Self Directed IRA LLC
Real Estate Investor · Alma, WI · Member since 2015 · 5 posts · 0 votes
I am looking at doing a SDIRALLC on 100 acres that has just come up for sale. It is all farmland and I would be getting about $15000.00 Rent a year from it which would be put back into the IRA. Who do I trust to set this account up? What if my expenses are more than the amount that I put in the account. Can I transfer some more from my IRA? Thanks for any help anyone can give me on this subject. Pro and Cons?
Thanks Dale
As a provider of such plans, I can't answer all of your questions - notably about recommendations on who to work with. (I could, but they would of course be biased).
At a certain point, the best thing to do is just speak with a couple of firms who offer such plans. they can help you understand the answers to the technical questions you ask as well as many others I'm sure you are not thinking about yet. As with any vendor selection, don't just speak with one company.
You can continue to add funds to an IRA LLC if it is properly structured.
Personally, I would question the need for the IRA LLC model providing checkbook control simply for a land purchase. There is not so much time-sensitive or high volume trasaction activity with that type of investing, and you may not require the additional flexibility the LLC provides as compared to simply using a good custodian to handle the transaction. The LLC will make it easier to keep the earnings from the property re-deployed, however, so worth exploring and comparing.
There is a lot of content on this topic on BP. Search around and I think you will get a good idea of who is well respected in the community.
Hello Dale!
I think you will find that there are actually employees of most self directed IRA custodians on BP already. RE investing in SDIRAs and Solo 401ks is absolutely EXPLODING right now.
Brain gave very good advice above. Firstly, if you plan to only invest in a single property, you can set up an SDIRA LLC, but it would actually cost you more in the long run (disclaimer, this is an estimation!) Generally an investor will spend between $600 (low end no operating agreement) to $6500 (high end, handles all paperwork including operating agreement and usually 2 hours consultation time with an on staff tax attorney) to set up your LLC inside your IRA. Compare that to the savings in fees from being able to write checks from an LLC account and I think you'll see that avoiding the LLC will be just fine. Obviously if you want to invest in other properties and those fees start increasing, it may be wise to form an LLC at that time.
You absolutely need to do your due diligence on not only investments, but also custodians. A SDIRA Custodian will not provide any investment or tax advice so you will need to either, be a tax professional (or near to,) or find a tax professional who has experience with SDIRAs. I cant tell you how many of the "run of the mill" CPAs I have had tell me that a self directed IRA or SDIRA LLC is illegal (SDIRA legality is based on ERISA law, and the SDIRA LLC by letter ruling Swanson v Commissioner.) Obviously the most important issues you want to check on a custodian are going to be solvency and reputation, but by far the 3rd most frequent question I get is "What does your fee structure look like?"
Make sure that you ask the right questions in regards to fees, i.e: Will my fee go up if my account value increases? or Will my fees go up if i decide to invest in more than one asset? etc. As Brian said above I can recommend the company I work for, Provident Trust Group, but I am certainly biased. What I can tell you is the answer to both of the example questions I posed are no. Provident charges a flat annual fee, regardless of account value or number of investment positions.
Additionally make sure you understand any fees involved with distributions and or monies out to pay for investment expenses (Remember NEVER co-mingle funds.) For example Provident Trust Group has different fees for a check distribution and a check to a contractor for upgrades on your RE investment, so make sure you understand the whole picture.
Finally the best way to get a good idea of how reputable and reliable a Custodian or Trust Co. is, is to ask for some references, either corporate or some sort of testimonial from from current clients, in addition use BP! You use it for RE advice already, you can certainly throw it out there to the fantastic forum community and I'm sure you'll get all sorts of excellent information!
Sorry if you fell asleep half way through, I have an issue with over-education! Feel free to contact me directly if you have any questions!
Adam Hershman
www,trustprovident.com
Whether you want to use an IRA LLC or simply a self-directed IRA to invest in real estate, the following IRA Trust companies may be able to help you.
IRA Services Trust Company
Pensco Trust Company