Real Estate Specializations
Can a Self-Directed IRA Buy Commercial Property?
A self-directed IRA can buy commercial real estate — office buildings, retail centers, industrial properties, warehouses, and mixed-use developments. The compliance rules differ in important ways from residential real estate IRA investing. This complete guide covers how commercial property works inside a self-directed IRA, what the common structures look like, and where investors most frequently make mistakes.
The commercial property self directed ira strategy is used by experienced SDIRA investors who want larger-scale real estate exposure, commercial lease income with built-in rent escalations, and the diversification benefits of non-residential property inside a tax-deferred or tax-free account. The buy commercial real estate with ira framework operates under the same core prohibited transaction rules as residential real estate investing but introduces several specific compliance considerations that arise from the nature of commercial tenancies, commercial financing, and commercial property management.
This guide covers the full office retail property in ira compliance and strategy framework — from acquisition structuring through tenant management through eventual disposition. For the foundational IRA real estate framework, see our guides on IRA non-recourse loan rules and best real estate IRA custodians for 2026. For the complete prohibited transaction rules, see our guide on who is a disqualified person in a self-directed IRA. For expense payment rules, the rules covering how IRA property expenses must be paid are covered in detail in our compliance guides. Start at how to open a self-directed IRA, explore the full library at IRA Guidelines, and model any investment using the self-directed IRA return calculator.
What Types of Commercial Property Can an IRA Own
The sdira commercial property guide begins with understanding that the IRS does not categorically restrict the type of commercial real estate an IRA can hold. All of the following property types are permissible IRA investments when acquired and managed in compliance with the prohibited transaction rules: single-tenant net lease properties such as fast food locations, pharmacies, and dollar stores; multi-tenant retail strip centers and shopping centers; office buildings ranging from small professional buildings to multi-story suburban office parks; industrial and warehouse properties including distribution centers and flex-space; mixed-use buildings combining retail ground floor with residential or office above; self-storage facilities; parking lots and parking structures; and medical office buildings.
The ira buy commercial building compliance analysis focuses entirely on how the property is acquired, managed, and transacted — not on the category of commercial use. A fast food net lease property and a Class A office building have the same compliance framework inside an IRA. The business operating inside the building does not create compliance issues; what creates compliance issues is the IRA owner’s or a disqualified person’s relationship to the business or the property management.
The Critical Tenant Compliance Question
The commercial real estate self directed ira compliance rule that causes the most problems — and that has no equivalent in residential IRA investing — is the tenant disqualified person analysis. A residential IRA property cannot be occupied by disqualified persons. The same rule applies to commercial IRA property: the IRA cannot lease space to a disqualified person’s business.
If the IRA owns a commercial building and the IRA owner’s adult child operates a business that wants to lease space in that building, the lease is a prohibited transaction. The adult child is a disqualified person. Their business is an entity controlled by a disqualified person. Any lease between the IRA-owned building and the child’s business creates a transaction between the IRA and a disqualified person regardless of whether the lease terms are at market rates.
This rule has significant practical implications for IRA investors who own businesses or whose family members operate businesses. Before purchasing a commercial property, the investor must verify that no disqualified person operates a business that could become a tenant or that has any current relationship to the tenants already in place. A common error is purchasing a multi-tenant commercial building without checking whether any existing tenant has a disqualified person relationship to the IRA owner.
The office building ira purchase compliance analysis must also examine property management. The IRA must hire a third-party commercial property management company that is not owned or controlled by any disqualified person. The IRA owner cannot personally manage a commercial building any more than they can manage a residential IRA rental. All management functions — tenant relations, maintenance coordination, rent collection, lease negotiations — must be performed by unrelated third parties.
Commercial Financing: Non-Recourse Loans and UDFI
Commercial real estate purchased inside an IRA with non-recourse financing generates UDFI on any income from the leveraged portion of the property. UDFI applies to both rental income and gain on sale in proportion to the average acquisition indebtedness as a percentage of the property’s adjusted basis. For large commercial properties with significant leverage, the UDFI calculation and annual Form 990-T filing obligation can be material.
Non-recourse commercial lending for IRA-owned properties is available through a smaller set of specialized lenders compared to residential IRA lending. Commercial IRA loans typically require 35 to 40 percent down payment from IRA funds, charge interest rates 1 to 2 percent above conventional commercial rates, and require debt service coverage ratios that are satisfied by the property’s existing commercial lease income. Net lease properties with investment-grade tenants and long remaining lease terms are the most financeable commercial properties in the non-recourse IRA lending market.
For the complete UDFI framework covering commercial property, see our guides on how UDFI tax works in a self-directed IRA and IRA real estate depreciation and UDFI deductions.
Net Lease Properties: The Most Popular IRA Commercial Structure
The sdira commercial property guide most frequently encountered by investors considering commercial real estate for the first time involves net lease properties — single-tenant commercial properties where the tenant pays base rent plus some or all of the property’s operating expenses including taxes, insurance, and maintenance.
Net lease properties are popular in IRA accounts for three reasons. First, they minimize the property management burden on the IRA — the tenant handles most operational responsibilities, and the IRA’s role is limited to collecting rent and maintaining the investment. Second, they generate predictable lease income that funds the IRA predictably over multi-year lease terms. Third, single-tenant net lease properties leased to national credit tenants have established secondary markets that make valuation and eventual sale more straightforward than non-standardized commercial properties.
The minimum investment for direct ownership of a net lease property — a standalone retail building leased to a national tenant — typically ranges from $1 million to $5 million. This capital requirement means net lease IRA investing is primarily available to investors who have accumulated significant IRA balances through decades of contributions and reinvestment, or who are rolling over large 401k balances into an SDIRA. Co-investment structures that allow multiple IRAs to own fractional interests in a single net lease property exist and lower the per-investor capital requirement.
Office Buildings and Multi-Tenant Properties
Office building ira purchase strategies involve more operational complexity than net lease investing because multi-tenant properties require active property management, ongoing lease negotiations as tenants turn over, and capital expenditure planning for common area maintenance and building systems.
An IRA that owns a multi-tenant office building must hire a professional commercial property manager to handle all tenant interactions, building maintenance, lease renewals, and tenant improvements. All of these costs are IRA expenses paid from IRA funds. The property manager’s fee — typically 4 to 6 percent of gross rents for commercial properties — is an IRA expense. Tenant improvement allowances for new leases, capital expenditures for roof replacements or HVAC upgrades, and common area maintenance costs are all IRA expenses.
The compliance discipline required for multi-tenant commercial properties is proportionally higher than single-tenant or residential properties because the number of ongoing transactions is higher. Every lease, every service contract, every capital expenditure is a transaction that must be analyzed for disqualified person involvement and paid from IRA funds rather than personal funds.
Industrial and Warehouse Properties
Industrial real estate inside an IRA — warehouses, distribution centers, manufacturing facilities, flex-space — has emerged as a particularly attractive commercial IRA strategy because industrial lease terms tend to be long, tenant improvement requirements are lower than office, and the industrial property sector has experienced strong fundamentals driven by e-commerce growth and supply chain restructuring.
Industrial IRA properties carry the same compliance framework as other commercial properties but typically have simpler tenant relationships and lower management intensity than retail or office. A single-tenant industrial property leased to a logistics operator on a 10-year net lease may require minimal management intervention over the entire holding period — the tenant manages the building’s operations, the lease provides predictable income, and the IRA’s role is primarily administrative.
FAQ
Can I lease commercial space in an IRA-owned building for my own business?
No. The IRA owner is a disqualified person. Leasing commercial space from your own IRA to operate your business creates a transaction between the IRA and a disqualified person — specifically a lease of property from the IRA to a disqualified person under IRC §4975(c)(1)(A). This is prohibited regardless of whether the lease rate is at market value, below market, or above market. The IRA cannot lease to your business under any circumstances while you remain the IRA owner.
What if an existing tenant in a building I want to buy turns out to be related to me?
If you identify a disqualified person tenant relationship before closing, you generally cannot purchase the building through your IRA without first resolving the tenancy issue. Options include negotiating a lease termination with the disqualified person tenant before closing, structuring the purchase to exclude the disqualified person’s portion if the property has multiple separate spaces, or simply not proceeding with the IRA purchase and considering whether personal purchase makes more sense. Purchasing knowing a disqualified person is a tenant creates a prohibited transaction from day one. For the complete screening framework, see our guide on how to screen for related party problems before funding any SDIRA deal.
How does depreciation work for commercial property held in an IRA?
Commercial property held in an IRA is not depreciated by the IRA owner on their personal tax return — the IRA does not pay income tax on its operating income under normal circumstances, so depreciation as a personal deduction is irrelevant. However, when a commercial IRA property is leveraged and subject to UDFI, depreciation under the Alternative Depreciation System reduces the UDFI calculation, which reduces the Form 990-T tax liability. The depreciation benefit exists at the IRA level in the UDFI context, not at the investor’s personal tax level. For the complete framework, see our guide on IRA real estate depreciation and UDFI deductions.
Can my IRA invest in commercial real estate through a fund or syndication rather than direct ownership?
Yes. An IRA can invest as a passive limited partner in commercial real estate funds and syndications that are managed by unrelated general partners. This structure gives the IRA access to commercial real estate without the direct ownership compliance obligations — the fund’s general partner handles all management, tenant relationships, and operational decisions. The IRA’s role is passive capital. This passive structure eliminates direct ownership compliance obligations while giving the IRA full exposure to commercial real estate returns.