All Forum Posts by: T. Philip Washington

Since Quest Trust was mentioned several times in this forum, I wanted to let folks know that they are resigning as a plan provider for many account holders as of 7.23.24. Has anyone else received this message? If so, does anyone have recommendations for a new plan provider for a Solo 401K? Also, Solera Bank is (one?) of their partner banks for the plan. Thanks for any comments/additions/recommendations. 

I'm a fan and a client of Mat Sorensen. I highly recommend his book - The Self-Directed IRA Handbook.

My self directed account is a Solo 401(k) which owns an LLC. Both the 401(k) and the LLC have checking accounts. I am the custodian (no 3rd party custodian) and beneficiary of both entities and can invest from either as I choose. I also like that I am able to borrow from my 401(k) and avoid UDFI (read Mat's book to learn more about this).

Mat helped to establish my Solo(k) through his law firm a few years ago. He's since launched a Self-Directed IRA company with Mark Kohler called Directed IRA. I don't yet have experience with the new firm, but expect it's worth checking out.

Best of luck -

Marco Bario

@Logan Hassinger @Scott Carson @Becky Kromminga

I visited Quest Trust today. Great resources and very informative. I am planning to go with them for real estate, once I complete re-balancing portfolio - they are located in Houston is a big plus!

@Alan Grobmeier

@Alan Grobmeier @Mike S. @Yolanda Salas thank you for sharing what worked best for you :-)

@T. Philip Washington There are a few things an SDIRA cannot invest in.  Collectibles (think baseball cards and stamps), life insurance policies, any investment with a prohibited party which is you, your spouse, your children and their spouses and your parents.  Think of a vertical line.  Uncle and brother or sister is fine. It's not really a mixed bag of apples, you're a prohibited party so no "partnering" with your SDIRA so you can only do white collar work, no blue collar hammer swinging.  

The only real exception is investment in a business in which Plan Participant or other disqualified person already has less than 50% ownership.

Hope that helps.  But yes - get advise from a qualified tax professional.   

 ^^^^^^^^^This right here^^^^^^^^^^^^^^^^^^^^^^

If you ask why? it is because loans are non recourse, meaning the property is all the lender can go after, and if it is to rehab or upgrade the property, that can be a HUGE risk.

T. PHILIP WASHINGTON 

A CPA and an attorney need to answer this legal question. If IRA partner with you a non-IRA funding source, that you as partner may owe taxes AND your SDIRA may also be subject to Unrelated Business Income Tax (UBIT). 

You need a CPA to file the LLC returns (costs $)

Add all the advisory fees, higher loan costs, filing costs, and hiring qualified companies as the middle soldiers... into each transaction.

As the comment above mentions, they are correct that with a SDIRA, the financing would need to be nonrecourse. Additionally, when using your SDIRA funds, you as the IRA account holder are not allowed to physically do any work on the property. But, there are custodians out there that process expense payment requests within a day, which make it really easy to get around this IRA rule. BRRR works for some people, but there are many other creative strategies that might work better for a SDIRA. I would definitely check out some webinars that some of the custodians offer, because you'll discover all sorts of possibilities that you might not have considered with a SDIRA. There is also a strong networking of Private Money Lenders at these type of events, which do make building that potential network of funding possible, too. You always have the option to partner with your personal funds. Let me know if you'd like more information.

I suggest you do a deal 1st, then worry about setting yourself up. It only takes a few minutes to open the LLC. So many work backwards. Want PM cos, attorney, Title, etc and do not even closed or have a deal.

 You are worried about taxes when you have not even done a deal yet , Find deals, see if this is something you can do well at, then worry about as mentioned, setting yourself up 

All the best 

To add to this...most lenders in the private space — aka DSCR loans — strongly prefer or in some cases require an LLC to close.

@T. PHILIP WASHINGTON

I suggest discussing your long and short term goals with an investor savvy attorney. In general the LLC provides protection. Write offs can be taken even as a sole proprietor so plan accordingly!