Real Estate FAQs

• What are the differences between buying real estate for me, personally, and purchasing a real estate investment for my IRA?
• Can my IRA purchase real estate that I own presently?
• Can my IRA purchase real estate that my corporation, partnership, or LLC owns?
• May I live in or work in a property that my IRA owns (e.g., personal residence, retirement home, office)?
• Can I have funds remitted directly to a seller?
• How fast can Equity Trust transact a purchase?
• Can I transfer/rollover funds from an existing IRA, 401(k), or 403(b) to a self directed IRA at Equity Trust, for the purpose of investing in real estate?
• I plan on purchasing a property with my IRA that will generate rental income. Does the rental income have to go back to my IRA?
• How does the rental income actually get back into my account?
• May I live in or work in a property that my IRA owns (e.g., personal residence, retirement home, office)?
• Can my IRA invest in a newly-formed entity (e.g., limited partnership, limited liability company, c-corporation, land trust) that will invest in real estate?
• May I use funds from my IRA to renovate property in order to sell it at a higher price?
• How do I sell a property owned by my IRA?
• When I sell a property owned by my IRA, may I keep a portion and send the remaining portion to Equity Trust?

What are the differences between buying real estate for myself, personally, and purchasing a real estate investment for my IRA?

There are four main differences between purchasing real estate for yourself and for your IRA:

1. Title - When purchasing an asset for your IRA, it must be properly titled to your IRA. Specifically, it must read " Equity Trust Company Custodian FBO [Your Name] IRA." Equity Trust will not accept any investments that aren't properly titled.
2. Funding - When purchasing an investment (or any portion of an investment) for your IRA, funds must come directly from your IRA. Equity Trust will send the funds directly to the title company/closing agent/attorney per your instructions.
3. Expenses/Income - Any expenses associated with your IRA investment must be paid from your IRA and any income must be paid into your IRA.
4. Signatures - Documents pertaining to your IRA investments must be signed by Equity Trust, serving as custodian on behalf of your IRA.

Can my IRA purchase real estate that I currently own?

No. This is considered a prohibited transaction (see IRC 4975). You may not purchase a property, or interest in a property, thats currently owned by a disqualified person (this includes you and family members of lineal descent).

Can my IRA purchase real estate that my corporation, partnership, or LLC owns?

No. See the previous question.

May I live in or work in a property that my IRA owns (e.g., personal residence, retirement or vacation home, office)?

No. This is considered a prohibited transaction (see IRC 4975).

Can I pay funds directly to a seller?

Yes, by completing an investment form, you instruct Equity Trust where to send the funds. Typically, funding to purchase real estate is sent to a title company, attorney, or escrow agent. Funds can be sent by check, cashier’s check, or wire.

How fast can Equity Trust complete a purchase?

The normal processing time for an investment is three (3) business days. Checks are sent via regular mail to the address specified by the client on the investment form. Clients have the option of sending funds overnight or by wire for a special service fee.

Equity Trust also offers expedited service for a special service fee.

Please Note: For expedited service, Equity Trust must receive all necessary investment documents no later than 10:00 a.m. Eastern Time. For more information about fees and procedures, please see special service fees.

Can I transfer/rollover funds from an existing IRA, 401(k), or 403(b) to a self directed IRA at Equity Trust for the purpose of investing in real estate?

Yes. At Equity Trust we believe that you’re the best steward for your retirement assets. You can choose to transfer or rollover all of, or portions of, your existing retirement accounts to Equity Trust. You can then self direct these assets into investments in which you have confidence, knowledge, and expertise.

I plan topurchase a rental property with my IRA. Does the rental income have to go back into my IRA?

Yes, all income generated by an IRA-owned property must return to your IRA. This ensures that you retain the tax-deferred or tax-free status of the investment.

How does the rental income actually get into my account?

Rental payments are sent to Equity Trust for the benefit of (FBO) your IRA. The checks or money orders are made payable to:

"Equity Trust Company Custodian FBO [Your Name] IRA #xxxxx."

Once received, the checks or money orders are deposited into your IRA. All checks must be sent to Equity Trust with a payment coupon.

Can my IRA invest in a newly formed entity (e.g., limited partnership, limited liability company, C corporation, land trust) that will invest in real estate?

Yes. Investments in newly-formed private entities are not prohibited under the Internal Revenue Code, with the exception of subchapter S corporations (please see IRS Letter Rulings).

Can my IRA purchase an interest in a subchapter S corporation?

No. IRAs are not qualified as investors in subchapter S corporations (please see IRS Letter Rulings).

May I use funds from my IRA to renovate property in order to sell it at a higher price?

Yes. However, your IRA must pay all expenses associated with a property that it owns, including renovations. Further, all proceeds from the sale of the renovated property must be deposited into your IRA.

How do I sell a property owned by my IRA?

When you're ready to sell a property that's owned by your IRA, you need to request the original documents from Equity Trust. This is done by completing an investment form.

Once the property has been sold, all funds from the sale must be deposited into your IRA. These funds must be sent to Equity Trust with a payment coupon.

When I sell a property owned by my IRA, may I keep a portion of the proceeds and send the remaining portion to Equity Trust?

No. All income generated from the sale of a property owned by your IRA must be deposited directly into your IRA.