In which order should things happen?
1.Open an IRA and make sure it will have cash
in it in time to make your investment. (Read below for help.)
2.Draw up an offer/ contract using your IRA's name.
3.Request deposit be sent from the funds in your IRA, if needed.
4.Send closing documents to PENSCO so we can fund the close.
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Before you shop around.
If you haven't already established and funded a PENSCO IRA, you will
want to begin there. Before moving any further, you will at the very least,
need to open an account so that you have your IRA's 'name' to work with.
For it is your IRA that is shopping around for for property - not
you!
Establish.
As soon as PENSCO receives your Application
for an IRA, you may call in to find out your new account number. Your IRA's
legal 'name' is "PENSCO Trust Company F.B.O. 'Your Full Name'
'IRA' (or SEP IRA, Roth IRA, etc.) 'Account #'. With
this new name, you may begin to hunt around for a good real estate investment.
Fund.
At the same time PENSCO Trust receives your Application, we should also
receive some indication of how you plan on funding your new IRA.
Because the time it takes for PENSCO Trust to receive funds can
vary greatly, please read the guidelines below for help, and take
this waiting period into consideration when planning your investment
timeline. (Your PENSCO IRA cannot make a purchase before funds
reach PENSCO Trust and have cleared the banking system.)
Via Transfer.
If you have decided to transfer other IRA funds into it, we will
have forwarded on your completed Transfer Request Form(s) to
your current custodian(s) to initiate the transfer(s). You should
expect this method to take anywhere between a week and a month,
depending on your custodian. Most take approximately 2-3 weeks to
process your/our request.
Via Direct Rollover.
If you have decided to roll over funds from a previous 401(k) or
other qualified plan, we should have received a Direct Rollover Request Form
from you. Because plan administrators vary, make sure to contact
your current administrator as well! Ask them what you need to
do to initiate a "Direct Rollover" to an IRA. Once you
and PENSCO have both requested this rollover, you should expect
this method to take anywhere between a week and a month, depending
on your administrator. Most take approximately 3-4 weeks to process
your/our request.
Via Cash Rollover.
Another way to move IRA funds from your
current custodian to PENSCO is a cash rollover. If you are in a
hurry, this is most likely the fastest method of moving cash between
accounts. You will need to request a taxable distribution from your current
custodian. If possible, ask them not to withhold taxes (because you are
going to cancel out the taxable event). You will then endorse that check
over to your PENSCO account by signing the back and making it payable
to "PENSCO Trust Company Custodian F.B.O. 'Your Full Name' IRA".
To avoid tax and/or penalty, you must deposit this check into your new
IRA within 60 days. Note: You are only allowed to use this method once
every 12 calendar months per IRA. This method takes only as long
as it takes you to get a distribution and mail it in with your Rollover Certification Form.
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Drawing up your offer.
You must draw up all offers and/or contracts so that the buyer
is listed as your IRA. Your IRA should be treated as an investor
separate from you, and its name - not yours - should be used anywhere
on the offer that describes the portion it is buying. Whether it
is the sole buyer, or buying as a tenant in common, the documents
should be vested correctly. The IRA's title is "PENSCO Trust Company
Custodian F.B.O. 'IRA Owner's Full Name' IRA 'Account Number'".
You are not allowed to transfer a contract drawn up in your name
into your IRA's name.
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Funding a deposit.
When your IRA purchases property, your IRA must fund any deposit
or earnest funds necessary. To authorize PENSCO Trust to put down
a deposit from your PENSCO IRA, simply mail or fax in our Investment
Authorization Form for Non-Publicly Traded Investments (using
the legal description of the property as the "Name of Investment"),
and a copy of the purchase contract. top
Closing time.
At closing, you, the IRA owner, must read, approve and sign all
documents before sending them to PENSCO Trust for the final custodial
signature. After checking for your signature of approval, a PENSCO
Trust Officer will finalize the sale by signing the documents on
your IRA's behalf. The signed documents will then be returned to
the closing agent, along with funds, for processing. top
Fundamentals
to remember.
All documents must be vested correctly:
PENSCO Trust Company Custodian F.B.O. 'Your Full Name' IRA 'Account Number'
Purchases should be transacted under PENSCO's
Tax ID:
02-0526633
The initial deposit, any increased deposit, expense item, and all
closing costs must be authorized for payment using our Investment
Authorization Form for Non-Publicly Traded Investments .
The IRA Owner or any other prohibited party
in relation to the IRA should not make any deposits from their
personal funds.
If financing, the IRA's loan must be a non-recourse loan.
Again: Contract of sale, counter offers,
etc. should all be in PENSCO IRA's name, read, approved, and signed by the IRA
owner (will then be signed by PENSCO). Note: Contract cannot be reassigned from the individual
to the individual's IRA (or other prohibited parties); this could be construed
as a prohibited transaction.
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Processing requirements
and suggested documentation.
PENSCO would like to see the following
documents prior to funding the close:
- Proposed Preliminary Title Report (or Chain of Title) with full
property description (i.e. legal description and street address)
- Funding Instructions - we recommend funding by wire
- Evidence of Title Insurance
- Phase I or Phase II Environmental Report (depending on circumstances)
- If you obtain fire and liability insurance then we would like
you to forward a copy of this to PENSCO Trust as well
- Property Appraisal (if acquired by lender)
- PENSCO Trust's own form: Investment
Authorization Form for Non-Publicly Traded Investments.
Use for funding, deposits, earnest money, and balance due.
PENSCO would also like:
- An independent escrow (usually your Title Company or Attorney)
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(The foregoing is a general discussion. It is not intended, and should
not be relied upon, as an opinion or advice on any legal, tax or investment
aspects of IRAs. An IRA owner considering an IRA investment in real property
should consult with his or her own advisor.)
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