Recomendations for SDIRA Custodian???

Question

Hello,
I am leaning very heavily towards doing my RE investing in a SDIRA. I have looked at several online that I have heard mentioned here and elsewhere. This would be a relatively simple type of investments; single owner (me) with possible leverage of borrowing with-in the SDIRA. It would be a ROTH, and I would like to set up and LLC inside of it to do the 'checkbook control' I hear refereed to here.

What type of initial and yearly fees are you all seeing when using a SDIRA? My roll-over would be up to 100K, which IF I leveraged it further, might be up to 200K. This would be for long-term holding of rental property. Is there any soecific companies that you have had good or bad luck with? (if we are allowed to pass that info here). And finally, how long approximately does it take to set one up, to the point you could make an offer and or close a property with it?

Thanks for all the help so far!

Dan

PS. Interesting side note; I was talking to our accountant from my 'day job' today about business matters, and asked him about SDIRAs. He has been aware of them for 10 years or more, but just now has his first client using one. He has around 4000 clients he (and his staff) does work for. Interesting how little they are used.

Bryan Hancock · Answer

Kaaren Hall has the best operation running right now IMO.  We sent 5 clients to her last week alone.

Mitch Kronowit · Answer

I use http://www.udirectira.com/ for my SDIRA. They're located very close to me here in SoCal and I have met the president, Kaaren (no, not Karen), on several occasions.

Just for clarity, uDirect is a 3rd Party Administrator. Your funds are actually held, and disbursed, by the custodian. Fees at uDirect are around $50 for set-up, then $275 or something annually for maintenance. The fees are flat regardless of the size of your account.

Marian Smith · Answer

Great video on youtube.  The one thing that had always bothered me about buying real estate in a SDIRA was that you could not depreciate it--as you don't pay taxes on an IRA.  The video made it clear that if you don't depreciate real estate in an IRA then when your IRA sells it you don't have to repay the depreciation.  (If you hold real estate outside an IRA you repay depreciation when you sell whether you depreciate it or not on your taxes.)

Joel Block · Answer

Kaaren will provide excellent customer service to you. This is a good move for your money because the administrator doesn't make commissions on the purchases you make. Companies like Fidelity prohibit real estate transactions because they don't make money on them.

Daniel Dietz · Answer

Thanks for the advice Mitch. It is slowly getting clearer to me :lol: I also came across this great video here through Bigger Pockets chat boards http://www.youtube.com/watch?v=z15aanCJ4sA&feature=youtu.be

I think this is the same lady you mentioned above. It explains a LOT about the SDIRA, including some ideas I had not even thought of even with all the research I have done. I would HIGHLY recommed that anyone thinking of doing a SDIRA to watch this.

I will be giving her a call next week to move forward on things.

Thanks,

Dan

Mitch Kronowit · Answer

You and I both! I'm not exactly sure myself, but a call over to Kaaren or Christie at uDirect should answer that in a snap. My understanding is the custodian is a bank or trust company that's actually licensed to hold your dough. But they don't always want to handle the administrative paper-pushing of an IRA, so a 3rd party administrator, such as uDirect, handles all the minutia.

If memory serves, I had some funds "rolled over" from one custodian to my SDIRA custodian. Make sure you specify this is a "rollover" and provide your existing custodian the proper information so they can cut your check using the correct verbiage. For example, the check should be payable to "ABC Bank, FBO* Daniel Dietz IRA" or something like that. As I understand it, this wording is very important because it means YOU cannot personally cash the check and, therefore, avoid the wrath of the IRS (paying a penalty for early withdrawal). If you personally cash the funds, I think you still have 90 days to get them reinvested into a proper retirement vehicle, but why the headache? Just make the transfer directly from one custodian to another.

* "For the Benefit Of"

I didn't do this myself because all my properties are in California and an LLC in this state (or registering a foreign one here) costs $800/year. I'm already "feeding" one LLC in this socialist state and I don't need another. Paying $10 to uDirect for each check they write for me is much cheaper.

Daniel Dietz · Answer

Mitch,
Thanks for the reply. I took a look at their website, lots of good info. They were not open by the time I saw this for more questions.

One thing I am still a bit confused on is the whole Administrator vs Custodian issue. Currently, my stocks and mutual funds are at Fidelity. Is Fidelity acting as both the Admin  & Custodian?

It look like from Udirectira's site that I would do a 'roll over' to them of my existing plans funds (maybe I am misunderstanding this though too). Would they then not be BOTH the admin and custodian too?

So you, or any others out there too, do the 'LLC with checkbook control' that they talk about? It looks like (looks can be deceiving at times though) that there is no real downside to doing this if I am understanding it properly.

Lots to learn. Thanks again.

Dan

Mitch Kronowit · Answer

As to your other questions, set up is just a matter of days. I believe once your funds arrive at the custodian, they may be held for a few days before they are available for investing. After that, you're in business and your money sits poised and ready for your direction.

Purchasing property is a little involved because the custodian has to sign all documents (remember, it's your IRA making the purchase, not you). For me, it went down like this: Realtor drew up the purchase offer and e-mailed it to me. I checked it for accuracy and electrically annotated any changes/additions it needed, then forwarded the file (via e-mail again) to my administrator, uDirect. Along with the purchase offer, I had to include two documents. One was a Direction of Investment, which basically directed the custodian to cut a check for the earnest money deposit and mail it to the Realtor's office. The second was a Letter to Execute Documents, which directs the custodian to sign the papers for your purchase. Once signed, the documents simply reverse course, i.e., e-mailed back to uDirect, who then forwards to me who forwards to the Realtor. The check makes a direct path via mail.

It's normally a 24-48 hour turnaround on documents, but the last thing I had the custodian sign (approval of a bank's counter-offer), was returned to me within hours.

Recomendations for SDIRA Custodian???

Most Popular Reply