Has anyone ever invested passively in a syndication using...

Question

Fidelity as their self-directed IRA custodian?

Paul Moore · Answer

Hey @Neil Henderson. Scuba accident?

Fidelity certainly is more flexible than some of the other big ones, but I haven’t seen it work in practicality either. You mentioned sticker shock. I was having continual sticker shock using equity trust. Several years ago I found another IRA provider and was happily surprised at how low the fees were.  I recommend your investor reach out to @Dmitriy Fomichenko.  Great service, low fees etc.

Taylor L. · Answer

Do they allow that?

I use a different custodian right now and I'm still going to close out my SDIRA when the current investment is sold. It's just waaayyy too big of a hassle to sweat UBIT every year.

Hope your arm has healed up, brother! Tough luck with the scuba injury

Justin Windham · Answer

@Neil Henderson

I highly doubt Fidelity can help you accomplish what you want. There are several providers that specialize in SD IRAs and Solo 401k plans that post regularly to the forums on BP. I'd recommend reaching out to a few to see what makes the most sense for you.

Joel Owens · Answer

I have accredited investors sometimes like to invest IRA money in my NNN cash purchase value add deals.

Personally I don't really care for IRA's and for people at certain levels of wealth can be a waste of time and money.

There are others ways to write down taxes on income today and get close to the same objective or better.

Another wrinkle people do not know about is when they approach me to buy a stabilized NNN investment grade tenant property to own themselves. When they have IRA money it almost makes it a non-starter especially in the lower price ranges of 2 to 5 million. The issue is the IRS requires an IRA loan to be FULL non-recourse with no carve outs for bankruptcy and fraud. When you do that you take out 95% of the lenders in the market that make non-recourse loans. The remaining NNN ones know they are close to the only game in town so charge 5.5% interest instead of the lenders in the high 3's. This makes a NNN property not work when buying it a a 5 plus cap rate and trying to get debt in the 3's for the DSCR ratios. So unless an IRA buyer pays all cash with self-directed IRA or gets owner financing which is almost impossible with properties getting 10 offers within 48hrs on the market they can't use the IRA money. IRA companies do not like real estate in general because they do not make the higher fees like off of the other type of IRA investments.

People need to create their own wealth their way. When you follow other systems that are so called (helping you) watch out. Often times you can go further and faster on your own.

Dmitriy Fomichenko · Answer

That's right Neil, maybe in theory they can do it, but not practically. This is not their focus. In order to invest in alternative assets you would want to use a custodian who specializes in creating truly self-directed IRAs, unlike Fidelity.

Brian Eastman · Answer

@Neil Henderson

Fidelity and other mainstream brokerage houses do not support investments in alternative assets. Well. they do if you are in their private client group, but do not really do a good job of it.  It is not their focus.

Documenting an IRA's investment in unique private opportunities is an entirely different business model than brokering publicly traded assets.  There are a handful of specialty firms that offer self-directed IRAs for alternative assets.  You will want to seek out an alternative asset custodian or a provider of "checkbook IRA" programs if you want to diversify your tax-sheltered IRA into syndications.

Todd Dexheimer · Answer

We take a lot of SDIRA's/Solo 401k's, but no Fidelity funds

Neil Henderson · Answer

So, this is more about one of our passive investors in one of our self-storage syndications who wants to invest with us using a SD-IRA. They had some sticker shock around the fees that other SD-IRA custodians charge and reached out to their primary investment fund managers, Fidelity. Fidelity said “Yeah, we can do a self-directed IRA and the fees are zero!” When I spoke to Fidelity’s Alternative Investment back office, they said they could do it, if we submit to annual third party audits. We are fine doing that, but so far, I’ve not found a single syndication sponsor or syndication attorney who has seen anyone take SD-IRA funds from Fidelity.

Has anyone ever invested passively in a syndication using...

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