Now that you’ve completed your real estate IRA purchase—hooray! You’re on your way to a sound financial future. But wait—this is a self-directed IRA, which means there are a few things you need to do to keep things running smoothly. Ready for those next steps in your post-real estate purchase process? Look no further! We’ve got the steps outlined, so you don’t miss a beat.
1. Gathering Required Documents
Once you’ve closed on your real estate transaction, it’s important to make sure the finalized documents end up in the right places. IRA Resources needs to receive your final closing documents, specifically the recorded Grant/Warranty Deed, for both safekeeping and compliance purposes. If you have any other original paperwork, forward this to IRA Resources as well, this paperwork is also stored with us for safekeeping.
If asked for a tax ID number on any of the paperwork during this process, you don’t need to file for your own— you can use IRA Resources’ EIN (33-6305812).
2. Setting Up The Essentials
After getting your documents in order, it’s vital that you get all necessary insurance and utilities set up through your IRA, unless the tenants or property manager are establishing the utilities in their name. If you want to speed up this process for yourself down the line, you can also set up recurring payment authorizations (for expenses such as property tax payments, utilities, and landscaping) to save yourself time and effort in the future. Just make sure the bills are getting sent or forwarded to IRAR— so we can make sure we pay the invoices promptly.
3. Completing Repairs & Construction
If you’re planning on making repairs or updates to the property before selling or moving in tenants, you’ll need to make sure this follows all the typical self-directed rules (no prohibited transactions, with expenses paid from your IRA) and keep the issues that this can present in mind.
Specifically, to avoid additional prohibited transactions, any construction or repairs should be performed by a non-disqualified person. You cannot personally perform the work, nor have a family member who is a disqualified person do any of the work. Additionally, if construction takes too long or gets too expensive you can run into a bind, especially since all expenses must be paid from the IRA.
If this happens, it is possible to transfer additional funds from another IRA you have, or make your yearly contribution— but remember! There is a limit on the additional funds you can contribute each year.
4. Handling New Or Existing Tenants
If you’ll be renting out your newly purchased real estate, we’ll need a lease or rental agreement for the new tenants with the landlord’s name listed in the name of the IRA. If you have any existing tenants with lease or rental agreement(s), they should be transferred into the name of your IRA. This should be formatted the same as on your vesting documents (IRA Resources, Inc FBO [Name] [Account Number].
You also need to make sure to provide the tenants with IRAR’s delivery instructions (or the property manager, if appropriate) for rental payments. One of the most common mistakes after purchasing real estate? The rent checks are made out to client personally, instead of their IRAR account— and we can’t deposit those checks. It’ll make the process easier for both you and your tenants if they understand how to make their rental checks payable and where to send them.
5. Determining Your Property Management Strategy
What if you hire someone to manage your property— what’s the process? The first step should be doing your due diligence and hiring a reputable company. This is may be the most essential step if you decide to go this route— you’re placing a lot of trust in the hands of your property manager and it’s important to know they are worthy of that trust. Contrary to the general rules on prohibited transactions, you can manage the property yourself— but you can’t pay yourself a salary or gain any compensation or other benefit (either directly or indirectly) for doing so.
Once you have identified a property management company, they’ll have you sign an agreement, which will also need to be signed by IRAR (since the property management company will be working for your IRA). The agreement needs to be in the name of IRA, the same as your property vesting. But before you forward the agreement to IRAR for our signature, please write “Read & Approved” and sign whenever a signature is required, showing you’ve acknowledged the terms.
You and your property manager will need to determine how exactly the management and payment of bills will go (whether we are billed directly by the providers or invoiced for expenses and bills paid by the property manager), but the funds must ultimately come from your IRA.
You’ve got a few things to remember after you’ve bought real estate with your IRA— but we’re here to help you keep it all in line.
- IRAR needs all original final documents after the deal is complete
- All bills and utilities must be set up in the IRA’s name
- IRA Resources, Inc FBO [Name] [Account Number]
- Expert Tip: Set up recurring payments for predictable expenses to save time and hassle
- Stay aware of construction costs and your IRA’s cash balance— you don’t want to be low on cash and in a bind
- Make sure IRAR signs off on all rental agreements with new or existing tenants
- If hiring a property manager, find a trustworthy company before signing an agreement.
If you keep the details in check and your property running smoothly, you’re on your way to a solid financial future.
At IRA Resources, we’d love to answer your questions. Let us help you decide your ultimate retirement strategy— setting you on the path towards the financial future of your dreams.