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Investing in Real Estate Using Your Self-Directed IRA/401(k) Property Types Your Self Directed IRA can purchase any type of real estate including single family and multi-unit homes, apartment buildings, co-ops, condos, commercial property, and improved or unimproved land. The property can be used to generate income, or for appreciation. There is no time limit to how long your IRA owns the property; it can be used as an investment property, a rehab, or to appreciate in value. There are many ways that you can use your Self Directed IRA to purchase real estate. Prohibited Transactions Your IRA may not purchase property that you or any disqualified person currently owns. Inversely, your IRA may not sell or rent a property it owns to you or any disqualified person.The property must be for investment purposes only, you may not personally benefit from the property. You may not use it as a vacation home, you may not let your son or daughter live there while they are in college, and you may not lease it to your business. Expenses including any repairs made to the property must be paid for by the IRA. Sweat equity is also not allowed in any property owned by your IRA. Repairs must be done by a non-disqualified person. Examples of disqualified people include you, your children, your spouse, or your parents. However, you can decide if, when, how, and by whom the work can be done. The property can be purchased with cash from your plan. This is the easiest way to purchase property with your IRA. The IRA owns 100% of the property. Your IRA can also be leveraged using a non-recourse loan. Here are some non-recourse loan guidelines: • Required Documentation • Loan Application • Purchase and sales contract • IRA statement • Appraisal • Rent roll Loan Guidelines • Max Loan to Value = 70% • Max Term =20 to 30 Years • 3/1 & 5/1 & 7/1 ARM’s • Income /Expense ratio= 1.25 • 3 to 6 month’s reserves • Eligible Properties • Single Family Residences • Certain Condo’s • 2-4 Duplex • Multi-family (5+ units) • Retail/Office/Warehouse • Ineligible Properties • Mobile Homes • Time Shares /Condo Hotels • Certain Restaurants • Residences w/ 5+ acres • Farms The IRA can partner with you, another person and/or another person’s IRA. In partnering, your IRA would only purchase a portion of the property and the remaining portion would be purchased by someone else or someone else’s IRA. Your IRA may partner with disqualified people, including yourself. If you decide to get a personal loan to partner with your IRA, your personal loan must not be secured by the property. In this scenario, your IRA only owns a percentage of the property, and the expenses need to be paid according to the percentage split. The profits from the property will also be split according to the percentage of ownership. Title and Vesting Instructions All contracts and documents related to a real estate purchase must follow these guidelines: Name: EntrustCAMA FBO Client Name, IRA or EntrustCAMA FBO Client Account # IRA Address: This is the buyer’s address; it should be written on the deed so that tax bills will be mailed to this address. Signature: the only authorized signers for the IRA are EntrustCAMA principals or designated employees. EntrustCAMA does not attend the closings; documents must be mailed, faxed or brought in to the office for signing. Documents will not be signed unless they have been previously signed as having been “read and approved” by the client. This means that every document the IRA needs to sign must have an additional signature for the client which reads: This Document has been read and approved by CLIENT NAME, beneficial owner of the IRA or a letter identifying each document to be signed. **There is only one exception; due diligence documents may be signed by the client; we do not need to review due diligence paperwork.
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