Anyone doing rehab lending with American Estate (uDirect)?

Question

I am lending on a rehab through my IRA. I want to release the funds in multiple draws based on progress of the project. My contact at uDirect does not know how I can accomplish this. He wants to release all of the funds on the promissory note up front.

Is anyone doing something similar with American Trust or any other non-checkbook IRA account? I would like to get an example or two to run by them.

Is anyone doing something similar with American Trust or any other non-checkbook IRA account?  I would like to get an example or two to run by them.

Justin Windham · Answer

@Jim Workman

I believe Account Closed is correct. They should be able to release funds according to your direction. If not, it is another argument for having checkbook control. I hope you get this worked out and can get your accounts functioning the way you'd like.

Account Closed · Answer

Not sure which is your IRA...uDirect or American Trust. There is no reason your IRA will not release funds according to your direction of payment..

Daniel Dietz · Answer

@Jim

@Jim Workman  I use UDirect (as do my two partners in our 3 way LLC) and we set things up with 'local checkbook control' at our local community bank. This is for buy and hold rentals.

Would there be any reason not to go this way with what you are trying to do? It seems like it would make the whole process simpler for you.

Dan Dietz

Jim Workman · Answer

@Kathie Riedel  American is the custodian, uDirect is the administrator (my contact).  The custodian has a bunch of secret rules that only come up when you try to invest your IRA money.   Whenever you attempt to do something a little different, you have to go back and forth until you figure out what they need (because they will never tell you what they want. (That is giving legal advice.))  Unfortunately this usually happens when I have a short window of opportunity.

So, again, has anyone successfully lent with periodic draws from an IRA?

Account Closed · Answer

@Jim Workman I would change custodians without an administrator in between. I use Equity Trust Company for my traditional IRA and Advanta for my Roth. Neither have an administrator. Whatever that is. I deal directly with the custodian and although they have picky rules I am correctly guided with the first phone call.

Justin Windham · Answer

@Brandon Moryl

I'm sorry to hear about your problems. Unfortunately, these are not isolated incidences. Checkbook control really is a vital part of many successful self-directed investment strategies.

Brandon Moryl · Answer

I'm having nothing but problems with UDirect.  My new nickname is WeDirect as everything I want to do keeps getting denied and they won't send my checks.  I've had 2 lawyers tell me that what I want is legal and they don't understand why they wont send it.  I stand to lose money due to them and yeah the customer service is a joke.  My coordinator has taken my number to give me a call back over 10 times now and not one call.  I have to call daily to get any information.  Today I sent in a personal loan with the same exact form I used last time minus a different person and different dates and they tell me it's going to be denied.  I try to laugh but it's bad.  Anyways If you decide to stay with UDirect I would highly recommend calling Scott Smith (

• http://www.royallegalsolutions.com)

and setting up a IRA owned LLC - It gives you the checkbook so it's not up to someone else to approve or deny depending on how they feel that day.

Jim Workman · Answer

Thanks @Mark Nolan

That is a solution for the future.

I would still like to hear from American Estate & Trust users without checkbook control.

Mark Nolan · Answer

@Jim Workman

You may want to look into a self-directed solo 401k instead. Following explains the similarities and differences.

The Self-Directed IRA and Solo 401k Similarities

• Both were created by congress for individuals to save for retirement;
• Both may be invested in alternative investments such as real estate,  precious metals tax liens, promissory notes, private company shares,  and stocks and mutual funds, to name a few;
• Both allow for Roth contributions;
• Both are subject to prohibited transaction rules;
• Both are subject to federal taxes at time of distribution;
• Both allow for checkbook control for placing alternative investments;
• Both may be invested in annuities;
• Both are protected from creditors;
• Both allow for nondeductible contributions;
• Both are prohibited from investing in assets listed under I.R.C. 408(m); and

The Self-Directed IRA and Solo 401k Differences

• In order to open a solo 401k, self-employment, whether on a part-time or full-time basis, is required;
• To open a self-directed IRA, self-employment income is not required;
• In order to gain IRA checkbook control over the self-directed IRA funds, a limited liability company (IRA  LLC) must be utilized;
• The solo 401k allows for checkbook control from the onset;
• The solo 401k allows for personal loan known as a solo 401k loan;
• It is prohibited to borrow from your IRA;
• The Solo 401k may be invested in life insurance;
• The self-directed IRA may not be invested in life insurance;
• The solo 401k allow for high contribution amounts (for 2015; the  solo 401k contribution limit is $53,000, whereas the self-directed IRA  contribution limit is $5,500);
• The solo 401k business owner can serve as trustee of the solo 401k;
• The self-directed IRA participant/owner may not serve as trustee or  custodian of her IRA; instead, a trust company or bank institution is  required;
• When distributions commence from the solo 401k a mandatory 20% of  federal taxes must be withheld from each distribution and submitted  electronically to the IRS by the 15th of the month following the date of  each distribution;
• Rollovers and/or transfers from IRAs or qualified plans (e.g.,  former employer 401k) to a solo 401k are not reported on Form 5498, but  rather on Form 5500-EZ, but only if the air market value of the solo  401k exceeds $250K as of the end of the plan year (generally 12/31);
• When funds are rolled over or transferred from an IRA or 401k to a  self-directed IRA, the amount deposited into the self-directed IRA is  reported on Form 5498 by the receiving self-directed IRA custodian by  May of the year following the rollover/transfer.
• Rollovers (provided the 60 day rollover window is satisfied) from an  IRA to a Solo 401k or self-directed IRA are reported on lines 15a and  15b of Form 1040;
• Pre-tax IRA contributions on reported on line 32 of Form 1040;
• Pre-tax solo 401k contributions are reported on line 28 of Form 1040;
• Roth solo 401k funds are subject to RMDs;
• A Roth 401k may be transferred to a Roth IRA (Note that from a  planning perspective, it may be advantageous to transfer Roth Solo 401k  funds to a Roth IRA before turning age 70 ½ in order to escape the Roth  RMD requirement applicable to Roth 401k contributions including Roth  Solo 401k contributions and earnings.);
• Roth IRA funds are not subject to requirement minimum distributions (RMDs);
• The fair market value (FMV) of assets held in a self-directed IRA is reported on form 5498;
• The fair market value of assets held in a solo 401k are reported on Form 5500-EZ;
• At termination, the solo 401k is required to file a final Form 5500-EZ and 1099-R; and
• At termination, the self-directed IRA is only required to file a form 1099-R.

Anyone doing rehab lending with American Estate (uDirect)?

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