What are the steps to invest in directly owned real estate?

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 1: Open

Visit Get Started to open a new retirement account. You will be asked to select your anticipated investment type, select a retirement account type to hold the investment in.

Step 2: Fund

Your STRATA account must be established and funded before making an offer. Funding (transfer or rollover) may take 5-20 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)
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 will sign to acknowledge they have read and approved the documents. STRATA will then execute the documents, where applicable, in its capacity as custodian of the retirement account.

Step 4: Investment direction

Investing involves three parts: (1) submitting pre-custody documents for review and earnest money release (if applicable), (2) submitting pre-closing documents for approval, and (3) submitting final closing documents for STRATA’s countersignature.

1. Pre-custody review:

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.

2. Prior to closing

Submit all required pre-closing documents as soon as they become available. Early submission helps ensure documents can be reviewed and approved prior to the scheduled closing date.

Title commitment: The proposed insured must be STRATA Trust Company Custodian FBO (Accountholder Name) IRA (Account #).
Settlement statement: Provide a copy of the signed settlement statement prior to closing.
This document breaks down all the fees and provides the final amount to wire.
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.

3. At Closing

Submit final closing documents and any additional supporting documentation required to complete
the transaction and confirm ownership by your STRATA retirement account.

Closing documents: You will sign all of the closing documents to acknowledge you have read and approved the documents 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.

Will the property be debt-financed? If yes, provide a copy of the non-recourse promissory
note, deed of trust, and amortization schedule. The borrower must be titled STRATA Trust
Company Custodian FBO (Accountholder Name) Account (#). You will also need to complete
and sign STRATA’s Expense Payment Authorization form form to establish loan payments
from your STRATA account.
- Only a non-recourse note is permitted for debt financing. The property must be the only collateral for the loan, and all payments must be made from your STRATA account. Per IRS rules, accountholders cannot guarantee the loan personally or make payments on the loan out of pocket. In addition, debt-financed property in a retirement account may be subject to Unrelated Business Taxable Income. For more information, please consult your tax advisor.
Is the property income-producing? If yes, provide a copy of the property management
agreement. Income-producing properties must be managed by an unrelated third-party
property manager. The agreement must be assigned at closing, require all income and expenses to flow through your STRATA account, and require the property manager to provide STRATA with reports at least quarterly.

Step 5: Confirm

Within 30 days after closing, submit STRATA’s Alternative Investment Purchase Confirmation form and upload supporting documentation. Supporting documents may also be submitted by mail or email and should include the title policy issued by the title company and a copy of the recorded deed filed with the county recording office. Until STRATA receives confirmation of the completed purchase, the investment will appear as Pending in your STRATA account.

Recorded deed: The deed must reflect the owner as STRATA Trust Company Custodian FBO (Accountholder Name).

Resources:

View STRATA's Directly Owned Real Estate Checklist for step-by-step instructions.