| Activity | Permitted? |
|---|---|
| Screening tenants and signing leases | Yes |
| Hiring and paying vendors from the plan account | Yes |
| Collecting rent into the plan account | Yes |
| Performing repairs or maintenance yourself | No |
| Paying yourself a management fee | No |
| Hiring a Disqualified Person to manage the property | No |
What counts as administrative management?
Administrative management covers the decisions and paperwork of running the investment: listing and marketing the property, screening and selecting tenants, negotiating and signing leases, selecting vendors and signing service agreements, paying expenses from the plan account, and collecting rent into the plan account. These are fiduciary functions you're performing on behalf of the plan entity, not services rendered to it. See How do I pay expenses and receive rent? for the mechanics of moving money on both sides of the transaction.
What crosses the line into a prohibited service?
Physical labor is where the rule draws a hard line. Repairs, maintenance, cleaning, landscaping, and renovation work all count as a service to the plan, and providing that labor yourself, compensated or not, is prohibited under IRC Section 4975(c)(1)(C). The IRS treats it as an undocumented contribution: value flowing into the plan from a Disqualified Person outside the normal contribution rules. See What is Sweat Equity and why is it prohibited? for the full rule this falls under.
The same prohibition extends to other Disqualified Persons. Your spouse cannot repair the property. Your adult child cannot perform the landscaping. All physical work must be handled by unrelated third parties, paid from the plan account.
Can I pay myself for managing the property?
No. You may administer your plan's investments without compensation, but you cannot pay yourself, or any Disqualified Person, a management fee for doing so. Your time has value, but that value cannot be extracted from the plan.
Why is third-party management often the better call?
A professional property manager is simply a vendor to the plan, fully arm's length, with no prohibited transaction risk. They bring tenant screening expertise, legal compliance infrastructure, and established vendor relationships, along with experience handling situations, evictions, emergency repairs, difficult tenants, that test a first-time landlord. The management fee is an ordinary plan expense, paid from the plan account. See Do I have to hire a Property Manager? if you're weighing whether this is required or simply advisable for your situation.
Short-term rentals are where third-party management moves from a good idea to close to a necessity. Frequent turnover, guest communication, and booking management are difficult to keep purely administrative, and the operational demands of a vacation rental push naturally toward a professional manager.
Can a family member manage the property?
It depends on the relationship. Disqualified Persons under IRC Section 4975(e)(2), your spouse, parents, grandparents, children, grandchildren, and their spouses, cannot be hired to manage a plan-owned property. Siblings, cousins, and other relatives outside that lineal line are not Disqualified Persons and can be hired, provided the arrangement is genuinely arm's length and compensated at fair market value.
Can I use my own property management company?
Generally no. If you or a Disqualified Person owns or controls 50% or more of a property management company, that company is itself a Disqualified Person. Engaging it to manage plan-owned property is a prohibited transaction under IRC Section 4975, regardless of whether the fees charged are at market rate, and providing the service at no cost doesn't resolve the problem either.
Frequently Asked Questions
Can I show the property to prospective tenants myself?
Yes. Showing a property is a management decision, not a compensable service, and falls within administrative oversight. The constraint is on physical work, cleaning, staging, repairs, which should always be done by unrelated third parties.
If I self-manage, can the plan reimburse me for expenses I pay personally?
No. All plan expenses must be paid directly from the plan's bank account. Paying costs personally and seeking reimbursement creates a loan from you to the plan, a prohibited transaction. Keep a sufficient operating balance in the plan account to cover routine and unexpected property expenses.
Does self-management create UBIT exposure?
Not inherently. Rental income from real property held for passive investment purposes is excluded from UBIT regardless of who manages the property. UBIT risk in real estate comes from active business activity, systematic flipping or short-term rental operations characterized as a services business, not from administrative self-management of a long-term rental.
What if my plan owns multiple properties? Does that change the analysis?
It can shift the practical considerations. Managing a handful of properties administratively is standard practice. A larger portfolio managed intensively involves more moving parts, more vendors, more tenant relationships, and more day-to-day decisions, which is simply more to stay on top of. Investors managing a significant portfolio often find a property manager worth the cost purely for the time it frees up, separate from any compliance consideration.
Grace's IRA-owned rental has a leaky faucet. Can she fix it herself over the weekend to save the plan some money?
No. Fixing the faucet is physical labor, a service to the plan, and prohibited regardless of the amount involved or her intent to save money rather than earn it. She needs to hire a licensed contractor and pay the repair from the plan's bank account, the same as any other maintenance item.
Can I personally handle guest communication and bookings for a short-term rental?
Yes, guest communication and booking management are administrative functions, not physical labor, so they're permitted. In practice, the volume and pace of a short-term rental often make this harder to sustain than a long-term lease, which is why third-party management tends to become the practical choice even though it isn't a compliance requirement.
Next Steps
An investor deciding between self-management and a third-party manager can review Buying real estate - the workflow for how a purchase closes, or use the Plan Finder to confirm the right plan structure.