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Three Tips for How to Buy Property in an IRA

Learning how to buy real estate in your IRA can feel overwhelming if you have never done it before. So to simplify the process, we rounded up three tips by one of our real estate experts. These tips will address many of our first-time investor’s questions and help you understand the real estate process from the purchase to the management of the property.

1. Start Right: Put the Name of Your IRA on Your Purchase Contract

Your first step to investing in real estate in your IRA would be to identify a property for your IRA investment. Once you are ready to make an offer, ensure your real estate agent writes the offer in the name of the IRA and not your name personally. This misstep is a common mistake that can delay the process.

The buyer’s name should be listed as Midland Trust Company as Custodian FBO (your name, your Midland acct #). You can negotiate the terms of the contract, and once all of the terms are agreed upon, you will forward us a copy of the contract.

If your real estate agent already wrote the offer in your personal name, you must request a new contract. You cannot assign the contract from you personally to the IRA. That is a prohibited transaction. Therefore, an amendment or addendum is unacceptable, and a new contract is required.

2. Understand the Closing Process

Midland is straightforward to work with for real estate investors; I like to say we are just an extension of you. Once the contract is sent over, we will need the contact information for the title company and/or closing attorney to provide them with our closing instructions. Midland will receive all the required documents for closing and send you a DocuSign with our internal paperwork along with the closing documents.

Simultaneously, you will review and approve the documents we sent to you. Once the DocuSign is completed, Midland will need to speak to you over the phone for verbal verification. This will allow Midland to talk to you before releasing any funds and allow us to reconfirm the details of the wire transfer.

Midland will sign the documents and prepare to release the wire at that time. Midland only requires two full business days to receive all the necessary documents so we can prepare for closing.

3. Stay on Top of Bills and Payments

Since the property is owned by your IRA and is self-directed, you will be responsible as the account holder for receiving bills and submitting them for payment. All the closing documents will reflect your mailing address, so property tax bills, homeowners’ association bills, and any other documents you may receive will be mailed to you directly.

Midland clients can utilize the Midland Portal to submit payments and pay bills. For example, if you need to pay a contractor for repairs on your rental property, it is simple to do through the portal using your IRA funds. Simply log onto your account and select “Pay a Bill.” You will input the payee and mailing address from that screen and select the delivery method. We offer direct deposit, overnight, regular mail, or a wire transfer.

Learn More About Real Estate IRAs

Investment property is a popular alternative investment for your tax-advantaged retirement plan. Learn more about what property you can buy, disqualified persons, benefits of investing, funding options, and rules regarding your real estate IRA here.

MIDLAND TRUST COMPANY, NOR ITS AFFILIATES OR SUBSIDIARIES (COLLECTIVELY REFERRED TO AS “MIDLAND”), IS NOT A FIDUCIARY: Midland’s role as the Custodian and/or Administrator of self-directed retirement accounts is non-discretionary and/or administrative in nature. The account holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account and is responsible for conducting his/her own due diligence. Midland has no responsibility or involvement in selecting or evaluating any investment and does not conduct any due diligence on any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee, endorsement, or certification of any investments.

Written by Jackie Diaz

Client Services Team Lead at Midland Trust Company