Investing in real estate with your IRA might seem complicated the first time you do it, but at IRA Resources, we make it easy. We'll be with you every step of the way, to assist and explain the process in plain English. We work with your agent, attorney, title company, and other parties to make sure nothing falls through the cracks. With more than 21 years of experience in the self-directed retirement industry, we have seen it all and know what to expect. But, before you start actively looking for an income property, you need to do your research and determine the right investment strategy for you.
In this blog, we'll summarize the Direct Purchase Strategy. Download the complete Real Estate IRA guide.
Direct purchase is when you buy a property using only money in your self- directed IRA, with your IRA paying all cash for the investment. This is the simplest and quickest way to fund a purchase.
We always recommend that you open and fund your account as soon as you have an investment in mind, to avoid delays in your transaction.
Making an Offer
Once your account is funded, you can make an offer in the name of the IRA. To make an offer, you need to complete a real estate or property purchase agreement in the name of the IRA.
Here is how the “buyer” or “offer from” on the agreement should read:
IRAR FBO John Doe, Account #12345
Real estate purchase agreements and contracts vary from state to state. What you need to keep in mind is that the “buyer" (or how the title will be vested) is in the name of the IRA. If the agreement is not in the name of the IRA, then IRA Resources cannot fund the earnest money deposit. From time to time this does happen in error— if that is the case, you'll need to amend the agreement by changing the buyer’s name to the IRA. This will delay your purchase, but can be fixed if it does occur. IRA Resources can discuss this with your real estate agent if they are not familiar with self-directed IRAs.
Earnest Money Deposit
The seller might require an earnest money deposit (EMD) along with the offer. Earnest money is a deposit made to the Broker or Title Company showing the buyer’s good faith in the transaction. If this is the case, you will need to complete all pages in the Buy Direction Letter-Real Estate and submit it, with the purchase agreement, to IRA Resources for review. If everything is in order, IRA Resources will fund your EMD within 24 hours.
Closing Documents
When all the closing documents are in order, and you have reviewed and approved them for your IRA’s purchase, the next step is for IRA Resources to sign them on behalf of your IRA. We will then review the documents and, if complete, submit them as appropriate.
The Funding
Depending on the state where you are purchasing the property, IRA Resources may need the seller’s executed documents before we can fund the transaction. We will work with the title company to obtain these. Once we have closing documents in order, we will review, sign on behalf of your IRA, and send the funds to title and finalize the transaction.
After Closing
Once escrow has closed, the title or escrow company must send IRA Resources the final executed closing documents to complete the IRA purchase and for safekeeping.
A few other things to keep in mind:
- If you have existing tenants, provide new rental agreements with the landlord's name as "IRA Resources FBO (Client Name) (Account Number)" and forward to IRA Resources for review and signature.
- Provide tenants with information on where and how to make checks payable.
- Utilities should be set up in the name of "IRA Resources FBO (client name) (Account Number)"
For more tips and information on this investment strategy, download the complete Direct Purchase Guide today! Let us help you plan for your financial future.
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