All Forum Posts by: Brian Eastman

@Monty George

I cannot specifically recommend a firm, since I work for a provider of self directed IRA & 401k plans.

I'm sure you will get some feedback from BP users that may help guide your search related to specific firms.

The point of my post it to recommend that before you consider which vendor to switch to, you evaluate which business model will be most effective for your investment portfolio.

IRA custodians (trust companies) are purely processors capable of transacting for the benefit of a client's IRA into non-traditional assets. Since transactions in this area are unique, everything is done by human beings and mistakes and delays happen. Any trust company will fall down at some point if you are asking for rapid turnaround of multiple transactions. And yes, there are some we would recommend over your current provider when it comes to customer service, but they are still not perfect.

A plan offering checkbook control eliminates that 3rd party processing layer for IRA investment transactions. You can self administer the investments out of a bank account of your choosing. If your portfolio contains multiple investments, or investments that are time-sensitive or transaction intensive by nature, you will find the IRA LLC or Solo 401k a much better tool for your needs.

@Daniel Dietz

This is absolutely a discussion you need to have with your licensed tax advisor.  Those of us knowledgeable in the SDIRA realm can only take you so far, especially in a web forum where we are not privy to all of the details.

As @Matt Devincenzo correctly pointed out, when using debt-financing on a property, only the percentage of income associated with the debt-financing is taxed, and the same percentage of the expenses is used to reduce the taxable income.  How this plays out in a situation with multiple investors will get further fractionalized.

The bottom line is that the UDFI taxation on rental income is generally very low, though tax the costs at the time of sale if there still debt-financing in place can be more significant.

Whether transitioning from an IRA to a Solo 401k would make sense for you is a much more complicated topic than would be able to be addressed online, and I strongly suggest you pick up the phone and converse with one of our resident self directed IRA/401k consultants here on BP. Factors such as your self employment situation, potential longevity of such, existing investments in a plan and a host of others will come into whether there is a benefit to be reaped through changing plans. The timing relative to a debt-financed transaction would also come into play.

@Randy Marshall

401k plans allow for an in-plan Roth transfer, but not all plan administrators support this option.  Even if your plan did allow for a Roth transfer, you may not be able to take distributions from the Roth portion of your plan prior to leaving your job or reaching age 59 1/2.

To my thinking, paying the taxes to change tax-deferred retirement savings to Roth status, only to immediately take a distribution is a non-starter.  The benefit of the Roth treatment is the tax-free growth you can earn while keeping the money working in the retirement plan.

If your goal is to purchase a property personally, a 401k participant loan may be a better route, assuming you have access to such.

As a self employed realtor, you may wish to explore the idea of a Solo 401k plan.  You could contribute on a Roth or tax deferred basis from your real estate commission earnings and invest the plan directly into real estate or related assets such as notes.  It would take a bit of time to build up some capital, but could provide an option to have some tax-sheltered retirement savings in real estate.

@Mr Naj

The IRA LLC may hold precious metals.

You are limited to us minted gold, silver and platinum eagles.

Documented secure storage is recommended, but you can hold these metals at home so long as you maintain good records of segregated storage.

Fees for the IRA LLC vary based on the level of access provided to quality support. generally speaking, the fees for a checkbook IRA LLC are higher than one would recommend specifically for metals holdings, but if you have broader portfolio goals, it can be a means to an end.

And yes, there is an awful lot of snake oil in the gold business.

@Bettye Chambers

There are a lot of choices when it comes to vendors and plan types for self directed retirement investing.

Equity Trust is a big name IRA custodian. They hold IRA accounts and can process transactions associated with an IRA's investment into non-traditional assets such as real estate. They will hold the funds, sign every document, cut every check and receive every deposit for the benefit of your IRA. As a custodian, they are prohibited by rule from providing any tax, legal or investment advice.

An alternate format that is probably more efficient for the goals you stated is a plan offering checkbook control. These plans come in IRA and 401k formats and will allow you to operate out of a bank account of your choosing and eliminate all the 3rd party processing of a trust company serving as custodian.

The goal of flipping houses may also have tax consequences inside an IRA, since this is viewed as conducting a business activity. You may choose to accept the taxes and generate good returns, or choose different strategies that may not be subject to taxation.

Regardless, you will want to speak with an expert in the field, as well as your tax and legal advisors before you move forward.

There is a lot of good information on this topic here on BP, as well as several experts in the field you can reach out to.

Best of luck as you get started!

@Jean G.

To be clear, this would absolutely be viewed as a prohibited, self-dealing transaction with catastrophic consequences for your IRA.

The IRS would view this as using your IRA to help facilitate the sale of a property you own personally. Since you are disqualified to your IRA, this benefit from the IRA to yourself would be prohibited.

As noted above, the idea of lending with the IRA on a mortgage is great, but you must avoid any direct or indirect benefit to a disqualified party.

@David C.

The IRS does not have specific caps on a loan from an IRA. The loan must comply with sate usury laws.

@Ben Daniel

As with many such inquiries, the answer very much depends on your situation.

A tax sheltered retirement plan, especially if you build it up when you are young, can produce a considerable amount of wealth for your later years.  Keep in mind, retirement plans are not limited to traditional stocks, bonds & funds, but may be invested into things like real estate and private lending transactions.

If your wife's school district is providing a match, that is free money and you want to take advantage of that.  Her funds would be locked up in the teachers retirement plan until she changes jobs, so your investment choices are limited, but between the deferral of income taxes and a match if one is present, you are getting a lot of additional return via the contributions coming from others or tax reductions.

Your Roth IRA is a fantastic tool. You put a few dollars in each year and it grows for 20+ years tax free into a big pile of cash. I'd recommend you research putting that into a self directed Roth IRA. Maybe not now, but once you have enough gas in the tank so to speak, and can put that plan to work in real estate.

Ultimately, the best thing for you to do would be to sit down with a good fee based financial planner (not one who earns commissions on what they sell, but who you pay for their guidance) and draw up a short/mid/long term strategy.  Financial literacy in this country is laughable.  If you focus on this at a young age and get yourself educated, you should have great success.

@Ron P.

That should be fine.

@Ron P.

Your ex-wife is not a disqualified party to your IRA, so on the surface, this would be an acceptable transaction.

Where there could be an issue is if there is any direct or indirect benefit to yourself or a disqualified party via the transaction.  If this note sale is done on favorable terms to mitigate some other demand on you related to divorce settlement, for example.