Rental Property Investor · Tinley Park, IL · Member since 2017 · 32 posts · 6 votes
I am looking to get into REI and have six figures in retirement accounts to potentially obtain multi family in Chicago market.
Friend / Mentor uses Equity Trust Company to purchase and hold real estate in IRA through this vehicle.
Does anyone have experience positive or negative?
Your understanding of the process lines up with the marketing promotion of Equity Trust and many of their custodial competitors, but unfortunately not the reality.
Custodians want you to think that they have your back and that they are "reviewing" your transactions. This is simply not true. You and you alone are responsible for the compliance of your investment transactions.
Here is the Equity Trust Investment Direction form. See the disclaimers on the last page.
The form is secured in a fashion that I could not easily cut and paste, but the key point is that they have absolutely no responsibility to ensure compliance with IRS rules.
When they review your paperwork, they are simply ensuring that you have provided everything required for them to accurately document the transaction - nothing more. Sure, they have good intentions and if you were to try and have them issue a check to someone who shares your last name, as an example, they may stop and ask questions.
When you do receive support from a custodial institution such as Equity Trust, it is generally coming from a marginally trained individual whose role is customer service and paperwork administration. The folks who answer the phones are not licensed to provide tax, legal or investment advice. They are just normal clerks trying to be helpful to the best of their abilities.
Over the course of more than a decade in this field, I cannot tell you how many times we have taken on a new client - or in some cases rejected a "poisoned" account - where there was information provided to a client by a custodian that was completely off the mark and put the client very much at risk.
Your point about wanting to have meaningful guidance so that you can adhere to the rules is critical, and is one of the most important things to know and understand about using a self-directed IRA or Solo 401(k). Getting that advice from a qualified source such as a licensed CPA or tax attorney is the only meaningful way to accomplish this goal.
Rental Property Investor · Tinley Park, IL · Member since 2017 · 32 posts · 6 votes
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@Michael Gravallese thank you very much! I am glad to hear you had positive experience. I appreciate it and will take this into account as I continue to research.
Rental Property Investor · Marietta, GA · Member since 2018 · 41 posts · 43 votes
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Thank you to all who have participated in this thread. Super valuable to me, as I trying to make a final decision on which self-directed IRA custodian to work with. Equity Trust was in my final decision set, but no longer. This feedback is too consistent and too recent to ignore. This thread just paid (in value to me) for my BP membership for the year...
Rental Property Investor · Tinley Park, IL · Member since 2017 · 32 posts · 6 votes
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@Gloria Sheridan Can you share (Privately of you prefer) what custodians / Firms you may have shortlisted? I would like to cross referance and analyze as I proceed down this path.
Investor · Dublin, CA · Member since 2016 · 344 posts · 228 votes
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@Bill Nolan I have not heard good things a out Equity Trust and NuView IRA. When I was evaluating, I had shortlisted Quest and uDirect. After doing the research, I realized that I can open solo 401K so I didn’t go with any of the SD IRA providers.
Rental Property Investor · East Coast · Member since 2018 · 96 posts · 65 votes
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Setting up the account was easy and painless. I can't provide much more than that however because I just completed it a few weeks ago and am looking to put those funds to use in my next deal.
@Bill Nolan I have not heard good things a out Equity Trust and NuView IRA. When I was evaluating, I had shortlisted Quest and uDirect. After doing the research, I realized that I can open solo 401K so I didn’t go with any of the SD IRA providers.
Yes, being Solo 401k eligible can really simplify the decision-making process, at least in that you can proceed without any of the custodians.
Investor · Northport, NY · Member since 2016 · 27 posts · 8 votes
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@Bill Nolan Hey Bill I heard only great things about them I was setting up an account myself but stopped only because they have restrictions in certain states. Be sure they can act as custodian in any state you may potentially buy in. I went with Quest.
Good Luck
Real Estate Broker · Beloit, WI · Member since 2015 · 232 posts · 60 votes
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Bill I have steered clients to working with Equity Trust and have found them great to work with. I can also show you 15 to 20 % cash on cash return, 1.5% to 2% rent to purchase price opportunities. You invest, we do the rest.
Before engaging with any self-directed IRA custodian, it is important to have a solid executable plan in place. I personally work in the self-directed IRA industry and personally self-direct my retirement accounts. I would prefer in this forum to remain agnostic and do my best to provide some non-advisory assistance to help:
1) Are you looking to buy and hold or flip in your self-directed IRA? If buy and hold, are you looking to borrow from non-recourse lenders or simply buy as a cash buyer. Reason I bring this up, if you are taking on debt financing you need to be familiar with Unrelated Debt Financed Income Tax (UDFI) and the 990-T tax preparation and filing. If you are looking to flip, please be aware that too many flips in one year can trigger UBIT.
2) Are you looking to lend with your IRA?
3) All self-directed IRA custodians have similar processes and procedures regarding buying and selling real estate. Some custodians are more technologically advanced than others. Consider a custodian that has the tools and technology capabilities that will work for you.
4) There are administrators and actual custodians in the industry and it is important to know the difference.
5) Lastly, there are a number of ways you can craft and paper transactions. Important you are working with your legal or tax professional as custodians are for the most part passive and cannot provide legal opinions. That being said, some food for thought:
- Partnering multiple IRA's together. I witnessed an investor in 2017, use 3 self-directed investment accounts to purchase a vacant lot for 8k, sell it for 60k and make nearly a 52k profit tax-free. Then he used 5 accounts in his family to buy a property for 120k approximately and sell for 200k. Please note, it is important when partnering with disqualified persons you invest proportionally and you work with your legal professional.
Self-directed IRA's and accounts can be powerful, but one should approach with care and attention to detail. Ask lots of questions and reach out to custodians and ask lots of questions.
Good questions. DOL 2000-10A is a good reference and also the Cherwenka Tax Court case can be cited.
If a disqualified person receives a benefit, then transaction can be considered prohibited. Example, individual only has 10k in their own personal name and they cannot demonstrate that they could have done the deal without the IRA, the transaction can be considered prohibited. This is a more grey area to explore, but you bring up a great point Justin for folks to understand.
Rental Property Investor · Jacksonville, FL · Member since 2008 · 784 posts · 528 votes
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I have 3 properties in my IRA with Equity Trust Company, I have worked with them since 2012. The payment process is simple and easy, 3 simple steps to send monies out, the inflows are easy, if the tenants send money in the right way, using the coupons. The online system is better at showing Cash Transactions. Back in 2012, the people were very hard to work with and often you would work with many people to get 1 thing done. Since then it has gotten better and better.
One thing I dislike about ETC is they want to charge you a lot higher annual rate based on the value of your portfolio. So if you see appreciation on your property, they want to charge you a lot higher based on that rising value. I think that is wrong, the service they provide is the same at $20000 as at $200000. Unless I am missing something.