All Forum Posts by: Adam Hershman

Hey Paula,

I can say I'm an expert in the SDIRA world, but I can't say I'm unbiased. I work for Provident Trust Group, just so you're fully informed.

The first thing you should do when looking for a custodian is decide what type of account you want to open, and what type of assets you want to invest in. For example if you want to roll over 401k pre tax funds, you would obviously want to open a traditional IRA. I'm going to assume that you're planning on investing in real estate, but be sure to be a little more specific. Things like tax liens and deeds can have different costs associated with them than purchasing a rental property will.

Next find some reputable passive custodians and do some online research. Unfortunately the world of self directed retirement accounts is not what you would call well known (2-3% of all retirement funds) so the sample size is going to be fairly small. Once you narrow that down to a few companies you are interested in, send them an information request, or give them a call to discuss how they operate, what assets they will allow you to hold, and what their fee structure is like. For example some custodians will have tiered pricing based on account value and how many assets are held under custody. Fortunately Provident Trust Group has a flat annual fee, which makes my job pretty easy. The other fees you are going to want to ask about are transactional fees. What do checks, ACHs, and wires cost, because remember you're going to have all your expenses paid for by the IRA which means you need to request monies out, unless you're looking at doing an IRA LLC which is a completely different conversation.

Then all you have to do is decide what the best fit for your situation is.

Let me know if you have any other questions, I'm always happy to help.

Adam

[email protected]

www.trustprovident.com

Income from selling drugs is not taxable income.

Is it worth all the effort to try and collect from him? Does he also have a regular job or is this his only source of income?

Hi Everyone,

Just wanted to get thoughts and feedback on approaching local banks vs utilizing an organization like PPR to purchase notes on my behalf? I've done a lot of reading about notes and think I'm more interested in the non performing side of things, and it seems like 2nds in general provide more risk, but also more upside? I'm a licensed Realtor in the state of Nebraska, so the concepts, nomenclature and exit strategies make sense to me. I also work full time as of now so my thought is to start a 401k, roll it to a self directed IRA and also invest in a tax deferred vehicle. Any good next steps and advice on which direction to persue for someone who hasn't ever purchased paper before? Thanks in advance!

Hey Thomas,

To address the IRA question, yes and no. You can invest your self directed IRA in real estate if your custodian allows it, but you cannot personally benefit from the investment. Only your IRA can. Meaning, you cannot invest your IRA money in a house and put the profit in your savings account. All profit has to go back into your IRA. You could invest your IRA money with a partner who is not related to you, but you cannot invest with family or combine personal funds with IRA funds to invest. It's a terrific strategy if you are looking to grow your retirement fund more than 1.5% or whatever it's getting, but not if you are trying to grow usable capital.

Just to clarify, you can use IRA and personal funds or a family member to invest with you in an investment property, the key in that scenario is that everyone involved has to treat the investment by the same rules as if it was all IRA money, and it has to be structured correctly.

For example, for an investment property costing $100,000, you and your IRA can purchase the property as tenants in common, $50,000 from your IRA and $50,000 from your personal account, or however you want to work out ownership percentages. Like I said the key here is you still cannot personally benefit from any of the property, regardless of how large or small the IRA ownership stake is.

I am looking at self directed IRA's using LLC's. From what I have read, this give the investor total control because the funds are at a local bank with check book control. This sounds great because it lowers the transaction fees and also gives you some legal protection. You still need a custodian, but they are removed from the day to day monitoring and approval process. It sound like a great option but seems too good to be true. Has anyone ever used this self directed method and, if so, can you recommend a custodial company? I am new to this so any advice would be great. It does sound like one should have an attorney generate and file the appropriate paperwork to insure that is done correctly.

Thanks;

Joel

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

[email protected]

www,trustprovident.com