How to Use Your IRA to Buy Real Estate house 6Administrators

Administrators handle the creation and maintenance paperwork required for your account too.

Some of them will physically accept your deposits and handle your money.

When I say “handle your money”, I’m trying to say that they function like a “middleman” between you, the account holder, and the bank where the money is held.

There are some things you should be understand about administrators.

Here are a few of them that come to mind:

  • When you’re dealing with administrators, your money is pooled with other people. Therefore it can take longer for them to release funds for your deals.
  • I’ve “heard” that having your money mixed with other people’s money could potentially put your money in harm’s way from a liability standpoint. I don’t know how true that is, but it’s something you might want to look further into.
  • Administrators aren’t regulated, so their actions aren’t overseen by banks or the IRS, which kind of makes me nervous.
  • They’re “For-Profit.” There’s nothing wrong with being for-profit, by the way, but I was just mentioning it as a reminder. If your money is sitting in the administrator’s financial institution, and it’s not “actively invested,” they earn the interest that’s earned on the account. To me, that isn’t fair.

 

Facilitators

Facilitators help you primarily from a consulting and advice standpoint.

They will also help you structure your investment strategies correctly. This includes assisting you with the necessary filings and paperwork that’s required to make investments out of the fund.

Facilitators are considered “one-stop-shops” by many, in that they can handle just about everything you need done.

Image: Casey Serin/Flickr
Image: Casey Serin/Flickr

As I’m sure you guessed, there’s some things to keep in mind regarding facilitators, as well:

  • Facilitators are supposed to just give you professional advice and help you execute your investment plan. But some of them will try to encourage you to invest in specific investments that they make commissions on, so be careful.
  • Some of them charge recurring maintenance fees on your account. Others will only charge you a one-time fee to setup your SDIRA.
  • Although they do a lot, they don’t provide custodian-like services. For example, they don’t hold the asset on your behalf, likeadministrators and custodians do.

So Which do You Choose? That’s up to you.

Bottom-line, make sure you ask a lot of questions when you’re talking to these people, so you know what you’re getting-into.

 

Finding a Custodian

Finding a custodian for your SDIRA is one of the more crucial steps in the whole process.

It can also be one of the most difficult steps.

From a custodian’s perspective, there’s not as much money to be made off of SDIRA’s.

Because of this, while you’re searching for a custodian, you might notice that there’s not as many SDIRA custodians out there as there are custodians that deal with regular IRA’s.

You’re also going to notice that SDIRA custodians are more expensive than those that only deal with regular IRA’s.

Next: The Three Types of Custodians, Tips for Opening an Self-Directed IRA, and More…