Rules & Process

What to know prior to purchasing a property

  1. There are Disqualified Parties to the IRA account. These parties include the IRA holder personally, a spouse, any lineal ascendants or descendents, or an entity in which the previous mentioned parties own 50% or more of.
    • You cannot buy, sell, or lease a property to any Disqualified Party.
    • The property is for investment purposes only. There can be no personal use of the property.
  2. The purchaser for the property must be in the name of your IRA. This vesting should listed on both the contract and all closing documents: Midland Trust Company As Custodian FBO [Client Name # Client Account Number].
  3. If the contract is in your name personally, a new contract will need to be drafted to list the IRA vesting. No assignments or amendments to contracts are accepted.
  4. Earnest Money must be paid from the IRA account. If Earnest Money is required, you will need to send the IRA vested contract to Midland to have funds issued.
  5. Midland will sign all documents on behalf of the IRA once the client initials as Read and Approved.

What to Know After Closing

  1. All related expenses must be paid directly from the IRA account. Your IRA cannot reimburse you for any payments made personally. Some examples of qualified expenses for an IRA owned property are utilities, repairs, improvements, HOA dues, taxes, insurance, appliances included in a Lease Agreement.
  2. All income from the property must be sent back to the IRA. Rental checks must be made payable to your Midland IRA account and not to the account holder directly.
  3. Improvements to the property must be completed by a non-disqualified third party. You cannot make your own improvements.
  4. All Lease Agreements must list your IRA account as the Lessor. You are able to sign the Lease personally and send a copy to Midland for your records.
  5. If you elect to have a property manager, it should be a non-disqualified third party. They can collect rent and pay any related expenses from the rental income. The remaining funds should be sent back to the IRA.

The Timeline

Open an IRA

Fund the account

Fund the account by making a contribution, transfer or rollover

Make an offer to purchase real estate

Make an offer to purchase real estate. All purchase contracts must list your IRA as the owner (Midland Trust Company as Custodian FBO Client Name Client Account #)

Close on the property purchase

Close on the property purchase using your IRA funds. Midland will work with your title company or attorney.

Property is owned within your IRA

Property is owned within your IRA. The IRA must collect all income and pay all expenses.