Anyone here invested with SDIRA Wealth? Would love to hear how it went
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Specialist · Long Beach, CA · Member since 2011 · 879 posts · 398 votes
2moI am not familiar with them. But I do know a few companies in Texas (Dallas, Houston, and San Antonio) that all offer new construction. If you want more options. Do you already have your SDIRA setup?
7 Replies
- 2moBrett SynickyPro MemberSolo 401k and SDIRA Consultant · Orange, CA · Member since 2013 · 875 posts · 498 votes
@Amy Breen Turnkey real estate can be a great investment in and out of a retirement plan. If you're going to use an IRA to own the real estate and it will use leverage study up on UDFI/UBIT. Solo 401k is exempt from UBIT on leveraged real estate.
Disregard if using personal funds.
Here's a pretty extensive thread asking the same question you did: https://www.biggerpockets.com/forums/92/topics/1181935-anyon...
- Specialist · Long Beach, CA · Member since 2011 · 879 posts · 398 votes2mo
I am not familiar with them. But I do know a few companies in Texas (Dallas, Houston, and San Antonio) that all offer new construction. If you want more options. Do you already have your SDIRA setup?
- Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes1mo
There is no easy street and I actually think it gets less easy the more you try to pass off to companies that try to sell you on stuff like that.
I am not familiar with the company, but have seen others that try to sell this stuff, which for the most part I think will cause nothing but disappointment. I would separate the two ideas. If you want a SIDRA then set that up and you handle the rest. Don't combine the two ideas SIDRA and the same company setting up your investment.
I think it is a total myth that new construction homes are easier to manage than resales. People think there is less maintenance and I don't think that is true for lots of reasons. What breaks? Toilets....new toilets break just as often if not more often than old toilets. AC issues...I've seen old Tranes, Rheems, Carriers and others last for 40 years or more with good regular maintenance and the cheap Goodmans in new homes last for maybe max 8 years. Roofs in Texas probably are good for about 8 years before we get a hail storm that destroys them. Doesn't matter if that roof is on a new or old home....still get the same life from them. Some people think they can rely on the warranties the builders provide...but I will say most of the big production builders have terrible warranty departments...they also rely on the trades to warranty their own work...so you're not going to get the builder to repair an electrical issue, but they're going to send you to the electrician who installed it. I see more issues on new houses than older resales with stuff like this. I'm seeing for example breakers fail in new construction. Why is a breaker failing after 2 years? I've seen 30-40-50 year old breakers that don't seem to have issues?
New construction rarely seems to have the ROI of resales from what I see as far as rent vs purchase price. Rents too low and prices too high. Rare day I see new construction cash flow with 20% down...maybe 30-40% down. Remember cash flow is a function of many different factors...rent, interest rate, down payment. All properties should pretty much cash flow if you pay cash and have it rented.
No one likes their property manager. You will feel like they're taking your money for little ROI.
Cost seg on a single family house probably not worth the expense or contributes very little to ROI in my opinion. AirBnB..yes....large MF for sure....NNN AutoZone?.....maybe not.Appreciation in Texas and probably most of the country is super low now. We're probably back to 2-3% if we are lucky. Hopefully it improves one day, but in most areas and especially on new construction, probably back to low single digits for a while.
The other issue with new construction in Texas are HOAs and PIDs and MUDs. Almost every new construction community will have HOAs. Many have all kinds of restrictions on rentals, like maybe you have to live in the house for a year-2-3 before you rent. Maybe they don't allow rental signs, Maybe they limit the amount of rentals allowed and they round robin the list moving forward...so maybe 100 home neighborhood that HOA restrictions allow 10% rentals or 10 rentals, but 15 people want to rent. So when your property goes vacant, you go to #16 and you can't rent it again until you get back to #10 on the list. Also I'm seeing communities impose or try to impose new rental restrictions because there are too many investors in the neighborhood. So they implement fees on investors or try to vote in new limits. That's a real risk. HOA president in one neighborhood I own proposed lowering the # of rentals allowed this year, but it did not pass.
If you live in Lubbock I think you will be a lot happier and a lot more successful taking on your investments yourself vs trying to outsource them. I'm not always a fan of student housing, but in Lubbock that just seems to be a prime opportunity. Buy a five bedroom 3 bath home and rent the bedrooms. Padsplit it....or turn it into a them house, like nursing student housing, vet student housing, or resident doctor housing...or visiting professor housing.I think there is all kind of opportunity in Lubbock, but not sure SIDRA turnkey outsource it all probably gives you the ROI or comfort you think it might.
- 1moTravis TurnerBusiness MemberReal Estate Agent · Lubbock, TX · Member since 2021 · 45 posts · 28 votes
I have helped quite a few people try to sell their homes after investing with SDIRA. Not entirely sure the process but every time I am brought a deal from them they have paid WAY over market price, and aren't able to exit the deal. In my opinion, I would suggest buying rentals and having a PM for management. You'll make more and can control the asset better. Thats all they really do as well and you don't get a ton of tax benefit from new construction, we do quite a few BRRRR down here. Feel free to reach out happy to help
- 1moTodd AndersonPro MemberReal Estate Agent · Cape Coral, FL · Member since 2023 · 392 posts · 175 votes
Welcome to BP.
To answer your your original question, I don't know anything about the company that you're referring to.
I have worked with a number of investors who have used SDIRA to do investments in new construction. We have worked in a number of different states to get this investment accomplished. I've talked to all of them real recently, and they are all still happy with the investment. It sounds like what they did is similar to what you're looking at.
The investors that I've worked with used an STIRA to make a down payment using a DSCR loan on a new construction property. We have had the property set up with property management and have worked with the builder many times before. This was a turnkey investment on a new construction property.
I can't answer any of the specific questions about the system you're looking at, but I would be happy to go over how the process works. Feel free to connect for more information.
Best of luck
- 1moAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Amy, I’d separate two questions here: is the real estate investment itself solid, and is the SDIRA structure actually helping you?
For the property, I'd still underwrite it the same way I would any other rental. Verify actual achievable rent, taxes, insurance, management, vacancy, maintenance, builder warranty coverage, HOA costs, and what similar properties are really reselling for. "New construction" removes some older-property headaches, but it does not automatically make the investment a good one.
The tax piece is where I'd slow down. If the property is being purchased inside a self-directed IRA, the usual personal depreciation and cost-segregation pitch needs to be viewed differently because the IRA owns the asset, not you personally. I would not assume a large cost-seg study creates an immediate deduction on your individual tax return.
I'd also understand the SDIRA prohibited-transaction rules before closing. Using IRA property personally, transacting with certain disqualified persons, or improperly providing benefits can create serious consequences for the account. The IRS specifically lists improper personal use and transactions with disqualified persons among the prohibited-transaction concerns.
And if the IRA uses debt to acquire the property, I'd have the CPA evaluate whether unrelated debt-financed income could apply. The IRS specifically identifies income-producing real estate financed with acquisition debt as potentially debt-financed property.
So before buying, I’d want someone to model the property both as an investment and inside the SDIRA structure, rather than assuming the retirement account plus cost segregation automatically creates the best tax outcome.
Happy to connect!
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