Property management due diligence for Michigan IRA rentals

A property manager may collect rent, call a plumber, answer a tenant, and send an owner statement. Those ordinary tasks become less ordinary when a self-directed IRA owns the rental. The manager's authority, the custodian's procedures, the lease, and Michigan law all need to point in the same direction before the first payment or repair request arrives.

Hiring a manager is not a way to hand off every decision. It is a way to put approved people, money controls, records, and response times around the property. The due-diligence question is whether the proposed arrangement can operate the specific West Michigan rental without personal payments, informal owner labor, or missing records.

Verify the manager and the licensed business

Start with the legal name of the company that will sign the management agreement and receive property money. Then identify the Michigan real estate broker responsible for the business and the people who will handle leasing, inspections, repairs, and accounting. Verify the current license record through Michigan LARA and ask how the people assigned to the property work under the broker's supervision.

Michigan Compiled Laws section 339.2501 defines property management as leasing or renting, or offering to lease or rent, another person's real property for compensation under a property management employment contract. The same section includes engaging in property management within the definition of a real estate broker. Those definitions make the license and contract part of the review, not a detail to settle after a vendor has started collecting rent.

• Licensed business and broker names that match LARA's current records
• Office and after-hours contacts for leasing, accounting, maintenance, and emergencies
• Experience with the building type, municipality, occupied status, and required local programs
• Insurance information and any contract requirements for professional or general liability coverage
• References for comparable work, checked with appropriate privacy and permission

Do not rely on a brand name, software portal, or referral by itself. The agreement should name the party doing the work, and the license search should support that arrangement. If a separate leasing company, maintenance affiliate, call center, bookkeeper, or subcontractor will participate, ask who employs or contracts with each one and who remains accountable to the IRA's ownership entity.

Read the management agreement as an operating manual

Section 339.2501 describes a property management employment contract as a written agreement between a broker and client that states the manager's duties and addresses the handling, safekeeping, disbursement, and use of property management money and accounts. Section 339.2512c says a broker's property management work is generally governed by that contract. A short fee sheet cannot carry all of that weight.

Read every grant of authority. The agreement should explain who may advertise, screen applicants, sign or renew leases, give notices, approve invoices, enter units, order emergency work, communicate with public agencies, handle insurance claims, and hire vendors. It should also state what requires prior client approval and how that approval is documented. A dollar limit without a definition of emergency work can create confusion when a pipe fails at night.

Review the term, renewal, termination rights, notice periods, transition duties, and fees due at the end of the relationship. Ask who owns photographs, advertisements, inspection reports, tenant communications, portal data, phone numbers, keys, security codes, and vendor records. The IRA should be able to move the property without losing the operating history it paid to create.

Draw the path for every dollar

The money flow should be understandable on one page. Show where tenants pay rent, when the manager deposits it, which account holds it, which fees or bills may be deducted, when the balance moves to the IRA, and how refunds, credits, insurance proceeds, utility reimbursements, and vendor overpayments are handled. Confirm every account name and payee with the self-directed IRA custodian before the agreement and tenant instructions become final.

Michigan Compiled Laws section 339.2512c requires a real estate broker engaged in property management to maintain property management accounts separate from all other accounts. It also requires records of deposits and withdrawals, including the date, source or recipient, and other information required by the contract. The broker must account to the client and remit money according to the contract. Ask for a sample owner statement and ledger so the buyer can see how those duties appear in the manager's actual records.

Security deposits and other tenant funds need their own legal and accounting review. Do not treat them as rent or as cash available for repairs. For an occupied purchase, reconcile each tenant's deposit with the lease, ledger, closing statement, transfer records, and required notice. Have the buyer's Michigan attorney determine how the state's security-deposit rules apply to the transfer, account setup, notices, and later claims.

Make the repair process fit the custodian's timing

A management agreement can authorize a repair, but it cannot make IRA money arrive instantly. Ask the custodian how service calls, contractor deposits, recurring bills, emergency invoices, insurance deductibles, refunds, and change orders must be approved and paid. Then give the manager a written process that matches those requirements. If the custodian needs a particular invoice name or direction-of-investment form, build it into the workflow before a vendor is waiting.

Define routine, urgent, and emergency work in practical terms. Name the person who may make the property safe, the spending limit if one applies, the documentation due afterward, and the method for contacting the custodian or other approved signer. The plan also needs an answer when the IRA lacks available cash. It should not assume the manager, IRA owner, tenant, or contractor will advance money and settle the account later.

West Michigan weather gives this planning a real purpose. A no-heat call during cold weather, frozen pipe, roof leak, fallen tree, or sewage backup may require quick access and a qualified vendor. The manager should know who receives the first call, how tenant communication is handled, which professionals are approved to diagnose the condition, and how the account will fund accepted work. No response plan can guarantee timing or outcome, but a written one is better than discovering the custodian's process during the emergency.

Review vendors and related parties before work begins

Ask for the manager's vendor-selection policy. It should cover licenses when required, insurance, bids or pricing, conflicts of interest, supervision, completion records, warranties, and markups or referral compensation. If the manager owns a maintenance company or regularly uses an affiliated vendor, require that relationship and every added fee to be disclosed in writing. The buyer's attorney should decide what the contract permits and what approvals are needed.

The retirement-account review is separate. Current IRS guidance lists sales, exchanges, leases, loans, extensions of credit, and furnishing goods, services, or facilities between a plan and a disqualified person among prohibited-transaction categories. It also describes improper use of an IRA by the owner, beneficiary, or another disqualified person. Have the custodian, CPA, and attorney review the proposed manager, vendors, related parties, compensation, owner's role, contracts, and money flow before anyone performs work or receives payment.

Do not assume the manager's involvement makes owner labor acceptable. The IRA owner should not plan to paint a unit, supply materials, perform an inspection, meet a contractor as an unpaid supervisor, cover a bill personally, or let a disqualified person handle work without transaction-specific review. A management agreement organizes authority. It does not approve conduct under the tax rules.

Require records that another person can follow

Monthly reporting should connect the bank activity with the property. Ask for a sample package that includes the rent ledger, income and expense statement, copies of invoices, management fees, work orders, deposit activity, unpaid balances, owner distributions, and bank reconciliation information appropriate to the account. Agree on a delivery date and a process for correcting errors. A dashboard total without source documents is hard to use for custodian, CPA, insurance, or legal questions.

The property file should also hold leases and amendments, inspection reports, tenant notices, photographs, local certificates, permits, service contracts, warranties, insurance correspondence, and records of completed work. Set retention and export requirements in the agreement. If the manager uses proprietary software, test what the owner receives when a tenant leaves, the manager changes systems, or the contract ends.

Choose review triggers instead of waiting for the annual tax packet. A repeated repair, missed rent, lease expiration, open municipal order, insurance inspection, large variance from budget, or unusual vendor payment should reach the approved decision maker promptly. The purpose is not to have the IRA owner manage every call. It is to make sure material issues do not disappear inside a monthly total.

Test the manager's local operating coverage

A manager who works across West Michigan may deal with several cities, villages, townships, counties, utilities, and rental programs. Ask who tracks registration, certification, inspections, local contacts, snow and lawn contracts, utility changes, and permit closeout for the exact address. A process that works in Grand Rapids should not be copied to Grandville, Wyoming, Holland, Muskegon, or a township without checking the responsible authority.

Response coverage matters as much as office location. Ask how the company handles nights, weekends, holidays, severe weather, and staff absences. Find out who has keys, who may enter, how access is logged, and what happens when the regular vendor is unavailable. For commercial or mixed-use property, compare these duties with the leases because a tenant may control part of the maintenance, utilities, or access while the owner remains responsible for other systems.

Keep leasing and service consistent with Fair Housing

HUD states that the Fair Housing Act prohibits housing discrimination because of race, color, national origin, religion, sex, familial status, or disability. Review the manager's written procedures for advertising, inquiries, showing access, applications, screening, accommodations, lease enforcement, maintenance response, renewals, and notices. Michigan and local protections may also apply.

The owner and manager should agree on lawful, property-related criteria and apply them consistently. Repair priority should follow documented conditions, lease duties, qualified recommendations, and applicable law rather than a tenant's protected characteristics. Accommodation requests and sensitive records need a clear route to the right trained person. A software score or canned policy does not replace legal review of the property's actual process.

Plan the handoff before closing

For a tenant-occupied purchase, identify when the seller's manager stops and the IRA's manager begins. Coordinate leases, ledgers, deposits, tenant notices, keys, inspection records, open repairs, vendor contracts, utilities, local registrations, and rent-payment instructions. Have the closing agent and attorneys align the handoff with the purchase agreement and closing statement, and have the custodian approve the account and signer details.

• Effective date and approved ownership name on the management agreement
• Tenant communication that states where rent and repair requests go after closing
• Reconciled deposits, prepaid rent, credits, unpaid balances, and pending claims
• Keys, codes, leases, ledgers, notices, inspection reports, open work orders, and vendor contacts
• First-month cash needs, recurring bills, custodian forms, approval limits, and emergency contacts

Price the management arrangement from the complete agreement. Leasing charges, monthly fees, renewal fees, inspection charges, maintenance coordination, markups, court or legal coordination, software charges, vacancy services, and termination costs may be separate. Put them beside taxes, insurance, utilities, repairs, vacancy, and reserves without assuming rent, occupancy, appreciation, savings, or investment results. None is guaranteed.

This article is educational, not legal, tax, financial, property-management, accounting, fair-housing, retirement-plan, or investment advice. No property manager, vendor, agreement, rental, ownership structure, or strategy is approved or endorsed by the IRS. Have your own self-directed IRA custodian, CPA, Michigan attorney, licensed real estate broker or property manager, insurance professional, property inspector, local authorities, and other qualified advisors review the account, property, documents, people, and money flow before taking action.

Leave the review with a working management file

Keep the license verification, signed management agreement, fee schedule, ownership and signer instructions, vendor policy, insurance records, sample and actual monthly reports, bank and deposit procedures, emergency plan, local compliance calendar, Fair Housing procedures, custodian forms, tenant handoff records, and termination checklist together. The file should show what the manager may do, what requires approval, where every dollar goes, and who gets called when the usual process breaks.

Primary sources for this review include Michigan Compiled Laws sections 339.2501 and 339.2512c, Michigan LARA's real estate license search, HUD's Fair Housing Act overview, and the IRS retirement-plan investment FAQs and prohibited-transaction guidance. The Michigan Legislature site listed the compiled laws as complete through Public Act 20 of 2026 when reviewed. These sources provide a general framework. The right arrangement for one IRA and rental comes from the current agreement, property records, applicable law, and the buyer's own qualified professionals.

Rennie can help identify West Michigan rental property and coordinate the real estate records, professional access, management questions, and offer deadlines needed for this review. Manager selection, contract interpretation, tenant-law compliance, accounting, and retirement-account decisions stay with the buyer's own broker, attorney, custodian, CPA, and other advisors.