Owning real estate in a self-directed IRA can seem like a great way to save for retirement. However, I have found that most clients want to structure the ownership and/or management of the real estate in such a way that they will run afoul of the prohibited transactions rules. Once they learn of the restrictions involved, they are not so keen on the idea. Real estate or business ownership in an IRA can work, but knowledgeable tax counsel should be consulted. Many attorneys and CPAs are not familiar with the laws regulating self-directed IRAs.
Check out this article by Lynn O'Shaughnessy: Sweat Equity in IRA Real Estate can be no-no