I'm in New Jersey and have a check from another IRA that needs to be rolled over ASAP. I want to start a self-directed IRA but cant find a financial institution that has them available for real estate investing. Tried TD Ameritrade,Wells Fargo, and a local community bank. Anyone know which financial institutions are handling SD IRA's?
Equity Trust in Elyria, Ohio
Lincoln Trust in Denver
Pensco in San Francisco
UDirect IRA in Tustin, CA
Are a few I have dealt with. Go with a well established bigger outfit may be best. I had funds with First Pension in LA, a small private boutique provider with great customer service, when they went belly up and stole $60M of investor funds. I lost $14k cash account, a friend just had a mortgage payoff and had $200k swept. Ouch. Fifteen? years ago and it still hurts. Good luck.
Self-directed IRA accounts are a specialty service, not served by the mainstream brokerage houses.
There are several types of account structures, and what will be best for you will depend a lot on variables such as the amount of capital, investment types, your employment status, etc.
I would suggest that you park that money by depositing it into a regular IRA at your local bank. You only have 60 days from the initial distribution to deposit that money, and failure to do so would be catastrophic to the IRA and taxable.
Then, take your time and learn more about self-directed IRA plans and how they line up with your goals. There are several providers of such plans active here on BP sharing their expertise, and a ton of great posts on the topic. There is no need to rush your decision just because you have to find a home for that money. Once you have a plan in place, you can then easily move it from wherever you park it for the short term.
Quest IRA out of TX
CamaPlan out of PA
NuView out of FL
IRA Services Trust Company is very reputable and have been in business since the late 70s. They are one of the top self-directed IRA providers.
I agree very strongly with @Brian Eastman do not rush this decision as it is an important one, you want a custodian that you trust, however be sure to have those funds deposited into a qualified account before your 60 days are up.
In terms of custodians, here are some things to consider.
1. Fees, this is important but I would not say it is the most important thing to consider
2. Speed, you want a custodian that has a quick processing time period
3. Reachable, do you really want to have an automated phone promt system that takes 30 minutes to get to a real person, or do you want to have the phone answered by a real person
4. Customer Service, you want a custodian that will listen to your needs and be able to help assist you with kindness
5. Knowledge, you want a custodian that knows what they are doing and can help explain the rules and prohibited transactions to you
Brian Eastman IRA123 is great
Thanks for all of the responses, they were very helpful. I did roll the check back into an IRA, for now and I am currently seeking out a self directed IRA that can be of use in the future.
I still want to learn a few things about the self directed IRA.
1- Can I use this fund to purchase rentals that I plan on holding onto for long term? (Are some self directed plans different from others)
2-If so, how much of the money borrowed would I be required to place back into the fund? Is there a time frame and payment schedule attached?
3- Can a business partner, whom is not a family member, borrow from my Self Directed IRA if its a flip project we are doing together?
I have seen this work well in partnerships by creating an LLC that the investing entities all become members of. It is my understanding that self directed IRAs have the flexibility to do a multitude of things in real estate. The main component is that it has to be propotional. So, if your Self Directed IRA is 75% partner with another entity, then it must collect 75% of the profit (rental income, sold gains, etc), it must also contribute 75% of the expenses (rehab, insurance, taxes, etc).
I am not sure about loaning to a partner. I know there has to be no connection from the IRA to the investment (relatives). And any loans need to be non-recourse. However, I am not sure about the IRA loaning money. That would be a good question for the custodian that you choose.
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It really is time for you to get off the internet and onto the phone with a plan professional and your tax advisor. Your questions indicate you are very far from even a basic understanding of this topic. That is totally fine as obviously this is entirely new to you, but you can choose to chip away on the internet and lead yourself on a long and not entirely well directed chase, or you can get to the point. Please don't take that wrong, just trying to help you save time and eliminate risk of misunderstanding.
While services differ somewhat, all self-directed plans are governed by the same rules outlined in the tax code. In fact, all IRA's are governed by such rules, but when your investments are within the very narrow box offered by a conventional Wall St. brokerage, you typically do not need to know most of the rules that apply once you take more control and invest more broadly.
An IRA may be used as a down payment for a house the IRA intends to hold over the long term. This is a more complicated strategy that involves the use of a non-recourse loan for the IRA, as you may not pledge a personal guarantee. Keep in mind, it is the IRA purchasing the property - not you purchasing property using IRA money. The use of debt-financing also introduces a tax known as UDFI on the percentage of the gains the IRA receives based on the use of the non-IRA (borrowed) money. The tax impact is generally significantly smaller than the benefits of leverage and the resulting higher cash-on-cash return the IRA receives, but does introduce the filing complexity.
The repayment terms would be those offered by the lender, not anything specific to the IRS rules. Again, you are not "borrowing" money from the IRA. The IRA is the borrower on a mortgage.
The IRA could be the bank and act as a lender to another investor such as a flipper. This would not be possible, however, if you also happen to be personally involved in the flip transaction.
See the following to learn about the prohibited transaction rules.
@Fred Canzano You may purchase real estate with your IRA. However, you are not borrowing funds from your IRA to do this. You are making the purchase with your IRA, your IRA will be named as the owner on the deed and all income and expenses must flow through the IRA that is holding the property.
Traditional brokers will not do this type of transaction or hold non-publicly traded assets since this is a specialized area of the financial services business.
You should probably contact a custodian in order to speak to someone live to get your questions answered. You can also look for local meet ups or other meetings where a custodian is providing an educational presentation.
It is a complicated topic at first, so get educated before pulling the trigger.
Quest IRA is good too. They'll answer any questions you have (https://www.questira.com/).
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