Self-Directed IRA questions

[Nick Scalero]

I'm considering a self-directed IRA but have a few questions.

First, If I purchase a house outright how do I calculate ROI? Is it simply (Monthly Income - Expenses) * 12 / Purchase Price?

Second, since I pay Taxes, Mgmt fees, Insurance, etc out of the IRA how do I (or do I ever) recover these costs from a tax standpoint?

Third, when I sell a house do the full net proceeds go into the IRA with taxes defered until I start to draw from the IRA?

Any recommendations for a reputable company with good fee structure and solid managment for the IRA?

I may have other questions as I think of them. For example, I'm thinking I don't want to leverage a house in the IRA since I get taxed on a portion of the monthly income based on the percent leverage. Any thoughts on that?

Thanks in advance.

[Will Barnard]

ROI or more accurately cash on cash return (COC) is calculated by the net cash flow each year divided by the total investment (acquisition price + costs of acquisition + rehab if any)

You do not "recover" the costs from a tax standpoint as you paid for the costs inside a tax deferred account. ALL costs associated with the IRA investment MUST be paid from the IRA and all proceeds go back into the IRA, including monthly rental income and proceeds from sale.
From the sale, all proceeds go back into the IRA and you don't pay taxes on it until you begin your withdrawls at age 59.5

I use and recommend Equity Trust Company at www.trustetc.com as they have the best service, fair all inclusive fees and are prompt at processing directions of investment and other items.

If you intend on investing in time sensitive investments such as tax lien certificates or courthouse step purchases, you need immediate access and thus need a checkbook control IRA from Guidant Finanial Services. It is much more costly as they have to set up an LLC for this to work.

You do have alternatives to an SDI such as a self administered 401k and I am just looking into a 401(a) pension plan for self employed or Corporate entities.
The 401k has more options and less regulations than an SDI.

Check with Grg Boots here on BP. He is an attorney who I received info from on the 401(a) plan and it looks good so far.