Self-directed IRAs were once one of the best-kept secrets in investing, but more and more investors are discovering that “the truth is out there,” and they’re enthusiastically hopping onto the self-directed bandwagon.
In case you’re not familiar with the self-directed phenomena, self-directed IRAs are retirement accounts structured in such a way that you can utilize those funds now to make nontraditional investments in real estate, tax liens, foreclosures, etc., without incurring taxes or penalties. The advantages to self-directed IRAs are many, including the potential to grow your IRA quickly, the opportunity to control the investments your IRA makes, and the chance to make on-the-spot purchases/investments using a checkbook literally tied to your IRA funds.
Although thousands now have discovered this method for investing in real estate, only a handful of institutions are equipped to create the structure in a safe and legitimate manner. The setup is a complex one, requiring that every “i” be dotted and every “t” be crossed. The IRS and DOL are very sensitive about any conflict of interest when it comes to investing your retirement funds; every purchase or investment you make must be for the exclusive benefit of your retirement account, so they’ve put restrictions on the types of investments you can make with your money. For example, profits earned on a real estate purchase must be plowed right back into the purchase or into the IRA itself. And, as a rule, you can’t engage in transactions with “disqualified persons,” such as your spouse or offspring.
The frightening reality is this: If your self-directed IRA or the purchase you make with it is structured poorly, you could not only end up paying severe penalties—you could lose your IRA altogether. If the government feels you’re playing fast and loose with your tax-free retirement funds, it will dissolve your account.
Needless to say, you want to make sure your account is structured properly. It’s a little like eating blowfish. You want to be certain that the potentially poisonous fish has been prepared by a highly skilled chef! For this reason, it’s imperative that you secure the most experienced and competent account facilitator to structure your self-directed IRA.
As mentioned earlier in this article, the demand for self-directed investment facilitators is growing, but the number of credible, specialized facilitators is still small—especially when you take into account the facilitator’s experience and track record.
So what do you want to look for? Look for an account facilitator that has:
-- A reputation for expertise and dedication to accuracy
-- Respect in the industry and good relationships with professional organizations
-- Competitive prices for services provided
-- Years of practical experience in this area of specialized investing
-- A conservative approach to handling your money
-- Conscientious customer service and proactive communications
-- A commitment to ongoing client education
-- Impeccable integrity, thoroughness and conformity to all rules/regulations
-- Lots of satisfied customers!
According to David Nilssen, president and CEO of one of the nation’s leading self-directed IRA service providers, Guidant Financial Group’s (www.guidantfinancial.com clients appreciate the company’s “there’s no such thing as a dumb question” approach to working with investors. “We recognize that this is a whole new approach to buying real estate for many people,” he says. “And we want to make sure the process is as easy and secure as possible. That’s one of the reasons why we set our clients up for a consultation with an outside, non-Guidant attorney. We’re just as anxious as our clients to make sure that everything is done perfectly.”
The search for the “perfect” self-directed IRA account structure does require some good due diligence on your part. Search online for service provider websites and check with professional real estate or business organizations. Many facilitators offer no-obligation consultations and educational materials.
“The primary thing is to find an account facilitator offering a structure and a business philosophy that meshes with your own,” says Nilssen. “After all, they’ll be holding your financial future in their hands.”
More Information: Self Directed IRA LLC & Small Business Financing
