Self-Directed IRA's with Checkbook Control

I’ve blogged a couple of times here at RCG about the benefits of using a self-directed IRA as an investment vehicle in Real Estate. When I originally set up my self-directed IRA I loved that I could control my retirement funds not only in securities but also in real estate.  I had to educate myself by going to seminars and talking to the very few professionals that understood the process.  However, being the do-it-yourselfer that I am, I traveled around the country attending lectures and symposiums until it started sinking in.

I set up the necessary entity and rolled over my IRAs and Seps into a Roth IRA (paid the taxes), created an LLC to buy real estate and then had my Roth IRA buy shares of my LLC.  This has been a great way to grow my retirement without ever paying taxes on the profit.

However, the process was cumbersome, I never thoroughly understood all the scary laws that would cause my self-directed IRA to loose it’s status and it was not always as fluid as I’d like. Such as, had I not attended the classes and done the research, I wouldn’t have even known where to go for the custodian that is required for the self directed retirement accounts.  Then, I had to find an accountant and an attorney who specialized in them.  Again, hard to find. Additionally, although I had good services in my chosen Custodial firm, I didn’t have the ability to have instant access to my money, and in fact, last month when I tried to take a distribution, it took over a week to get the cash out.  What if I’d wanted to purchase a home on the court house steps? not possible with my custodian.  I have no access to cash, nor do I have a checkbook.

Recently, I’ve learned of a completely different way of investing with self-directed IRA’s that’s being offered here in our own backyard in Bellevue. The company is Guidant Financial and they’ve developed a product called ‘Auriga’, (Auriga means the helsman of one’s ship).  Although I’m just learning about this product, it appears to provide a solution to problems inherent in custodial accounts by giving you checkbook control over your retirement account.  Additionally, Auriga allows the retirement plan to invest in more than one vehicle, and in my case, where my LLC sometimes is the owner of the property and sometimes is the lender, it allows for that flexibility.  Guidant is not the Custodial account for the IRA’s but has negotiated a very low fee thru a custodial business relationship that is not based on increasing the fee as the account increases in value.  The way they do this is to provide all the legal, accounting and guidance as Guidant Financial, streamlining the custodial role. My experience is that the custodian cannot give legal, accounting or much of any assistance in setting up the account, but it does charge an annual fee based on the size of the account.  Guidant Financial charges a one time up front fee for the setup and continued operation of the IRA account.  As your account value grows, the costs are still minimal since the custodian fees are not based on the size of the asset.

For more information there will be a webinar on Wednesday November 28 at 12pm.  I know that I’m not alone out there with my self-directed real estate investing.

Why I Don’t Want to Be Young Again

These days when I pass the mirror, I always wonder whose looking back at me cuz it’s sure not the 30 something person I think I am. I guess the answer to that problem, is not look into the mirror!

So, I’m looking for the good things about getting older. Know what the best thing is (given that I have no grandchildren yet)? For me it’s the day when I turn 59.5 and can take money out of my retirement fund and start spending it!

For those of you who can’t even think that far ahead, at least give some thougt to tax planning. Remember a dollar saved in taxes is a dollar you don’t have to earn! Real estate as an investment vehicle works for me, becuase of the leverage involved and the control I have and the great tax incentives. When you combine a good real estate investment with good tax planning, you can grow your wealth faster since you have some great tax free or tax deferred IRS sanctioned programs to take advantage of. Here’s a quick rundown of three of these programs to shelter real estate investment income. I’ve been using two of them for years.

Self Directed IRAs Investing in Real Estate

If you have a retirement account from a job you’ve left, did you know that you can self direct that money and invest it in real estate? Or, if you have IRAs, you can also self direct and invest them in Real Estate. First, you need a custodian to handle the transactions. Simply set up self directed IRA’s and self directed Keogh’s and 401K’s through a custodian such as Entrust or Pensco Trust. I use Pensco Trust out of San Francisco. They’re great at making sure you handle all the details and they can help you through the process. There are tricky issues to work through like needing non recourse debt financing and working through the UBIT taxes can be a challenge.

But for every roadblock there is a solution and if you have a Roth IRA and invest right, then your money can grow tax free! There are lenders willing to finance the necessary non recourse loans, and the UBIT tax is only on the leveraged portion and can be as low at 15%. Be sure to check out your particular situation with a tax professional.

In the next couple of days, I’ll write about the 1031 and the Family Foundations.

So, give it some thought. Don’t be afraid of getting older becuase it’s a blast!