Westford, MA · Member since 2016 · 113 posts · 106 votes
Hi BP!
I am currently between jobs and I am in a position to roll my 401K over to a new investment account. I am considering opening a Self-Directed Roth IRA.
I am looking to speak with someone about their successes and failures with using a Self-Directed Roth IRA as a way to invest in Real Estate.
I am attracted to this account because one pays the taxes on the front end opposed to a Self-Directed IRA or a 401K where one is required to pay taxes on the back end. Ultimately, I want to pay taxes on the seed - not the crop.
One of the companies I am interested in working with is Equity Trust.
If you have advice, guidance or a recommendation of someone to talk to please let me know!
Depending on your situation a self-directed IRA or Solo 401(k) would be a great vehicle for investing in real estate. Contrary to the prior poster, I would recommend just about any provider other than Equity Trust. They are slow, expensive, and do not believe that customers are the reason they are in business.
For investing in real estate, a plan that offers checkbook control will be vastly superior to a self-directed IRA held by a 3rd party custodian. With a custodian, every interaction needs paperwork, processing review and issuance of a check. Real estate is too time-sensitive and interactive for that 3rd party model to be effective.
You could look into a Roth held IRA LLC or if you qualify by being self-employed, a Solo 401(k) plan that has a Roth component. Either way, your comment of wanting to pay tax on the seed and not on the crop is absolutely solid.
There are several quality providers of both 3rd party custodial services and the checkbook style plans here on BP. Do some reading and get on the phone. You'll be able to tell who brings expertise to the table and has your best interests in mind pretty quickly.
Equity Trust is a good choice. There are tons of them. Just make sure that you use a lawyer to do your operating agreement and then I would suggest using a custodian with ET or another company at least at first as opposed to going checkbook because there are a lot of little nuances that can void your IRA if you misstep, so having the extra layer of protection until you are really comfortable with the rules is a good idea. I really like the idea of Roth SDIRA investment. Gives you more flexibility and if you like real estate, it's a good way to get into the business instead of investing in stocks which you don't have an active participation in. Happy to answer any questions if you want to send me an email.
Depending on your situation a self-directed IRA or Solo 401(k) would be a great vehicle for investing in real estate. Contrary to the prior poster, I would recommend just about any provider other than Equity Trust. They are slow, expensive, and do not believe that customers are the reason they are in business.
For investing in real estate, a plan that offers checkbook control will be vastly superior to a self-directed IRA held by a 3rd party custodian. With a custodian, every interaction needs paperwork, processing review and issuance of a check. Real estate is too time-sensitive and interactive for that 3rd party model to be effective.
You could look into a Roth held IRA LLC or if you qualify by being self-employed, a Solo 401(k) plan that has a Roth component. Either way, your comment of wanting to pay tax on the seed and not on the crop is absolutely solid.
There are several quality providers of both 3rd party custodial services and the checkbook style plans here on BP. Do some reading and get on the phone. You'll be able to tell who brings expertise to the table and has your best interests in mind pretty quickly.
Another good self-directed IRA custodian is IRA Services Trust Company. They have been in business since 1978 and are well respected in the industry. Equity Trust Company appears to have 22 negative reviews on their BBB page.
I have to agree with Brian, while I don't have personal experience with ET, I spoke with numerous people who are their clients and many of them did not have good things to say about their customer service. Just google it to see for yourself.
I also agree with Brian and Dmitriy. I have heard many people who have been very unsatisfied with equity.
We are a SDIRA administrator, but out of respect for bigger pockets we don't want to blow our own horn. Below are 3 things to consider when selecting a custodian/administrator for a self-directed IRA.
1. Knowledge (They actually know what they are talking about)
2. Customer service (can you reach a person, how quickly?)
3. Ease of transactions
If you have any questions or would like to connect, please feel free to send me a message. I would be happy to share some links to you for our fee schedule.
The real question is - will you be able to afford to invest after paying all the taxes on converting your 401(k) into a Roth IRA??? Most people have a different strategy than you, they prefer to invest pre-tax dollars so they can have a larger pool of money to invest. This may not be an issue if you have a large 401(k) balance however you should talk to your tax advisor and make sure you aren't jumping brackets to do this.
@Scott Graham You have received some great advice, I would recommend you take your time and do some research. Find out more about the LLC structure versus having your IRA hold title. Both structures work, you need to decide which is best for you. Most administrators have on-line processes now making managing a property through your account easier and faster than in years past. Get on the phone and call around, see which companies answer the phone and are willing to educate you on your options. Using a post tax account, like a Roth IRA, is a great strategy for real estate investing. Just think, you can buy a beach house with your plan, rent it out until you turn 59.5, then distribute that house to yourself tax free and move in! Great way to finance your retirement home.