What Is a Self-Directed IRA All About?
don’t want you to know about!
The term self-directed IRA isn’t a technical term; it merely means that your IRA is directed by you instead of by someone else. You may get conflicting answers through various institutions who say they offer self-directed IRAs, yet restrict you from investing your IRA in the way you want. A “Truly” Self-Directed IRA (TSD IRA) is the term we use to say there are no in-house custodial restrictions and you have ultimate flexibility and checkbook IRA control without unnecessary restrictions imposed by your IRA custodian or trustee.
“The type of investments that may be held in an IRA is limited only with respect to insurance contracts, under 408(a)(3), and with respect to certain collectibles, under section 408(m)(1)”
~ IRS Field Service Advice, April 2001
Aside from life insurance, collectibles and 5 prohibited (self-dealing) transactions under section 4975, a truly self-directed IRA has no restrictions, allowing you and your retirement investments to evolve and grow in the ever changing world we live in.
What Exactly is a Self-Directed IRA LLC?
A self-directed IRA LLC is a modern hybrid between an Individual Retirement Account and a Limited Liability Company. The combination between these two types of legal entities will give investors iron clad asset protection, tax free growth on investments and freedom to make and maintain investment decisions and directions at will. The IRA LLC (TSD IRA) structure is by far the future of retirement investing!
The TSD IRA format has been vetted through the legal system, legitimized through case law, private letter rulings, IRS memorandums and has been openly practiced since before the Roth IRA was even an option. Surprisingly however, the concept seems new to many investors because most retirement advisors have little incentive to research and inform you about this option. We strive to give you better advice, service and ongoing support that helps put you in control because after all, very few people invest other people’s money as carefully as they do their own.
Real Estate IRA
Although you can use a TSD IRA for various investments, if you want real estate in your IRA portfolio the TSD IRA structure is an invaluable tool. There are custodians who will allow their IRA participants to hold real estate without an IRA LLC; however, chances are you will be competing with other savvy investors who can move quickly. A few benefits they will have over you are:
Flexibility:
With a TSD IRA your competitor will have the flexibility to move in and out of real estate deals before you can even make an offer through your self-directed IRA custodian. A few angles your competitor may take are to loan money and secure it with real estate, acquire property at an auction, make partnership arrangements or negotiate with banks who are foreclosing on property.
Checkbook Control:
With a TSD IRA you have true checkbook control. Checkbook control means that you don’t have to get approval for your investments. You make the decisions, you sign the contract and you write the check. When your competitor decides to take action the decision can be executed immediately. Meanwhile it could take you a week to sign the contract and another week to write the check. Being in this position will most likely leave you with the opportunities nobody wants.
Fees:
Most real estate IRA custodians will charge you fees based on what they are doing, this means there will be a fee for:
- Writing Checks
- Registering Assets for your benefit
- Liquidating Assets
- Re-Registering Assets when they are sold
- Holding Assets for your benefit
- Wiring Funds
- Expediting Documents
- Delivering Documents
- Looking at a document (research)
- The list goes on…
With a TSD IRA you are making one investment and holding one asset; this can get the fees down to the bare minimum (usually $100-$200 a year). Without these nickel-and-dime-fees your competition has more margin and some investment opportunities may be feasible to make.
Registration of Assets:
When dealing with Real Estate Investments it is standard practice to use a LLC to hold the property. Sellers, buyers, realtors, banks, title companies, et al., are used to dealing with LLCs and the process goes smoother than without an LLC. Without a TSD IRA, you will need to title the property under the custodian’s name for your benefit (i.e. XYZ Trust Company fbo John Doe). Imagine 30,000 investors all doing business under the same name! This could cause you problems from start to finish, including:
- Losing properties to banks
- Involved in an open law suit
- Late on property taxes or insurance
- Etc.
Imagine you as an investor go to a title insurance company, try to buy a tax deed or get a loan from a bank and get stonewalled until these other investors take care of their issues. These situations aren’t hypothetical. We’ve had clients who experienced them first-hand before they came to us.
Cash Flow:
Your competitor can manage cash flow much more effectively with their TSD IRA. As rent comes in, it gets deposited into a bank account and redirected into other investments or expenses. Without the TSD IRA you will need to have checks sent back to the custodian and incur nickel-and-dime fees when making other investments or paying expenses.
Give us a call and an Advisor can help you down the path of taking true control over your financial future!




