How to Buy Real Estate — and Other Assets — Inside a Checkbook IRA
A checkbook control IRA gives you direct command of your retirement money — you write the checks and send the wires yourself, instead of waiting on a custodian to approve every move. For most of our clients that means real estate: putting in an offer, funding earnest money, and closing on the timeline established in the purchase contract. The same structure also unlocks private lending, startup rounds, and crypto — but real estate is by far the most popular asset acquired with a Checkbook IRA.
But "you control it" is not the same as "it's yours." The IRA owns everything, and an IRA-owned LLC carries its own rules and a modest annual cost. Get the funding flow, the titling, and that carrying cost right, and the structure runs quietly in the background. Get them wrong and you can disqualify the entire account. Here's how it actually works.
The Structure, in Plain Terms
You start with a self-directed IRA at a custodian. That IRA invests into an IRA-owned LLC (or a trust). You're the manager of the LLC — which is where "checkbook control" comes from — but the IRA is the member (the owner). The LLC opens its own business checking account, and every dollar of investment activity runs through that account, never your personal one.
The Tax Court validated IRA-owned LLCs in Swanson v. Commissioner (1996), so the structure itself is sound. What gets people in trouble is how they operate it.
Getting Money In — The Only Correct Flow
| Step | Who acts | Money source |
|---|---|---|
| 1. Open the self-directed IRA | You, with an SDIRA custodian | — |
| 2. Fund the IRA | Contribution, rollover, or transfer | New contribution ($7,500, or $8,600 if 50+ in 2026); rollover from an old 401(k); transfer from another IRA |
| 3. IRA invests into the LLC | Custodian, at your direction | IRA cash |
| 4. LLC opens a business checking account | You, as manager | Funded only by the IRA's investment |
| 5. All deals run from that account | You, as manager | LLC funds only |
The one rule that breaks accounts: never move personal money into the LLC account. If the IRA didn't send it, it doesn't belong there. Commingling can disqualify the whole IRA — treated as distributed as of January 1 of that year under IRC § 4975.
Common funding mistakes that quietly do this:
- Writing a personal check straight to the IRA LLC.
- Paying a deal expense on a personal card, then "reimbursing" yourself.
- Forgetting to list the custodian/IRA as the LLC member (or trust grantor/beneficiary).
The LLC Cost Layer (and Why Your State of Formation Matters)
Your IRA owns an LLC, and an LLC has a small annual cost wherever it's formed — paid from IRA funds, never your personal money. For most states that's a modest filing fee in the $50–$140 range. The thing to know is that the number swings widely by state, so where you form the LLC matters. Here's the 2026 annual cost in several common states:
| State | Annual LLC cost (2026) | Notes |
|---|---|---|
| Texas | $0 | No annual report fee; franchise tax only applies above ~$2.47M revenue |
| Georgia | $60 | Annual registration |
| Washington | $70 | Annual report |
| Florida | $138.75 | Annual report |
| California | $800 | Minimum franchise tax, plus Form 568; a tiered fee applies above $250K of CA-source income |
The takeaway: California is the high-cost outlier, while most states run well under $150 a year. If your deal isn't tied to a specific state, you may have room to form the LLC where the carrying cost is lowest — but the property's location, where the LLC is "doing business," and your custodian's requirements all factor in. It's worth a short conversation about your specific facts before you file, because the wrong choice can mean paying the $800 every year for no reason.
Titling Real Estate, Notes, and Startups So You Stay Compliant
Every asset is titled to the IRA structure, never to you:
Real estate. The purchase contract, the grant deed, and the closing statement all name the IRA LLC as the buyer — e.g., "XYZ Investments, LLC." Rent and sale proceeds flow into the LLC account; every expense (property taxes, insurance, utilities, repairs, paying inspectors) is paid from it. You never take title personally, and you never live in or personally use the property. (For financing mechanics and the UDFI that leverage triggers, see the non-recourse article.)
Private lending. The promissory note lists the IRA LLC as the lender; any deed of trust uses the entity name; all interest and principal flow back into the LLC account.
Startup investing. The subscription agreement, the cap table, and any SAFE or convertible note all show the IRA LLC as the investor — not you. Shares in start-ups are held by the entity, never in your personal name.
Crypto. The exchange account is opened in the LLC's name, KYC matches the entity, and the title reads something like "XYZ Investments, LLC FBO [Custodian] FBO [Your Name] IRA #xxxx." Crucially: cryptocurrency is treated as property (IRS Notice 2014-21), not a collectible, so it's permitted in an IRA — unlike art, gems, or certain coins, which IRC § 408(m) prohibits.
Prohibited vs. Permitted: Alternative Assets Edition
| ✅ Permitted | ❌ Prohibited |
|---|---|
| IRA LLC buys a rental and leases it to unrelated tenants | You, your spouse, or family live in or vacation at the property |
| IRA LLC lends to an unrelated business | IRA LLC lends to you, your spouse, parents, kids, or a company you 50%+ own |
| IRA LLC invests in a startup you have no role in | You invest IRA money into a company you work for or control |
| IRA LLC buys crypto on an entity-titled exchange account | You hold IRA crypto in a personal wallet or personal exchange account |
| All income returns to the LLC account | You take a "small" personal draw or use an entity debit card personally |
| Third parties paid from the LLC account | You personally guarantee a loan the IRA makes or takes, or do the rehab yourself |
Disqualified persons (IRC § 4975(e)(2)): you, your spouse, your parents and grandparents, your children and grandchildren and their spouses, and any entity 50%+ owned or controlled by these people. Siblings, aunts, uncles, and cousins are not disqualified persons.
Four Worked Scenarios
Maria — real estate (the most common case). Maria's IRA LLC buys a $420,000 rental all-cash, titled to the LLC. She uses checkbook control to wire earnest money the day her offer is accepted and closes ~20 days later. Rent lands in the LLC account; the property manager, taxes, and insurance are all paid from it. Her LLC's annual state fee comes out of the LLC, not her pocket. She never sets foot in the property as anything but the IRA's manager.
Lisa — private lending. Lisa's IRA LLC wires $80,000 to an unrelated contractor's flip at 11% interest, secured by a deed of trust in the LLC's name. Monthly interest lands back in the LLC account and compounds tax-deferred. Because the loan isn't leveraged, there's no UDFI.
David — startup round. David joins a Bay Area seed round through his IRA LLC. Before signing, he confirms he holds no board seat, no employment, and no existing ownership in the firm — so it's not a prohibited transaction. The SAFE is issued to the LLC, and the cap table shows the LLC, not David.
Tom — crypto. Tom opens an exchange account titled to his IRA LLC, moves IRA funds in, and trades spot only — no margin, no personal withdrawals. He keeps his exchange statements for the annual fair-market-value report to his custodian.
Recordkeeping That Keeps the Account Clean
Keep, at minimum: monthly LLC bank statements; notes and loan agreements; subscription docs and cap tables; any K-1s; and exchange trade histories. Each year your custodian needs a fair market value for every holding — including illiquid startup positions and crypto across wallets — so build a simple folder-by-asset system now. If any holding ever throws off UBTI over $1,000 in a year (e.g., an operating-business LLC via a K-1), the IRA files Form 990-T, and clean records are what make that painless.
When You Don't Need This
A checkbook IRA LLC isn't free — there's an annual state LLC fee (as little as $0–$70 in many states, up to $800 in California), any required state filing, and real recordkeeping every year. Skip it if:
- You're making one or two simple, slow-moving investments a custodian can hold directly (a single private note, for instance).
- Your alternative-asset activity doesn't need an entity to sign or the speed of a checkbook.
- The annual LLC cost outweighs the convenience for your deal volume.
The checkbook structure earns its keep when you're making frequent alternative-asset moves that need an entity and fast funding — and for real estate, which generates ongoing expenses the checkbook structure is built to handle.
Frequently Asked Questions
Can my checkbook IRA buy real estate? Yes — and it's the most common use. The IRA LLC takes title and pays every expense from its own account; you can't live in or personally use the property. The LLC owes a small annual state fee (which varies by state — see the table above).
Can my IRA hold cryptocurrency? Yes. Crypto is treated as property, not a collectible under IRC § 408(m), so it's permitted — as long as the exchange account is titled to the IRA entity, not you.
Why is California's LLC fee so much higher than other states'? California charges an $800 minimum franchise tax (plus Form 568, and a tiered fee on larger California-source income), where most states run $0–$140. If your deal isn't tied to California, you may be able to form the LLC in a lower-cost state — worth confirming for your facts before you file.
Can I invest my IRA in a startup I'm involved with? Usually no. If you or your family own 50%+ of the company, it's a prohibited transaction outright. And even below 50%, investing IRA funds into a company you work for, are an officer of, or otherwise benefit from personally can be a self-dealing prohibited transaction under IRC § 4975. The safe version is the one in David's example above: a company where you have no role, no employment, and no existing ownership. Get a professional review before signing.
Can I keep IRA crypto in my personal hardware wallet? No. The asset must be held by the IRA entity. A personal wallet is commingling and risks disqualifying the IRA.
What happens if I accidentally pay a deal expense personally? That's a prohibited transaction — and there's no clean fix. Under IRC § 4975 the IRS treats the entire IRA as distributed as of January 1 of that year, with income tax (and the 10% penalty if you're under 59½) due on the whole balance, not just the expense. There's no self-correction for IRAs. That's why every expense has to come from the LLC account from day one.
Take Control of Your IRA — the Right Way
If you're buying real estate — or moving into private lending, startups, or crypto — and want the speed of checkbook control without the compliance landmines, the setup needs to be right before your first wire.
Call us at 760-303-5909 or schedule a 15-minute consult to structure the LLC, handle the state filings, and get your titling right. Or start your application and have the structure ready before your next deal.
MyDirect IRA does not provide tax, legal, or investment advice. This article is for educational purposes only. Consult a qualified tax or legal professional about your specific situation before investing retirement funds.
