Camarillo, CA · Member since 2013 · 9 posts · 3 votes
Hey All,
I've become interested in the idea of a self directed IRA as I'm growing increasingly put off by my Edward Jones dude trying to convince me that a 6% rate of return is awesome. I'm also looking into the prospects of a self directed IRA because I'm intrigued by the idea of having tax liens within such an IRA.
That said, what self-directed IRA would you all recommend? Has anyone tried Guidant Financial? What are the pros and cons you all have experienced with a self directed IRA?
Blue Bell, PA · Member since 2012 · 3 posts · 6 votes
13y
Hi Mike,
Self-directed retirement accounts give you the freedom to invest in the things that you know and understand best - not what your advisor at Edward Jones thinks is best. We have many clients that purchase real estate for the purposes of renting and rehabbing. With rehabbing, all expenses relating to the property need to be paid with the cash in the IRA, since the IRA is the property owner. Everything flows in and out of the account nicely, with the goal being that you're making a profit and watching it grow either tax-deferred or tax-free (in a Roth account).
Can I flip a house using my IRA is a question I often get asked. Technically, the answer is yes, you can flip a house using your IRA. The better question is do you want to flip a house inside your IRA. What can become involved when you flip a house with your IRA is Unrelated Business Taxable Income (UBTI). You can't have an unfair advantage over the competition by not paying taxes. When you flip a house with your IRA, the IRS might consider the house inventory and require taxes to be paid. Usually one or two within a year will not raise any red flags.
Tax liens can be a great alternative to flipping if that is something you are looking into.
One of the advantages on investing IRA or solo 401(k) funds in promissory notes is that the notes can be structured in a variety of ways. For example, the note can be structured as an interest and principal note, interest only with a balloon payment due at maturity, or a convertible note, to name a few.
On Self Directed 401K's I understand the flexibility you have - no need for custodians. You have to pay tax, though, when you start to draw on this for income.
For Self-Directed Roth IRA's for purely passive income (UBiT not relevant), the money is already taxed when it enters the Roth IRA, so will increase with no further tax to pay (I believe).
From a purely already-taxed, or tax-deferred, any thoughts on which is 'best'?
You can have Roth funds within a self directed 401k too. The 401k offers both while an IRA must be either pre-tax or Roth.
Attorney/Homeowner · Chicago, IL · Member since 2015 · 5 posts · 2 votes
10y
@Brian Eastman
Ah yes, I did see that rule against lending to an entity in which you have a 50% interest. I should have realized that it meant that I can't use the funds to buy my own flips. Thanks for the response that was exactly what I was looking for.
Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
10y
@Evan Hughes you can buy and rehab a flip in your IRA (i know a guy that does just that) but you will not have a roll other than coordinating work, you are not allowed to so much as sweep the front porch, think of it this way, do you go to your IRA's custodian and work at their office in exchange for equity? same principal. Just be careful if you go this route, many of the "Check Book" IRA's as some other self directed are being investigated by the IRS, it would be horrible if down the road you find out from a court ruling that the transaction is deemed a taxable event. I have and will continue to advise to steer clear of these, if you want you IRA in RE, there are plenty of ways to do it that are not questionable.
Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
10y
Here is some reading you may want to do prior to investing. In many cases its wrong doing by the QI, but this area seems to be ripe with fraudulent administrators.
I'm using Accuplan and have been happy with them so far. Set up as an llc with checkbook control. Only doing buy and hold real estate so far but may also do some tax liens or notes. I have a sfr a duplex and a triplex in it and it is returning 1-1.5% a month not counting any appreciation. Much better than I was doing in the stock market.
Now that it’s been 4 years with the company, do you still recommend them? Why or why not?
Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
8y
@Brittney Highsmith Yes I would. I haven't had to do many transactions with them because I have check book control. But about a year after I set it up I moved some more funds over and they handled it quickly and smoothly.
Also, I probably don't have to convince you to setup a SDIRA if you are investigating companies but I do an end-of-year valuation of the account every year because the IRS requires it. My SDIRA has about doubled in those 4 years.
In comparison I still have a similar amount in stocks and it has gone nowhere. Mostly that's because I'm a poor stock picker because I would have done much better just buying index funds but still, the real estate has been steadily climbing each year and throwing off income.