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    What's In Your IRA?

    If your IRA custodian is a big bank or a brokerage house, chances are your investments range from stocks and bonds to mutual funds. Your decisions may be limited to how much of each of those asset classes you own.

    When you have a self-directed IRA, your investment universe expands to include actual real estate, not just REITs (Real Estate Investment Trusts). In fact, real estate is the most popular investment in self-directed IRAs. That makes sense when investment experts have timelessly stated that real estate:

    • Offers diversification, an important factor in any investment portfolio according to financial professionals
    • Is a time-tested hedge against inflation
    • Is a familiar asset for people who have owned homes or other property

    This report explains the types of real estate an IRA can invest in and the IRS rules that are related to these types of investments. Being familiar with the rules will help you avoid jeopardizing the qualified status of the retirement plan. Lastly, the report walks you step by step through the process of investing in real estate using your self-directed IRA with The Entrust Group.

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    What Your IRA Can Own

    You can own real estate in a Traditional or a Roth IRA. In both cases, the assets in your IRA grow tax-free over time. The big difference is once a set of requirements are satisfied in a Roth IRA, the earnings are distributed tax-free.

    Your self-directed IRA can own:

    • Residential real estate (single or multi-family properties, condos, mobile homes)
    • Commercial real estate (shops, office buildings, gas stations, and more)
    • Vacant land; leveraged or unleveraged

    If you don’t want to own actual real property, you can still diversify your retirement savings with:

    • Trust deeds
    • Mortgage notes
    • Real estate options
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    What Your IRA Cannot Do

    The IRS sets rules that govern all IRA investments. Many of the rules governing real estate in an IRA relate to the kind of transactions you may not make and the people you may not do business with. Breaking these rules could result in the asset being distributed immediately, triggering taxes and penalties.

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    Prohibited Transactions
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    Disqualified Persons
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    Self-Dealing

    In real estate investments, prohibited transactions also include:

    • The account holder acting as property manager. All rents must be paid directly to the IRA. Likewise, the money used to pay the property manager must come from the IRA.
    • The account holder cannot do any repair or maintenance work on the property. Neither can any other disqualified person, such as a child. This kind of work must be done by a third-party and services paid for by the IRA.

    Ready to take the first step to investing in real estate in your IRA?

    Schedule a Free Consultation →

    The 5 Steps to Investing in Real Estate with your Self- Directed IRA

    • Open a Self-Directed IRA
    • Make a Decision
    • Find the Right Investment
    • Direct Entrust to Make the Purchase
    • Close Escrow
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    Open a Self-Directed IRA

    The Entrust Group has developed forms and procedures that make it easy to open a self-directed IRA. And while our website provides a complete overview of what you’ll need to open an account, it’s our staff who are credentialed as Certified IRA Services Professionals, (CISP) who really make the difference. Our clients are more than account numbers in a database. Each client works with a dedicated representative at one of the offices in our nationwide network. Your calls and emails will be answered by a familiar voice, someone who knows you, your account, and your retirement goals.

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    Make a Decision

    Decide on How You Will Fund Your IRA and Your Real Estate Investment.

    You can fund your self-directed IRA in three ways and You have several choices when it comes to funding your real estate purchase.

    Fund your self-directed IRA
    Transfer Funds
    Rollover Funds
    Contribute New Money
    Fund your real estate purchase.
    Direct Purchase
    Partnering
    Leveraged Purchase
    Limited Liability Company
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    Find the Right Investment

    Working with a qualified, knowledgeable real estate professional is one of the best moves you can make. They are familiar with the local market and will work with you to look for properties that meet your needs.

    Finding the right investment property depends on several factors, such as:

    Your investment goals
    The amount of money you have to invest
    Whether the seller is willing to sell to an IRA
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    Direct Entrust to Make the Purchase

    When your offer has been accepted, Entrust handles the paperwork for the actual sale. Typically, that process looks like this:

    • You complete an Entrust Buy Direction Letter and submit it with the purchase contract. Note that Entrust will sign the contract since it’s your IRA that is purchasing the real estate and not you personally; you will sign as “read and approved.”
    • Once the contract is executed, Entrust will use your IRA funds to pay the earnest money deposit.
    • You and your real estate broker open escrow.
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    Close Escrow

    When the title company is ready to close escrow, you will submit the paperwork to Entrust, including the:

    • Warranty or grant deed
    • Preliminary title report
    • Estimated closing cost statement
    • Loan documents (if applicable)
    • Documentation regarding the seller’s entity formation (if applicable)

    When Entrust has completed its review, we will fund the balance due on the purchase and the property will belong to your Real Estate IRA.

    Once Your IRA Owns The Property

    As the owner of the property, all related income and expenses have to flow through the IRA. That means rent checks are sent to your property manager or directly to The Entrust Group. If you employ a property manager or need to hire a plumber to make repairs, they are paid directly from the IRA. In addition, all agreements for property management services, insurance policies, and tenant agreements must be made in the name of the IRA, not you as an individual.

    Read more about how to manage property in your Real Estate IRA and about how The Entrust Group myDirection Visa® Prepaid Card makes it quick and easy to pay for supplies and services.