What Is the Pre-Custody Process for Directly Owned Real Estate Investments?

Overview of the pre-custody process for the purchase of directly owned real estate including pre-closing documentation, the pre-custody process timeline, how to title your investment and where to submit your documents.

Pre-Custody Process

Prior to accepting custody of an investment, STRATA Trust Company (“STRATA”) completes a pre-custody check to make sure we can meet our custodial responsibilities and the administrative requirements of the investment. Use this checklist to ensure you’ve gathered all the necessary documentation to proceed with your directly owned real estate investment. 

Examples of directly owned real estate investments include, but are not limited to:

• Residential single-family and multi-unit homes
• Commercial or industrial properties
• Apartment buildings and condominiums
• Improved or unimproved land

Prohibited Transactions

Please contact us if the type of real estate investment you wish to process is not on this checklist. There are certain types of investments that we will not 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)
• The investor nor any disqualified persons may not 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 IRA as collateral for a personal loan
• Selling the property from your STRATA IRA to yourself or a disqualified person
• Purchasing a property that you already own, either personally or through a business. 

Step 1: Open and Fund Your STRATA IRA

Ensure your STRATA IRA is established and you have initiated funding of the account (i.e. transfer or rollover) prior to making an offer. Funding your IRA is typically dependent on third-party institutions that take 10-14 days to process your requests and deliver funds to your STRATA IRA. Click here to open your STRATA IRA account.

Deed and Title Registration

The investment registration must reflect the following named investment owner.

Step 2: The Offer 

To onboard your new investment to STRATA, please provide the following documents:

• Purchase Contract: When your IRA makes an offer on real estate, the buyer on the purchase contract must be STRATA Trust Company Custodian FBO (Accountholder Name) IRA (Account #). You will sign the contract as the Accountholder, and STRATA will sign in its capacity as the IRA Custodian. You cannot list yourself as the buyer and assign or amend the contract to your IRA as the buyer. STRATA will not process the transaction if you or a disqualified person are listed as the buyer since it would be a prohibited transaction.

• 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 IRA account. Do not use personal funds to pay the earnest money deposit, or you will disqualify the transaction.
• Real Estate Investment Direction: Complete and sign STRATA's Investment Direction - Real Estate form. To avoid any processing delays, please be sure to complete all sections of the form. This form authorizes STRATA to send funds from your IRA to the property closing once all documents are provided to STRATA in good order.

Step 3: Before The 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) IRA (Account #). You will also need to complete and sign STRATA’s Expense Payment Authorization form to set up the scheduled payments from your IRA to the lender. The lender must either be a financial institution (bank, credit union, etc.) or the seller may owner finance the transaction.

Step 4: The Closing

• 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 IRA Custodian. Please provide any overnight and/or fax instructions for STRATA to deliver the closing documents to the title company/closing attorney.
• Wiring Instructions: Please include the wiring instructions with the closing documents or on your Investment Direction Real Estate form.
• Payment of Fees: Make sure your IRA has sufficient funds to cover our Real Estate Processing Fee of $125 and any other wire or overnight fees. Fees must be paid before we will fund any Real Estate purchase.

Step 5: After Closing

• Recorded Deed: Please email 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 #).  

Once all the information has been completed and we have received all the necessary documentation, it will take up to 2-3 business days for us to determine whether STRATA is able to custody the asset. The documents listed above provide a guideline for typical directly owned real estate assets. Please note that STRATA has the right to request additional documentation to complete the custody process.

Directly Owned Real Estate Checklist

STRATA's Directly Owned Real Estate Checklist includes form links and a step-by-step guide. Download and save, email, or print!

 

 

Additional Resources:

• STRATA IRA Fee Schedule -  Overview account, processing, and service fees for your STRATA IRA.
• In-Kind or Rollover Pre-Custody Process for Directly-Owned Real Estate  
• Important Reminders for Real Estate Transactions