Self-Directed IRA Custodians
I'm going to use my IRA to invest in Real Estate, and have been investigating custodians and wanted to see if anyone here has had experience with this. I am also interested in keeping the cost of doing this under control.
One that looks very good is Guidant Financial (http://www.guidantfinancial.com/). According to their materials, they will setup your accounts in such a way that you will get a checkbook and can write your own checks for real estate (and other investments - it's not limited to real estate), without having to submit your requests to the custodian. This sounds very flexible and attractive. They also maintain that they minimize the yearly fees much more than other custodians. The only downside I can see here is that their fee to set this up is $4,000. Guidant is not the custodian themselves, but works with custodians, and they have a team of lawyers, accountants, etc. that create the LLC and do all the other work necessary.
Does anyone have any experience with other companies that may cost less but offer similar flexibility? I see that someone else here recommended Equity Trust Co, which is a custodian. Their fees seem reasonable, and they seem to turn around transactions quickly. Does anyone know how they would compare with Guidant?
Thanks much,
I have no first hand experience but have heard lots of good things about: http://www.trustetc.com/
Also, I think that $4000 is crazy and would not pay it. I've thought about this briefly and think it would be easy to get your own checkbook access.
I don't think that the government cares if your IRA makes a "smart" investment. You can simply lend an unsecured note to your newly formed entity. Then just have your entity get a bank account.
I agree the $4000 is totally riduculous
I use Equity Trust. So far they have been timely in alll matters and no per transaction fees.
I did contact them to ask if they would be implementing checkbboks but no answer so far
Thanks for both or your responses.
linlin - What type of annual fees does Equity Trust have? It sounds good that there is no per transaction fee.
Also, I notice you live in Loxahatchee, FL - so do I![ Edited by larrylef on Date 11/27/2004 ]
larryleft,
The fees are here - http://www.trustetc.com/links/feesched.html and the special fees for wires and such are here
http://www.trustetc.com/links/sfees.html
Of all the ones I checked they were the most reasonable especially for investors starting out small.
I have lived in Loxahatchee for about 20 years(on and off). I used to absolutely love it here. Not so much now - getting too crowded - lol
Yes, I believe so. However, your taxable gain would be only 25k if you paid 5k for the property, sell it for 70k and use 40k for the 1031. Given the transaction costs, your taxable net could be even less.
You are correct Mike. You would pay tax on the profit which would be 70K minus 40K minus transaction costs = profit.
Good deal, thanks for your replies.
Thanks,
[addsig]
You are in the military, huh? Thank you for your service.
You are actually in a unique situation for renting property if you are living near a military base. Both my father and I were in the Army and all of our service was at Ft. Bragg, NC. Although most military families move around, he was in Special Forces and I worked for the Special Operations Command so we were always there at Bragg. Anyway, in Fayetteville, nobody wanted to buy (and they were overbuilding) which lead to over 5,000 houses on the market; but, the transient nature of the military caused a tremendous opportunity in rentals. I have always thought that living by a military base just about anywhere would provide the same results. Check out your market.
First of all, pick your strategy--buy/fix/rent or buy/fix/sell. You can move into other areas once you are comfortable with your first choice; but, study this site and read books. Plus, tax strategies are going to be different depending on which strategy you settle on.
Buy/Fix/Rent
Rental property is typically held in an LLC. Rental property is good because you can usually be in the black on your books and show a loss to the IRS. Some people think that rentals are supposed to lose money so that way it can be taken off of your taxes. WRONG! By using depreciation, you take a part of the purchase price every year off of your income; however, you will still recieve actual revenue from the rental income. Rehabbing and then renting will just make your monthly cash flow a lot higher. You also have the 1031 exchange available to you. It allows you to defer capital gains by selling your rental property tax free and then buying a replacement property with the profit.
Buy/Fix/Sell
This is typically done in an S-corp. The profit is taxed at your ordinary tax rate and you will pay a fair portion of SE tax; however, after a fair salary is paid, you will only pay the ordinary rate. 1031 exhanges are not available to you.
In Closing
Really nail down the exact stratgey you want. Are you trying to get cash to pay off bills or are you looking for a long-term retirement strategy? Can you remodel a kitchen? Are you able to evict someone? Take into consideration your goals and strengths. Decide which route you will take and then develop a tax strategy that will maximize your take-home money.
I started by reading the forums here to build my strategy. Your best bet is to read a lot and then ask very specific questions in the right forums.
Hope this helps. Good Luck.