Real Estate

Mountain West IRA – Real Estate

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. Please visit our webinar page to view all self-directed IRA webinars.

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 properties assets 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 recordkeeping 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.

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:
  1. 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
  2. Complete and return a Real Estate Purchase Kit – Watch Instructional Video HERE.
  3. Supply our Transaction Department with the contact information of your realtor, title agent, and lender to ensure proficient communication between all parties involved.
  4. 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)
  5. 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 2 business days prior to the date you wish funds to be sent
  6. 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 2 business days prior to the date you wish funds to be sent
  7. 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
  8. 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.
  9. 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

Qualified Plan – Real Estate Purchase Kit
Outgoing Wire Instructions – Transactions

Electronic Signature: Outgoing Wire Instructions – Transactions

PDF: Outgoing Wire Instructions -Transactions

*Please complete the Outgoing Wire Instructions Form to send outgoing funds for the purchase of Real Estate, Promissory Note, or Private Placement assets.

Real Estate Purchase Kit

Review step-by-step directions to complete a Real Estate Purchase Kit HERE.

Electronic Signature: Real Estate Purchase Kit

PDF: Real Estate Purchase Kit

Real Estate Maintenance

Payment Authorization Letter – Property Tax
Sell Direction Letter – Real Estate
Outgoing Wire Instructions – Maintenance

Electronic Signature: Outgoing Wire Instructions – Maintenance

PDF: Outgoing Wire Instructions – Maintenance

*Please complete the Outgoing Wire Instructions Form when sending outgoing funds to pay an expense related to an asset your IRA owns. 

Incoming Check & Wire Instructions
Loan Payoff Confirmation
Real Estate Purchase – Direction of Investment

Electronic Signature: Real Estate Purchase – Direction of Investment

PDF: Real Estate Purchase – Direction of Investment

Real Estate Purchase – Do’s and Don’ts

Electronic Signature: Real Estate Purchase – Do’s and Don’ts

PDF: Real Estate Purchase – Do’s & Don’ts

Form 990-T
Payment Authorization Letter – Single Use
Payment Authorization Letter – Recurring

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.