Self directed IRA

[Gary Onstad]

I'm having trouble figuring out how I would manage a property using funds from a self directed IRA. If I use an IRA I have a transaction fee ($35) every time it writes a check. So $30 to mow the lawn becomes $65 expense. Is there a better IRA or way to make this work? How do you use your self directed funds to buy and manage properties. My goal is to find and buy a mobile home park but I need to get this figured out.

[Brian Eastman]

@Gary Onstad

IRA accounts held by a custodian will generate a lot of processing fees. The more time-sensitive and transaction intensive an investment is, the less practical this can be.

The alternative is to establish a plan that provides you with checkbook control. This can be done with either an IRA LLC or a Solo 401k if you qualify for the latter as someone who is self-employed with no full time employees.

With the IRA LLC, an IRA held by a custodian is used, but makes one single investment into a specially crafted LLC. The IRA owns the LLC but you can be the non-owner manager of the LLC and therefore have signing authority for the LLC. You will operate the LLC out of a business checking account at the bank or credit union of your choosing. With this arrangement, there is a higher initial cost to create the structure, but you eliminate all of the paperwork, processing delays and per-transaction fees that would be associated with using the IRA custodian as the processing layer.

The LLC also provides a layer of asset protection, and if you work with a quality firm instead of just a document mill, will come with access to quality support related to compliance with IRS rules.

The Solo 401k provides similar checkbook control, but functions differently.  The plan itself is a trust and you serve as the trustee.  No 3rd party custodian is required.