What is the pre-custody process for directly owned real estate investments?

Before STRATA accepts custody of a real estate investment, we complete a pre-custody review to confirm the asset meets our administrative requirements and can be held within a tax-advantaged account.

Step 1: Self-check

For directly owned real estate, the process begins with a Prohibited Transaction Self-Check to help investors review common IRS rules under IRC §4975 before opening and funding an account.

This self-check helps identify potential prohibited transactions or disqualified persons early in the process and ensures the required documentation is gathered before proceeding. Transactions involving prohibited transactions and/or disqualified persons STRATA is unable to process, including, but not limited to:

Investments that would be deemed as Prohibited Transactions (i.e., self-dealing) under IRC 4975
Single-member or family-owned entities (owned 50% or more by family members)
Neither the investor nor any disqualified persons may reside in or engage in personal use of the property.

Examples of prohibited transactions involving real estate:

Paying for expenses personally rather than directing the payment from your STRATA IRA
Using the property in your STRATA account as collateral for a personal loan
Selling the property from your STRATA account to yourself or a disqualified person
Purchasing a property that you already own, either personally or through a business.

Step 2: Open and fund

Your STRATA account must be established and funded before making an offer. Funding (transfer or rollover) may take 10–14 business days, depending on third-party institutions. All required documents and sufficient funds must be received at least 48 hours before closing.

Your account must also have enough funds to cover:

Purchase price
STRATA account and real estate processing fees
Earnest money deposit (if applicable)

View STRATA’s Fee Schedule for details.

Step 3: Make offer

The buyer on the purchase contract must be your STRATA account listed as:

STRATA Trust Company | Custodian FBO (Accountholder Name) (Account #)
If your IRA will not own 100% of the property, the property title and closing documents should reflect STRATA Trust Company Custodian, FBO (Accountholder Name) (Account #) as to an undivided interest of ____%.
The accountholder may not be listed personally as the buyer, and the contract may not later be assigned or amended to the STRATA account.

Why this matters
The retirement account—not you personally—must purchase and own the property from the beginning of the transaction. Listing yourself as the buyer and then assigning the contract to your STRATA account may be considered a prohibited transaction under IRS rules, which could jeopardize the tax-advantaged status.

⚠️ Signing the contract and closing documents:

For the purchase contract and closing documents, the account owner must sign “Read & Approved” on each page that requires a signature or initial. Afterward, STRATA will sign in its capacity as the custodian of the retirement account.

Step 4: Investment direction

Once the offer is accepted, submit the following together to avoid delays:

Earnest Money Deposit: Complete and sign STRATA's Earnest Money Deposit Authorization form to process a payment for any earnest money required by the purchase contract. The earnest money deposit must be paid directly from your STRATA account. Do not use personal funds to pay the earnest money deposit, or you will disqualify the transaction.
Direction: Complete and sign STRATA's Investment Direction - Real Estate form to authorize STRATA to send funds from your account to the property closing. The following supporting documentation showing proper titling is required:
1. Fully executed purchase agreement
2. Title commitment
3. Copy of deed of trust

If funds are available and all supporting documents show ownership in the name of the STRATA account, funds can be released within two business days. Include the wiring instructions for closing with the supporting documents.

Step 5: Prior to closing

Title commitment: The proposed insured must be STRATA Trust Company Custodian FBO (Accountholder Name) IRA (Account #).
Debt-financed real estate: If the property will be debt-financed, provide a copy of the non-recourse promissory note, deed of trust, and amortization schedule. The borrower must be STRATA Trust Company Custodian FBO (Accountholder Name) (Account #).
- Complete and sign STRATA’s Expense Payment Authorization form to set up the scheduled payments from your account to the lender. The lender must either be a financial institution (bank, credit union, etc.) or the seller may owner finance the transaction.
Closing documents/settlement statement: You will sign all of the closing documents as “Read and Approved”, and then STRATA will sign in its capacity as the custodian. Please provide any overnight, funding, and/or fax instructions for STRATA to deliver the closing documents to the title company/closing attorney.
Payment of fees: Make sure your STRATA account has sufficient funds to cover any processing or service fees. Fees must be paid before we will fund any real estate purchase.

Step 6: After Closing

Recorded deed: Please email NewInvestments@StrataTrust.com or mail a copy of the recorded deed to STRATA for safekeeping once it has been filed. The deed must reflect the owner as STRATA Trust Company Custodian FBO (Accountholder Name) IRA (Account #).
Title policy: Please email or mail the original title policy to STRATA once issued by the title company. The insured must be STRATA Trust Company Custodian FBO (Accountholder Name) IRA (Account #).

Resources:

Downloadable guides to ensure a smooth investing experience.

Prohibited Transaction Self-Check	Directly Owned Real Estate Checklist
Review preliminary self-check prior to opening and funding a self-directed retirement account.	Step-by-step instructions for investing in directly owned real estate.