Avoiding the DIY Trap – Why You Can’t Manage an IRA-Owned Property

Owning real estate through a Self-Directed IRA can be a smart way to diversify your retirement assets. You get the potential for rental income and long-term appreciation, for starters. And doing it within the tax-advantaged structure of your retirement account will feel like a genius move. But there’s one catch that trips up more investors than you’d think: you can’t manage the property yourself. A handyman mindset might save money on a personal rental, but in a Self-Directed IRA, it can lead straight to penalties, disqualification, and a whole lot of frustration.

Why Personal Involvement in a Self-Directed IRA Crosses the Line

The IRS rules are clear: you can’t personally benefit from assets held in your Self-Directed IRA. That means you’re not allowed to paint the walls, fix a broken window, or even mow the lawn. You also can’t live in the property, even for a weekend getaway, or rent it out to your children, parents, or spouse.

If you’re not aware, these activities are considered “prohibited transactions.” And they’re not just frowned upon—they can result in your entire IRA losing its tax-advantaged status. That could mean taxes on the full account value, and depending on your age, early withdrawal penalties too.

It may feel counterintuitive. After all, if you own rental property outside of your IRA, being hands-on can save money. But inside an IRA? That DIY attitude becomes a liability.

It’s not just physical labor that can trigger trouble, either. Even coordinating repairs or negotiating with tenants can cross the line if you’re doing it directly. The IRS expects all actions related to the property to be handled at arm’s length. If it looks like you’re acting in your own interest—or stepping in where a third party should—you could be inviting unwanted scrutiny. The safest route is to stay entirely behind the scenes and let qualified professionals manage the work.

What You Can Do Instead

Just because you can’t manage the property yourself doesn’t mean you have to give up control entirely. You can hire a property manager to handle the day-to-day upkeep, tenant communications, and repairs. Their fees can be paid directly from the IRA, as long as the account has enough funds to cover them.

The same goes for maintenance expenses, insurance, and property taxes. Every dollar that goes into the property has to come from the IRA. And every dollar of income it generates—rent payments, for example—has to go back into the IRA.

If you’re using checkbook control through an IRA LLC, you’ll have more flexibility to write checks and pay bills, but you still can’t perform the work yourself. You’re essentially acting as the manager of the IRA’s checkbook, not the maintenance crew for its properties.

Keeping It Legal and Simple

The easiest way to stay on the right side of the rules is to think of your IRA as a separate entity. It owns the property. It pays the bills. It collects the income. You’re there to direct strategy, not to swing a hammer.

This mindset helps you avoid the temptation to “just fix that one thing” or “help out this once.” Even small violations can create big problems. That’s why most successful Self-Directed IRA real estate investors build a reliable team and treat the IRA like the business partner it is.

With the right approach, real estate inside a Self-Directed IRA can be a long-term win. But it takes planning, discipline, and a willingness to step back from the work you might be used to doing yourself.

Want to learn more about keeping your real estate investments compliant in a Self-Directed IRA? Call American IRA at 866-7500-IRA. We’ll help you stay on track while your retirement portfolio does the heavy lifting.