Morristown, NJ · Member since 2013 · 1 post · 0 votes
I am considering a self directed IRA. Has anyone worked with BuyPD, Am Estate and Trust and Accuplan? I also talked to IRA Financial Group in NY but they do not work as custodians'. Is a custodian required?
it looks that you work as a real estate agent (based on your profile description), and while self directed IRA will allow you to use your retirement funds to invest in real estate and other non-traditional investments, I want to make sure that you are aware of another option that is available to you: Self-Directed Solo 401k. If you are self-employed you would qualify for this option and there are several major advantages of using Solo 401k over self directed IRA. Here are few:
No need for a custodian (save $$ on transaction and asset based fees)
Checkbook control - you don't need to ask custodian consent to make the investment, simply write the check
Roth sub-account - in essence you can have two accounts in one: regular pre-tax as well as Roth after tax
High contribution limits up to $56,500 per year, this is nearly 10 times more than an IRA. This feature makes Solo 401k great tax sheltering vehicle.
Participant loan feature - give you the ability to access cash up to $50K in your account at any time for any reason
Exempt form UBTI tax on leveraged real estate
There are few other, but I think the above make the point. There is additional info available online if you wish to learn more.
I think it is very important to make the informed decision (knowing all your options). Wish you the best!
I'm doing a deal with a guy who is using American Estate and Trust right now. They are worse than Equity Trust. I'd give them a 2 on a scale of 1-10. Just my experience/opinion.
I am not familiar with the ones you mentioned, but I recently set mine up with UDirect IRA Services out of California. I believe they work in all states. They also put us in touch with lawyers who could do the legal work at very reasonable fees. I have been VERY happy with their service.
Welcome to BP! I don't know much about it personally but @Brian Gibbons here on BP recommended a great book that could help get you started called IRA Wealth Revolutionary IRA Strategies for Real Estate by Patrick Rice. Brian is a great resource, he can probably shed some light on the subject for you.
I set mine up with IRA Services Trust and so far I have no complaints. They have been responsive and have done a good job communicating every step of the way.
Jon Klaus ,
Do you know anything about American Pension Services (APS)? They gave a short intro to their company at a seminar I attended a little while back. I am looking into setting up my own self directed IRA in the near future and have next to zero knowledge on it.
Jon Klaus , Do you know anything about American Pension Services (APS)? They gave a short intro to their company at a seminar I attended a little while back. I am looking into setting up my own self directed IRA in the near future and have next to zero knowledge on it.
Sorry, I don't. Maybe someone who does will reply.
I have a SDIRA with Accuplan. I setup it up through their Irvine, Ca office and they have been pretty good for me. The person I've worked with at Accuplan has always been responsive and very helpful.
@Stephen Turner I used APS before Accuplan. I switched because I felt APS took a long time to respond to basic questions. When they did answer, it was usually short answers and it felt like I had to pry information out of them. This was a few years ago, so I can't say how they are now.
it looks that you work as a real estate agent (based on your profile description), and while self directed IRA will allow you to use your retirement funds to invest in real estate and other non-traditional investments, I want to make sure that you are aware of another option that is available to you: Self-Directed Solo 401k. If you are self-employed you would qualify for this option and there are several major advantages of using Solo 401k over self directed IRA. Here are few:
No need for a custodian (save $$ on transaction and asset based fees)
Checkbook control - you don't need to ask custodian consent to make the investment, simply write the check
Roth sub-account - in essence you can have two accounts in one: regular pre-tax as well as Roth after tax
High contribution limits up to $56,500 per year, this is nearly 10 times more than an IRA. This feature makes Solo 401k great tax sheltering vehicle.
Participant loan feature - give you the ability to access cash up to $50K in your account at any time for any reason
Exempt form UBTI tax on leveraged real estate
There are few other, but I think the above make the point. There is additional info available online if you wish to learn more.
I think it is very important to make the informed decision (knowing all your options). Wish you the best!
We transferred my husbands 401K into a self-directed IRA last year with Entrust Group. We have been happy with their service. They have a lot of educational material as well as recorded and live webinars. We have used the account to purchase real estate and precious metals.
Dmitriy Fomichenko hit the exact point I was going to make. If you are looking to set this up for future fund allocations, you may want to heavily consider a self directed 401k instead of an SD IRA. The IRS regs on much less stringent on 401k funds and you can even use debt in some cases without triggering UBIT.
If you have funds already in an IRA and are looking to transfer them to a SD one, you can't roll them into a 401k so your kind of stuck.
Dmitriy Fomichenko hit the exact point I was going to make. If you are looking to set this up for future fund allocations, you may want to heavily consider a self directed 401k instead of an SD IRA. The IRS regs on much less stringent on 401k funds and you can even use debt in some cases without triggering UBIT.
If you have funds already in an IRA and are looking to transfer them to a SD one, you can't roll them into a 401k so your kind of stuck.
Mike, please allow me to clarify your comment. Almost all qualified retirement funds can be rolled over or transferred into self directed Individual K (or Solo 401k). There is only one exception: Roth IRA. If you have funds in a Roth IRA, then those funds can not be moved over to Solo 401k. However, almost all other accounts can. Few examples: Traditional IRA, SEP IRA, Simple IRA, 401k, 457, 403b.
@Dmitriy Fomichenko is right. The solo 401K makes the IRA look like a '92 Yugo. Not only are all the advantages that Dmitriy listed huge to an investor, but IRAs (both Traditional and Roth) incur a really nasty tax inside them. Unrelated Business Income Tax (UBIT) leaps to 35% after $11,200 of profit if you are leveraged. Leverage is one of most powerful tools to a real estate investor, and the IRA structure cripples it. The same leveraged property held inside a 401K can be 30% - 50% more profitable than in an IRA. This is simply due to the tax savings.
Think of the IRA as your stern father, and the 401K as your kindly uncle.
Assuming you qualify for a Solo(K), there are some advantages over an IRA, such as higher contribution limits (tied to the profits of the business your Solo(K) is tied to)
I would suggest calling around to some IRA custodians. Most custodians don't charge transaction fees (usually it's a quarterly fee based on the value of the account). The benefit to having a custodian is having someone to keep you on the right track, not setting up a plan, giving you a check book, and telling you to have at it. You have resources at hand to make sure you aren't running into any prohibited transactions.
Check out Dmitriy Fomichenko. He facilitates 401Ks as do I. I don't think either of us would tell any of our clients to "have at it." Dimitriy has listed the major advantages of 401Ks in a very clear and succinct manner, so if you search his posts, you'll see why I recommend them over IRAs. Higher contribution limits are probably the least valuable advantage, so check out all the others.
Oh, and do get sound guidance. Don't "have at it" in any transaction. That's good advice even if you're investing in your own name. Too many people have struck real estate deals that were not good for them simply by moving too fast and not doing their homework.
...The benefit to having a custodian is having someone to keep you on the right track, not setting up a plan, giving you a check book, and telling you to have at it. You have resources at hand to make sure you aren't running into any prohibited transactions.
Gil, let me disagree with you. What you are describing is certainly not my model (or other Solo 401k providers that I know such as @Mike McDermott who pour themselves out helping those who are not even their clients).
Having a custodian does not automatically mean that client has superior service and the resources to rely on any time he or she needs help. This is not the case of nearly 400 clients we helped over the last 3 years obtain checkbook control over their retirement accounts. We provide them all the support they need, whenever they need. And I can also say that we had number of clients switch to use from different custodians because they were dissatisfied with the service. One recently told me that people didn't want to do business with her IRA because of the X custodian she had her account with (she was lending out of her IRA and it was very difficult to deal with that custodian lately and her clients were aware of that). She switched to us to get the checkbook control.
Having a custodian also does not mean that client will be protected from engaging in a 'prohibited transaction'. All custodial agreements that I reviewed (at least dozen) take all the liability off the custodian. So the client is ultimately responsible for what he does with his or her IRA/401k. Therefore regardless if you have a custodian self directed IRA or checkbook control Solo 401k - educate yourself!
The same can be said of some Solo 401k providers. Over the years I helped number of fellow BP-members (and others outside of the BP community), who had their plans set up by someone who does not offer any or good enough service to clients when the need it.
So the bottom line is - it all comes down to the particular provider and the quality of the service they offer. I have some friends who offer self-directed IRA and doing great job servicing their clients. And I refer business to them because not everyone qualifies for Solo K, and I get business from them.
While I believe that truly self-directed trustee-managed Solo 401(k) plan is superior to self directed IRA, there are millions of SDIRA users and I think there is a place for both. There is also millions of people who are never heard of a self directed IRA or Solo 401(k) and my goal and passion is to educate those people.
@Dmitriy Fomichenko I agree that having a custodian doesn’t mean superior service, which is why I always recommend calling around.
I’m sure there are cases where people don’t require or have use for a custodian. However the thousands of people that we’ve helped every year have mostly found having a custodian to be invaluable.
Also, at no point did I say that the custodian takes on responsibility. In fact, I tell every client that due diligence is on behalf of the client.
And last, while I agree that, in some cases, having solo 401K can be more beneficial over an IRA, you absolutely need to weigh out each plan.
At the end of the day, you are spot on: Education is the MOST IMPORTANT aspect.
@Leah M. does Entrust also do self-directed 401k? Someone else recommended Entrust to me.
Kristen, Entrust does offer self-directed 401k, but keep in mind that it would work similar to a self-directed IRA, they are the custodian and hold all your assets. They do not offer truly self-directed, trustee-managed Solo 401k plan.
American Estate &Trust is the worse SDIRA custodian to use for real estate investing. It takes 5-7 days to just sign and return the purchase contract and much longer to sign and return closing documents.
I can tell you that American Estate and Trust has more fees than the fleas on a wild dog.
In March 2014, I attended the BuyPD "Buyers' Summit" in Las Vegas, where we were treated to fine food, unending motivational speakers, and a big load of ********. Famous TV personalities and authors of investment books convinced us that we were missing out if we didn't take advantage of the recent crash in housing prices and the economy, which had made investments in rental houses affordable. All we had to do was use our IRA money to buy them. We didn't need good credit, we needed no cash, all we had to do was sign a bunch of paperwork with a lot of legalese and fine print. These houses were represented as newly rehabbed and up to code, already rented out, and already placed with a management company.
Instant mortgages were provided with no effort on our part - no loan applications, just 1/3 down coming from our IRAs, the rest financed at a whopping 12% for three years. We were assured that there was a positive cash flow nonetheless. If we refinanced, we could get a lower rate and make even more money! Too bad if you can't qualify for a mortgage due to bad credit or lack of income; they are happy to take our 12% and after three years, they can simply repossess the property if you can't pay it off (we can't).
These houses turned out to have numerous problems not fixed by the rehabbers; we are rresponsible for the repairs. They far exceed our "profits" from positive cash flow.
I contacted a realtor to try and sell them. I paid between $60,000 and $70,000 for each one. The realtor says the going price in that neighborhood is between ($2,000 - yes, you read that right! - and $30,000). What am I supposed to do now?
Last but not least, BuyPD offered a 12 month rent guarantee, but when I tried to make a claim, it was denied.
It is important to understand all fees especially the variable fees. With so much competition in the market place today, you should be able to find a provider that charges under $200 per year.