Before choosing an IRA real estate custodian, there are a few things to consider. First, just because an IRA custodian allows real estate transactions doesn’t mean they “encourage” them.
I think I can better explain what I mean with this example.
Suppose you decide to use the account to bid on one of the many foreclosures in your neighborhood. You can get the property and with minor repairs, it is ready to go back on the market, at a higher price of course.
It takes six months to find a buyer, but the sale goes through and the deed is transferred to the new owner’s mortgage company.
There is an IRA real estate custodian who would charge you a total of $341 to complete this transaction.
So, because of the high fees associated with the transaction, it seems like the IRA custodian allows real estate, but doesn’t exactly encourage it. If you want to get the best deal, you need to shop around, just like you would for any other good or service.
That same IRA custodian allows real estate, but also takes 45% of your earned interest on uninvested cash balances. When investing in the real estate market, there are almost always cash balances in the account and it is not fair or financially sensible to earn less as it is up to you what to do with that cash.
If the account owns a rental property, there will always be cash coming in and it is wise to keep a cash balance to pay for repairs, as any fees associated with the property must come from the account.
The best IRA real estate custodian is one that doesn’t charge transaction fees or other charges that can really add up over a year.
A reasonable annual fee that is generally based on account value is the best option.
If the custodian of your current IRA allows real estate transactions, you may want to find out what fees your account will incur, as these fees are often hidden in the fine print. And while you think about it, find out if they offer educational materials or free seminars on investing.
Some custodians post success stories about what other investors have accomplished and how they did it. There is at least one IRA real estate custodian that allows you to form a Limited Liability Company (LLC) within the account, so the account can hire a management team. That can really simplify the process.
There is a team that specializes in “Neighborhood reactivation”.
As a result, they already have buyers lined up and properties available to buy.
They only need investors who are interested in ‘duplication’ your typical rate of return, without putting in too much effort.
If an IRA custodian allows real estate transactions, you may be familiar with the entire process. If not, you may want to choose a different IRA real estate custodian. It pays to shop around.
Your next step is to find an IRA custodian with real estate experience. Timing is the issue as recent news articles reveal that home sales are showing signs of improvement.
Real estate will circulate as it always has. Now is the time to start your profitable adventure.
