A due-diligence checklist for self-directed IRA real estate in Michigan

A property can fit the rules of a self-directed IRA and still be a poor purchase. It can also look strong on paper and fail because the account cannot own it the way the buyer intended. Good due diligence has to answer both questions. Does the real estate hold up? And can this retirement account own and operate it without crossing a line?

That means the work starts before the inspection. A useful first pass looks at the account, the property, and the people who will handle the transaction. If one part is not ready, slowing down is usually cheaper than trying to repair the structure after an offer is signed.

Confirm the account before studying the property

Ask the self-directed IRA custodian whether the account can hold the type of property under consideration and what documents the custodian needs before closing. Confirm how the buyer must be named on offers, title work, insurance, leases, and vendor agreements. The IRA is the purchaser. Personal funds and personal signatures should not be used as a shortcut.

• Verify that the retirement funds are eligible and available to move
• Ask how much cash must remain in the account after closing
• Get the custodian's document and funding timeline in writing
• Identify any disqualified persons before discussing occupancy, leases, or vendors
• Have the CPA and attorney review financing or an unusual ownership structure

A conventional closing schedule may not leave enough time for custodian review and funding. That timing should shape the offer from the beginning. It is much easier to write a realistic deadline than to ask every party for an extension at the last minute.

Inspect the real estate like any other investment property

Retirement-account ownership does not change the roof, foundation, furnace, well, septic system, or parking lot. Order the inspections that fit the property and its intended use. Review repair estimates with enough detail to decide whether the IRA will have adequate reserves after closing. If the property needs work, confirm that independent contractors can perform it and that the account can pay them.

For vacant or recreational land, the checklist changes but it does not get shorter. Access, surveys, easements, wetlands, utilities, soil conditions, and permitted uses can matter more than the condition of a building. For commercial property, leases, maintenance obligations, environmental history, and future capital expenses deserve the same attention as the purchase price.

Check the local rules and the operating numbers

West Michigan is not one market with one rulebook. A short-term rental that is allowed in one township may face different zoning, licensing, or occupancy rules a few miles away. Confirm the intended use with the appropriate local authority instead of relying on an old listing description or a neighbor's experience.

• Review current zoning and any permit or licensing requirements
• Estimate taxes, insurance, utilities, management, maintenance, and vacancy
• Read existing leases and verify deposits, rent history, and tenant obligations
• Compare projected rent with documented local market evidence
• Price the repairs that are likely in the first year, not only the visible ones

Be careful with numbers that arrive already polished. A seller's projection is a starting point, not a budget. Insurance may cost more for a rental, seasonal property, vacant building, or unusual use. Property taxes and utility costs deserve their own verification. The goal is not to make the spreadsheet pessimistic. It is to make it honest.

Make sure the account can operate after closing

The transaction is not finished when the deed records. Rent must return to the IRA, and property expenses must be paid from the IRA. Someone still needs to collect rent, coordinate repairs, keep records, and communicate with the custodian. Decide who will do that work and how they will be paid before the property becomes the account's responsibility.

This checklist is educational, not legal, tax, financial, or investment advice. A self-directed IRA custodian, CPA, attorney, insurance professional, inspector, and other qualified advisors should review the details that apply to your account and property.

A better reason to walk away

Due diligence is often described as the path to closing. Sometimes its best result is a clear reason not to close. A property that needs too much account cash, depends on personal use, cannot support its operating costs, or does not fit local rules is better rejected early. The right property should survive careful questions. If it does, the buyer can move forward with fewer surprises and a team that already understands the plan.