Before I spent my career in real estate, I spent it in emergency rooms and trauma bays. As a Navy Nurse Corps officer, I worked alongside people who were brilliant at caring for others and much too busy to think about their own money. Most of my colleagues had a 403(b) or 401(k) on autopilot, invested in whatever target-date fund the plan picked, and that was the whole plan.
There's nothing wrong with that. But many nurses, CRNAs, physicians and therapists eventually ask me: "Can I use my retirement account to invest in real estate?" Often, yes, through a self-directed IRA. Here's how it works, what it costs, and the rules that catch people.
Important: Any numbers in this article are hypothetical examples and are not guaranteed. Omega Property Investments is not a law firm, attorney, or financial advisor and does not provide legal, tax, or financial advice. Please consult your own financial advisor (and your attorney or CPA) before investing.
What is a self-directed IRA?
A self-directed IRA (SDIRA) is a regular traditional or Roth IRA under the tax code. The difference is the custodian. Most brokerages only let you hold stocks, bonds and funds. A self-directed custodian also lets you hold "alternative" assets, such as:
- Rental property (owned by the IRA, not by you)
- Private real estate funds and syndications
- Promissory notes and mortgages
- Private company stock, precious metals and other assets the custodian accepts
The tax rules are the same as for any IRA. Traditional IRA money grows tax-deferred; qualified Roth withdrawals are tax-free. What changes is what you can own, and how carefully you have to follow the rules.
How nurses typically fund one
Most healthcare workers don't start a self-directed IRA with new contributions. They move money that's already saved:
- A rollover from an old employer plan. When you leave a hospital system, the 403(b), 401(k) or 457(b) you leave behind can usually be rolled into an IRA. Ask for a direct rollover (trustee to trustee) so no taxes are withheld and you don't trigger the 60-day rule.
- A transfer from an existing IRA. Moving IRA money from a brokerage to a self-directed custodian is a transfer, not a distribution.
- Annual contributions, within the IRS limit for the year (check IRS.gov; the limit changes).
If you're still working for the same employer, your plan may or may not allow an "in-service" rollover. Ask HR or the plan administrator. Travel nurses and per-diem staff who've worked for several systems often have several small old accounts. Consolidating them is a good first step regardless of what you invest in.
Veterans: a TSP can generally be rolled to an IRA after you separate. The same direct-rollover advice applies. Traditional TSP money goes to a traditional IRA, and Roth TSP money goes to a Roth IRA.
How the IRA actually buys real estate
Here's the mental shift: the IRA is the investor, not you. In practice:
- The property or fund interest is titled in the IRA's name (for example, "XYZ Trust Company, Custodian FBO Jane Smith IRA").
- The IRA pays every expense, from purchase price and repairs to taxes, insurance and management, out of IRA cash.
- All income goes back into the IRA: rent, distributions and sale proceeds.
- You direct the investment; the custodian executes it and keeps the records.
For a busy clinician, this is why many choose passive investments, such as a private fund or syndication, over a rental house. With a rental, the IRA has to pay for every repair and you can't swing the hammer yourself (see below). With a fund, the IRA writes one check, and the sponsor handles operations and sends distributions back to the IRA.
The rules that cause problems
1. Prohibited transactions
The tax code (IRC §4975) bars your IRA from dealing with disqualified persons: you, your spouse, your parents, grandparents, children and their spouses, plus certain businesses you control, and your IRA's fiduciaries. In plain English:
- You can't live in, vacation at, or rent the property to your daughter.
- You can't buy a property you already own from yourself, or sell the IRA's property to your parents.
- You can't do the repairs yourself or pay for them from your personal checking account.
- You can't personally guarantee a loan for the IRA.
The penalty is severe. A prohibited transaction can disqualify the entire IRA, treating it as distributed and taxable (plus possible penalties if you're under 59½).
2. UBTI and leverage
If your IRA buys property with a mortgage, or invests in a fund that uses debt, part of the income may be unrelated debt-financed income (UDFI). That can trigger unrelated business income tax (UBIT), paid by the IRA, and the custodian may need to file Form 990-T. Many real estate syndications use leverage, so ask the sponsor whether they expect UBTI and whether they'll provide the information your CPA needs. Because this area is technical, a CPA familiar with SDIRAs is worth the fee.
3. Liquidity and RMDs
Private real estate is illiquid. Money may be tied up for 5–10 years. If you own a traditional IRA, required minimum distributions (RMDs) still apply starting in your 70s, and you'll need enough liquid cash in the IRA, or a plan, to meet them. Don't put every retirement dollar into one illiquid asset.
4. Fees and valuations
Self-directed custodians charge setup, annual and transaction fees, and some charge per asset. Your IRA also needs a fair market value reported each year, which for private investments usually comes from the sponsor.
Accredited investors and private funds
Many private real estate offerings, including those under SEC Rule 506(c), are available only to accredited investors. An IRA's eligibility is usually evaluated by looking at you, the owner. Under the SEC's definition, individuals generally qualify with $200,000 of income ($300,000 with a spouse or spousal equivalent) in each of the last two years and a reasonable expectation of the same this year, or with $1 million of net worth excluding your primary residence. Plenty of experienced nurses, especially CRNAs, nurse practitioners and dual-income healthcare households, qualify and don't realize it. In 506(c) offerings, the sponsor must take reasonable steps to verify that status, usually through a CPA or attorney letter or a review of financial documents.
Questions to ask before you move a dollar
- What custodian will hold the asset, and what are all the fees?
- Is the investment illiquid? For how long? What happens if I need the money?
- Does it use debt, and should I expect UBTI?
- Who's the sponsor, what's their track record, and how do they get paid?
- What are the risks in the offering documents (read the risk factors section)?
- Have my CPA and financial adviser reviewed this for my situation?
The bottom line
A self-directed IRA can let a healthcare professional put retirement savings into real assets without writing a personal check. But it comes with strict rules, extra paperwork and real risks. Learn the rules first, run your numbers, and get your CPA involved.
Next steps: - Read more on our self-directed IRA page. - See whether your current path gets you where you want to go with the retirement calculator. - Subscribe to the Omega Investor Brief. - If you'd like to talk it through with a fellow nurse who's been there, book a call.
Charles L. White, LCDR, Nurse Corps, USN (Ret.), Founder, Omega Property Investments
This article is for educational purposes only. The numbers are not guaranteed. Omega Property Investments is not a law firm, attorney, or financial advisor and does not provide legal, tax, or financial advice; please consult your own financial advisor (and your attorney or CPA) before investing. Omega Property Investments is not an IRA custodian, tax adviser or registered investment adviser. Tax rules change and depend on your circumstances; consult a CPA and a licensed financial professional. Private real estate investments are speculative, illiquid and involve risk of loss. Any offering by Omega Property Fund LLC is made only to verified accredited investors under Rule 506(c) and only through its offering documents. Full disclosures.