Real Estate IRAs are the hottest investment trend for real estate investors. However, some potential investors are put off by the fees and some self-directed IRA providers. Here are 3 factors you should consider when opening a self-directed IRA to invest in real estate: fees, service, and knowledge.
Fees – Don’t Overpay for a Real Estate IRA
If you don’t do the research and compare providers beforehand, you may overpay or be overpaying for your Real Estate IRA. Real Estate IRAs should not cost you a fortune— after all, with a self-directed IRA, you are the one making the investment decisions. All providers are different and charge in different ways, with some charging based on asset value and others based on number of assets. Download this FREE TEMPLATE to help you assess the fees associated with a self-directed IRA.
When you invest in real estate your IRA will have to pay taxes, insurance, and other types of payments. Asses the annual cost for these transactions while considering your investment strategy. Some IRA providers do not charge a check fee, but be careful— the all-inclusive annual fees can triple the cost of any self-directed IRA.
At IRA Resources, some of our clients schedule these payments quarterly, annually or as allowed by the service provider instead of requesting checks monthly, in order to save on the check fee. We do our best to make our self-directed IRAs as easy and low-cost as possible for our clients, any way we can.
Another way to save money is by using an IRA LLC. If you are planning on purchasing multiple investments in one IRA, you might want to consider an LLC. Research the costs associated with establishing a LLC – this is not something IRA Resources can do for you. Your LLC will hold the real estate, while IRA Resources holds your LLC. If you have an IRA LLC held at IRA Resources, you are billed $99.50 semi-annually, regardless of the number of investments within the LLC itself.
Service – Get More Than What You Expected
Saving on fees is great, but it is just as important to make sure that you are getting excellent client services from a knowledgeable team. Clear communication is very important, especially when it comes to your retirement.
The self-directed IRA industry uses a lot of terminology or jargon. If you inadvertently say something or make a request that is understood as something else, there can be disastrous consequences (like the loss of tax status and/or a hefty fine). Make sure that the person on the other end of the phone line understands exactly what you are trying to accomplish with your transactions. Explain your investment purchase or strategy in detail— do not assume the representative intuitively knows what you want. They should be engaged in the conversation, asking you questions that may lead to discoveries, warnings, or tips.
If you feel like you are being rushed to get off the phone, this is a warning sign of subpar customer service. As a potential client, you should feel appreciated and get more than what you expected— this is an indicator of how current clients are treated by representatives.
Knowledge – Expect More from Our Experts
Asses how well they know Real Estate IRA transactions (the template I mentioned earlier can help you do that). Are they knowledgeable enough to answer your questions? Ask about the options you have to fund your purchase and if all of these are allowed at their establishment. Make sure this information lines up with what you’ve researched and heard from other providers.
What is their turnaround time to review your purchase contract offer? To give you an idea, at IRA Resources we review the purchase contract offer the same day or within 24 hours, because we are focused on the success of our clients’ transactions.
It is important for representatives assisting you to know IRA rules (to make sure you are not making a prohibited transaction) but due to the complexity of the transactions it is just as important for them to have experience in real estate transactions. Are they experienced in working with your real estate agent, attorney, title company, and insurance agent? The real estate IRA process is similar but different from when you or a friend purchase a home. For things to go smoothly during this process, the representatives must know how to answer questions from all parties involved in the transaction. A mistake during this process can drag things out, or even cause a deal to fall through—a nightmare for all involved.
Do not be put off by fees or a lack of knowledge, because not all providers are the same —but do the research beforehand. Your investment strategy and transaction volume should dictate the type of fee structure that is appropriate for you, in order to spend less on fees and save more for retirement.
Give us a call to discuss our fees and service in more detail. Find out how we compare to other providers, you will be pleasantly surprised at what we have to offer.