What self-management allows
As manager of your IRA LLC or trustee of your plan trust, you are permitted to administer the plan's investment. That includes:
- 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
- Collecting rent into the plan account
These are administrative functions. You are acting on behalf of the plan entity, not providing personal services to it.
What self-management does not allow
You may not perform physical work on the property: repairs, maintenance, cleaning, landscaping, or renovations. Providing labor adds value to the plan through personal services, which is a prohibited transaction under IRC Section 4975. The IRS treats it as an undocumented contribution to the plan.
All physical work must be performed by third parties who are not disqualified persons to your plan. Your spouse, lineal family members, and entities they control are all disqualified; they cannot be hired to perform services for the property either.
Why third-party management is 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. Their fees are a plan expense paid from the plan account.
For investors who prefer a fully passive role, or who want to eliminate any ambiguity around personal involvement with the property, third-party management is the cleaner approach.
Frequently Asked Questions
Can I hire a family member as property manager?
It depends on the family member. Disqualified persons under IRC Section 4975(e)(2) include your spouse, parents, grandparents, children, grandchildren, and their spouses. These individuals may not be hired to provide services to a plan-owned property. Collateral relatives such as siblings, cousins, nieces, nephews, and similar are not disqualified persons and can be hired, provided the compensation is at fair market value and the arrangement is genuinely arm's length.
Can I use a property management company I own or control?
Generally no. If you or a disqualified person owns or controls 50% or more of a property management company, that company is considered a disqualified person. Even if you own less than 50%, there could be an indirect benefit between you as a disqualified person and the plan through the transaction. Engaging such a company to manage your plan-owned property would constitute a prohibited transaction.