Pseudo-newbie looking for advice - wholesaling/flipping to start

[Vikki Baumler]

Hi all. I previously owned/managed and did all repairs for a duplex I later sold in a divorce. (Originally purchased with a private lender who has since passed away.) Now I do repairs and property mgmt for my boyfriend's properties. I'm eager to have my own real estate portfolio. I plan to transfer my 403b funds to a self-directed IRA, but since I don't have a lot of funds, I thought I would start with wholesaling to build my funds with the ultimate goal of building up enough to buy and flip SFHs to either sell or rent out. (Eventually, I want to own a multi-family unit. For now, this market is ripe with affordable SFH cosmetic fixer-uppers. Also ripe with multi-families, so I'm quite eager to dive in.) I do not believe I can get a conventional loan and do not currently know a private lender. Any tips for a newbie? I've been diving into blogs and podcasts to research SDIRA, wholesaling & flipping. But if you were to give me your top 5 action steps (after join BP) to get the ball rolling, what would you say to me? Thanks!
-Vikki

[Frank L. Bridges]

First thing is to choose a custodian for your SDIRA. There are between 20 and 23 self-directed custodians. 

• If you plan to use a single member LLC (in other words, a "check book LLC", of which you are the manager), you want to make sure the custodian is one that will allow that. Many don't.
• Another factor is how the custodian will charge. Some charge a small annual amount, but charge you for every transaction, while others charge you a larger annual fee, but charge you less for transactions. 

Next, of course, you set up you new IRA at the custodian and transfer the funds (after liquidating the current investments) from your 403(b) to the new account. When you transfer to the new account, make sure that the transfer is done from the custodian or trustee of your 403(b) to the SDIRA custodian. Don't do a rollover. Just do it directly between the two.

Your next decision is how you want to hold the new investments. Depending on state law, you can hold the new investments in your IRA, or you can establish an LLC (of which you are the manager) to be owned by your IRA and buy the investment in the name of the LLC. There are a number of factors to consider for this. Without going into all the complexities here, the short scoop is that the LLC is more efficient from a transaction point of view (you don't have to instruct the custodian every time you want to pay a bill, and parties to the transactions don't have to send money to the custodian), but is more expensive generally with setup costs, annual filing fees and registered agent fees. If you don't have a lot of money in your IRA, you'll probably opt to avoid the extra expense for a transaction or two, and then when you understand the ins and outs of what you are doing, maybe upgrade to an LLC.

Finally, you will need to choose your investment and negotiate the terms of purchase. Then you instruct the custodian to make the investment. 

I hope this helps. Best of success in your investments.