mountain west ira

Real Estate Information

Real Estate in Your Self-Directed IRA

Over time, real estate investments have afforded many people the powerful combination of appreciation and income. The purchase of real estate through a self-directed IRA is a popular choice for this and other reasons.

Mountain West IRA has been providing clients with continuing education and seminars to put their retirement plan to work for them through real estate IRAs and self-directed IRAs.

A self-directed IRA or “Real Estate IRA” gives you the freedom to invest in alternative assets such as single-family and multi-unit homes, apartment buildings, condominiums (leveraged or unleveraged), improved or unimproved land, commercial property, and more.

Financing a Real Estate Purchase

If your Mountain West IRA self-directed IRA does not have enough money to pay for the entire purchase on its own, you may be able to finance or leverage any income producing property.

The property is used as the collateral for the loan. Because the property belongs to the IRA, the debt must be repaid from assets within the IRA, whether those are income from the property, permissible contributions, or other assets in the IRA.

There can be no personal guarantee given by you as the account holder and consequently, there can be no personal recourse against you since the property and the loan are held within the retirement plan.

The loan your IRA would need to acquire is normally known as a non-recourse loan. Be aware that loans for property inside of IRAs may require the payment of Unrelated Business Income Tax (UDFI).

It is the IRA holder’s responsibilities to have the tax forms (990-T) prepared by a tax advisor and have the administrator send in the forms for the property owned by the IRA. You also may be able to partner your IRA with other IRAs, or individual investors as a way to share the ownership of an investment property.

Additional Requirements

Your transaction must flow through the tax-free or tax-deferred retirement account. The escrow must be opened by the account, not in the name of the beneficial owner. Vesting is always in the name of the account.

When purchased, the property becomes an asset of your retirement plan or account. In addition:

You may not personally own property that you intend to purchase with plan funds and you must ensure that your intended purchase is not a prohibited transaction.

Neither you, your spouse, nor your linear family members may have owned the property prior to its purchase by your plan.

Neither you nor your linear family members may live in, lease, or have personal use of the property while it is owned by your plan.

Your business may not lease or be located in or on any part of the property while it is owned by your plan.

You may distribute without penalty at age 59½ any property or portion of a property from your plan as a normal or required minimum distribution.

Note: you nor lineal ascendants or descendants or spouses thereof may use the property until it is completely distributed from your plan.

Managing the Property

Administration of plan assets does not include property management conducted by the beneficial owner of an IRA or a company owned by more than 50% by the beneficial owner of real or personal property in the IRA.

The record keeping and administration fees charged by Mountain West IRA may be paid either directly through the plan or with personal funds, and may be tax deductible. Note: consult your tax advisor as to the possible deductibility of your IRA fees.

Managing property owned by your self-directed IRA involves understanding the unique responsibilities and limitations as set by the IRS.

  • Self-Managing vs. Hiring a Property Manager: You must decide whether to oversee the property yourself or delegate this responsibility to a professional property manager. The choice hinges on whether you believe you're the right fit for the managerial tasks.
  • Full Control and Responsibility: If you opt for self-management, you will have the autonomy to make decisions. However, this also means taking on all responsibilities associated with the property.
  • Tenancy and Rental Income: As the manager, you'd handle the leasing process, from finding tenants to drafting agreements. Crucially, all rental income should flow directly into your IRA, not your personal accounts.
  • IRS Guidelines: Properties held in an IRA are subject to specific IRS regulations. For example, you can't personally perform any hands-on work or maintenance on your IRA-owned property. This differs from properties you own personally, where you have more latitude. Remember, even if you choose to self-manage the property, you cannot be paid any management fees.
  • Contracting Work: You or any disqualified individual associated with your IRA cannot do any maintenance or repair required on the property. Instead, you'll need to hire unrelated third-party contractors for tasks, whether it's routine maintenance or more significant work. Remember, the IRA will need to pay for those tasks.
  • Administrative Duties: You can manage the administrative aspects of the property. This includes hiring contractors, screening potential tenants, and ensuring rental payments are channeled directly to your IRA. However, it's imperative to remember that you cannot enhance the property's value through personal labor or supplying materials.
  • Hands-Off Maintenance: All tasks, whether it's basic landscaping or more extensive repairs, must be contracted out. You can't personally mow the lawn, fix a leaky roof, or clean the property.

Remember, while you can manage many aspects of an IRA-owned property, adhering to IRS rules is essential.

Title & Escrow Companies

When title and/or escrow companies are involved, proper instructions will be provided to them for all documents regarding your account.

Mountain West IRA’s staff of experts will contact the company and walk them through the smooth closing of your IRA owned property. At Mountain West IRA we do this every day.

We have simplified our processes so that you can quickly and easily take care of your real estate transactions.

Buying Real Estate in Your Self-Directed IRA

To purchase real property in your IRA, the process is as follows:

Identify the property you wish to purchase.
  • Make sure no disqualified persons will be renting from you, such as but not limited to, children, spouse, grandchildren, grandparents and parents
Complete and return a Real Estate Purchase Kit
Supply our Transaction Department with the contact information of your realtor, title agent, and lender to ensure proficient communication between all parties involved.
Work with your real estate and title agents to show that you are purchasing the property within your IRA. Remember, your IRA is the buyer, not you as an individual.
  • Vesting must read: Mountain West IRA, Inc. FBO (Your Name) IRA
  • If partnering, the vesting must read: Mountain West IRA, Inc. FBO (Your Name) IRA, an undivided ___%
  • Any buyer address information must be our office address:  13905 W. Wainwright Dr., Boise, ID  83713 (Including Warranty Deed)
If earnest money needs to be sent, we will need the items below:
  • Purchase/Sale Agreement
  • Direction of Investment Form indicating the amount that needs to be sent.
  • Please complete all information in Section C4, “Earnest Money”, on the Direction of Investment form
  • Please remember these items must be received at least 3 business days prior to the date you wish funds to be sent
Once the offer has been accepted, we will need the following items before we can fully fund the purchase:
  • Closing documents (including the title commitment and deed)
  • Proof of property insurance
  • Please remember these items must be received at least 3 business days prior to the date you wish funds to be sent
All closing documents, purchase/sell agreement, etc. must be notated “Read and Approved by: (Your Name)” with your signature and date on each applicable page.  
  • Please do not sign where a signature is required, as Mountain West IRA will sign on behalf of your IRA
After you have reviewed and signed “Read and Approved by: (Your Name)”, please send all closing documents, purchase/sell agreement etc. to Mountain West IRA.
Once we have received the 100% complete, correct and required documents that have been “Read and Approved,” an authorized signer from our office will sign on behalf of your IRA as the buyer of the property. We will then forward all necessary documents on to the Title Company to complete the purchase.  Incomplete documentation may result in processing delays.

Please note you will need to maintain a sufficient cash balance in your IRA to pay expenses related to this property (property taxes, maintenance, improvements, etc.), as all expenses must be paid from your IRA.

Required forms and documents can be mailed, faxed or sent as an email attachment to:

Mountain West IRA

  • 13905 W. Wainwright Dr. Boise, ID 83713
  • Fax: (208) 376-4567 – Attention Transactions Department

Real Estate Forms

Real Estate Purchase Kit

Direction of Investment Real Estate Purchase Kit

Qualified Plan – Real Estate Purchase Kit

Download the Qualified Plan – Real Estate Purchase Kit.

Outgoing Wire Delivery Instructions Transactions Real Estate

Outgoing Wire Delivery Instructions Transactions

Real Estate Maintenance

Direction of Investment Real Estate

Download Direction of Investment Real Estate.

Form 990-T

Download Form 990-T Exempt Organization Business Income Tax Return.‍

Incoming Check and Wire Instructions - Real Estate

Download Incoming Check and Wire Instructions - Real Estate.

Loan Payoff Confirmation

Download Loan Payoff Confirmation.

Outgoing Wire Delivery Instructions - Maintenance

Download outgoing wire delivery instructions maintenance real estate.

Payment Authorization Letter - Recurring

Download payment authorization letter - recurring.

Payment Authorization Letter - Single Use

Download Payment Authorization Letter - Single Use.

Payment Authorization Letter – Property Tax

Download Payment Authorization Letter – Property Tax.

Sell Direction Letter – Real Estate

Download Sell Direction Letter – Real Estate.

The Do’s and Don’ts of Real Estate in Your IRA

Download 'The Do's and Don'ts of Real Estate in Your IRA'

Mountain West IRA does not offer investment, tax, financial, or legal advice to clients. Individuals who believe they need advice should consult with the appropriate professional(s) licensed in that area.