Own Rental Real Estate in Your IRA
A common investment is to own rental real estate in your IRA or other types of property that generate income and expenses.
All expenses and income related to property owned by your self directed IRA must be paid from and returned to the IRA.
Real Estate IRA Income: How Funds Get Back to Your IRA
Here are some key points to remember about property income:
- All profits/income related to the investment must return to your self directed IRA.
- Renters/Payers must make out checks to your self directed IRA, not to you personally. For example, a check would be made out to:
“Equity Trust Company Custodian FBO IRA#1234”
- Equity Trust provides deposit coupons to accompany any checks for deposit, and coupons must be submitted with payments.
- Checks can be remitted from renters/payers directly to Equity Trust (with deposit coupons) or they can be sent to the IRA owner and then forwarded to Equity Trust.
- IMPORTANT: You are not permitted to deposit IRA payments into your personal accounts. Checks must be deposited directly into your self directed IRA. Co-mingling of funds could be considered a prohibited transaction.
Here are some key points to remember about property expenses:
- All expenses related to the investment must be paid from your IRA proportionate to your IRA’s investment in that property. For example, if you purchased a 50% interest in the investment, then 50% of the expenses must come from your IRA (i.e., 50% ownership of property = 50% expenses).
- You must complete an investment form to instruct Equity Trust to make a payment from your account. Reoccurring expenses can be automated at Equity Trust.
- IMPORTANT: You are not permitted to pay IRA expenses from your personal accounts. Expenses must be paid from your self directed IRA. Co-mingling of funds could be considered a prohibited transaction.