunities to take advantage of more lucrative investments than the stocks, bonds, and funds that are offered through non-self-directed accounts…while getting the tax benefits associated with retirement accounts.
Transactions Prohibited by Self-Directed IRAs
SDIRAs come with a list of prohibited transactions to prevent account holders from gaining an unfair advantage in the market. For example, as an SDIRA account holder, you can not engage in the following:
Using IRA assets for personal benefit. For example, you cannot stay in a vacation home owned by your IRA.
Providing services to the IRA-owned property. For example, you cannot make repairs on a rental propertyowned by your IRA yourself; you must hire a professional.
Receiving unreasonable compensation for managing IRA investments. You cannot pay yourself a management fee from the IRA for overseeing your own investments.
Buying or selling property between the IRA and a disqualified person. SDIRAs disqualify certain people from any involvement with your portfolio. This includes: You, as the IRA owner, your spouse, your parents, grandparents, children, grandchildren, spouses of your children or grandchildren, your IRA custodian or financial advisor, and any entities owned or controlled by any disqualified person. You cannot, for example, purchase a property for your SDIRA from any disqualified person.
Borrowing money from your IRA or lending to a disqualified person. Borrowing money from your IRA to lend to your children, for example, is prohibited.
Violations can lead to penalties, taxation of returns as earned income, and/or disqualification from the tax-advantaged retirement account status.
Why So Many Investors Use Self-Directed IRAs for Real Estate
Tax-deferred or tax-free growth. Rental income and capital gains from property sales are tax-deferred (in a traditional SDIRA) or tax-free (in a Roth SDIRA).
Passivity. Since SDIRA rules prevent account holders from actively working on their properties, you will not need to invest time or sweat equity in your real estate holdings. Your returns will be entirely passive.
Real estate serves as a hedge against inflation. During periods of inflation, real estate values and rental income typically increase, helping your portfolio to keep up with the market.
Types of Real Estate You Can Invest in with a Self-Directed IRA
Another compelling reason for investing in real estate with an SDIRA is the broad range of unique investment opportunities this presents.
You can invest in any of the following real estate project types with your SDIRA:
Limitations on Using an SDIRA to Invest in Real Estate
Before using an SDIRA to invest in real estate, it’s important to understand the limitations that apply:
You and your disqualified persons can’t live in or use the property. It must be strictly for investment.
All expenses must be paid from the SDIRA. Funds in your SDIRA must be used to cover taxes, insurance, repairs, vacancy losses, etc. You cannot pay these expenses from your personal bank account.
All income must go back into the IRA. These funds cannot come to you directly.
No self-dealing or “sweat equity” is allowed. To maintain your distance, you cannot make repairs, repaint, or even mow the lawn yourself.
Real estate in an SDIRA can’t be mortgaged with a regular home loan. If you plan to use leverage for your SDIRA properties, you must find an alternative financing method that does not use the property as collateral for the loan.
How to Invest in Real Estate Syndication with a Self-Directed IRA
Real estate syndication is growing in popularity as an ideal property investment type for SDIRAs.
Syndication allows you to buy into a professionally managed real estate deal and share in the profits, automatically fulfilling the requirements for keeping some distance between yourself and your SDIRA properties. Each project is hand-selected by a team of real estate analysts, who don’t typically make any money unless the project is financially successful. This incentivizes syndication companies to choose lower-risk, higher-reward-potential projects.
Gatsby Investment, for example, specializes in development projects in high-demand Los Angeles neighborhoods, generating average annualized returns of 22.3% to accredited investors (from 2017 through 2024). By accepting investments from self-directed IRAs, Gatsby helps investors maximize their tax-advantaged retirement benefits quickly and easily.
How to Invest in Syndication through a Self-Directed IRA with Gatsby
Gatsby simplifies the process of investing in real estate syndication through a self-directed IRA. Here is a five-step plan for investing in syndication with a self-directed IRA:
Create an account with Gatsby. Sign up with your full legal name and select “retirement account” when asked how you would like to invest.
Complete the accredited investor verification process. Provide documentation through our platform to confirm your status as an accredited investor based on the income or net worth criteria.
Explore Gatsby’s investment opportunities. Choose from Gatsby’s pre-vetted real estate projects and place your investment directly online. With minimum investment amounts as low as $25,000, you can even spread your investment across multiple projects for greater diversification.
Have your SDIRA custodian work with Gatsby to activate the investment. Gatsby can work directly with your custodian to gather the required documents, get the investment approved, and transfer the funds to activate the investment. If you don’t already have an SDIRA custodian, consider The Entrust Group, Equity Trust, Rocket Dollar, or Sense Financial, all of whom have successfully worked with Gatsby.
Track your portfolio progress. You can watch over your property investments through the convenient online dashboard. At the end of any tax year in which income is generated, a Schedule K-1 tax form will be issued in your retirement account’s name for easy income tax filing. Consider reinvesting proceeds in new projects to compound your returns.
Investing in Syndication with a Self-Directed IRA FAQs
Can I invest in any syndication deal with a Self-Directed IRA?
Not necessarily. The syndication sponsor must allow IRA investors and structure the deal accordingly. Gatsby Investment is an SDIRA-approved syndication sponsor.
Do I need to be an accredited investor to invest in a real estate syndication with my SDIRA?
Usually, but not always. Most syndication deals are offered under SEC Regulation D Rule 506(c), which requires that investors be accredited. However, some 506(b) offerings accept a limited number of non-accredited investors. Your eligibility depends on the specific deal terms. To invest with Gatsby, you must be accredited.
Can I invest in multiple syndication projects with one SDIRA?
Yes. As long as you have enough funds in your account, you can invest in multiple opportunities simultaneously.
Who holds the title to the investment when investing with an SDIRA?
Your SDIRA (not you personally) will be listed as the investor. As the account holder, you direct the investment, but the IRA legally owns the asset.
Can I use an old 401(k) or another IRA to fund a syndication investment?
Yes. You can roll over or transfer funds from a previous 401(k), Traditional IRA, or other eligible retirement account into a Self-Directed IRA to place your syndication investment.
How do I choose a syndication platform to invest with?
To choose a syndication platform to invest with, research the company’s track record, financials, investment strategy, and legal documents. Look for transparency, third-party references, and a history of successful deals completed.
Welcome to the Gatsby AI assistant. I am here to answer your questions about investing, our investment products or other helpful information about our company.
