Five Factors for Choosing Your Self-Directed IRA Company | Think Realty | A Real Estate of Mind

Five Factors for Choosing Your Self-Directed IRA Company

Retirement plan with calculator

Making the Decision Easier

You’re convinced. You know a Self-Directed IRA is a powerful way to build wealth, using its protections to help you get the most out of investments like real estate. But there’s a catch: you can’t move forward unless you have a Self-Directed IRA administration firm in your corner. And you’re not sure which one to pick. How can you tell which Self-Directed IRA company has the experience and know-how to make life easier for you? We’ve put together a list of the five most important factors to help you decide.

Factor #1: Team Knowledge

Simply put, a Self-Directed IRA company should know things.

A lot of things.

You’re working with a Self-Directed IRA company, after all, for a long-term commitment. Shouldn’t you be concerned about who it is that will help educate you?

You’d be surprised. Many Self-Directed IRA companies have leadership and speakers with very limited experience in the asset classes they’re teaching you about. For example, let’s say you signed up with a Self-Directed IRA company because you wanted to invest in real estate. What if you work with a Self-Directed IRA company whose team knows very little about this asset class? Do you want to learn from someone who’s reading out of a manual?

American IRA’s team is comprised of investors who bring value to you from a place of personal experience. Our ownership AND employees are comprised of individuals who have created a 7-figure net worth by investing in real estate.

Factor #2: LLCs and Checkbook Control

LLCs like Single Member LLCs allow the Self-Directed IRA to put a lot of power in your hands. In essence, a “Checkbook IRA,” as its called, can function much like a personal investment account—with the obvious caveats and regulations of a retirement account.

With Checkbook Control, an IRA/401(k) is a member of an LLC, which allows the investor to directly transact for their investment. There’s no going through middlemen here. They don’t have to check with their Self-Directed provider for paperwork, or for the flow of money for the account. It’s as simple as writing a check.

Is there a catch? Of course. You have to set it up properly.

Your Self-Directed IRA administration firm should allow you to do this. You’ll find that some companies mandate that you have to use a checkbook if you use their service, while others will not allow checkbook control if you’re going to work with them.

But isn’t a Self-Directed IRA all about the freedom to call your own shots?

American IRA realizes that every client has different goals and needs. For that reason we employ a hybrid approach to checkbook control. For clients that want to utilize a retirement account owned LLC, they can do so. For clients that do not want that structure, it is not mandatory. This gives all clients the tools that allow them to optimize their self-directed investments.

Factor #3: Firm Continuity—and a Long-Term Relationship

If you were going to propose to get married and knew there was a chance it would only last a year, would you re-think it?

That’s often how it works with Self-Directed IRA administration firms. You’re happy to sign up with one if you know you can work with them for years and even decades. But if you knew that the firm doesn’t have a strong history of continuity, you might rethink things.

You may think it a bit strange that we compare a Self-Directed IRA administration firm to a relationship. But here’s the thing: relationships do matter. Isn’t it frustrating to constantly have to reinvent the wheel when your vendor is constantly hiring new employees? It’s like hitting the “reset” button over and over again. There’s no sense of long-term progress.

And with retirement investing, long-term progress is the name of the game.

When you constantly hit “Reset” because of new relationships, it means that you have to start over again. You have to communicate old ideas again. And you may be working with people who now don’t understand the investments you make. Or they might not know the way you prefer to communicate.

Look for a Self-Directed IRA administration firm that emphasizes the following:

  • A strong senior staff, many of whom should have experience at the firm for 8-10+ years.
  • Real relationships with clients, and a long-term understanding built on that communication.
  • Knowledge and experience within the team to offer the proper education.

Factor #4: The Kind of Self-Directed “Provider” You Want

There are Self-Directed Providers that are reliant on third parties to stay in business. And if there is a new policy by the custodian, it can mean that this arrangement can be shut down. This is a scary situation. You got into Self-Directed IRAs because you wanted more independence. You didn’t want to cultivate dependence on a third party.

Your Self-Directed IRA administration firm should be fully integrated, meaning it doesn’t rely on third parties to get its work done.

Factor #5: Fees

Simply put: how much does it cost?

Even if you have a great Self-Directed IRA firm to work with, exorbitant fees negate the good work you do. Many Self-Directed IRA administration firms charge annual asset fees. This means that your annual fee for an account with 4 properties will be far higher than an account holding 1 asset.

Do they charge a higher annual fee as the account balance grows? If so, then your fees grow with your wealth.

American IRA charges a low, set annual fee of $285 per year, which means that the percentage of the fee relative to your account goes down as you grow wealthier. Your annual fee will not change with an increase in the value of the account or number of assets, and that’s the way it should be.

These factors all matter when you choose a Self-Directed IRA administration firm. If you want one that meets all of the criteria here, learn more about what makes American IRA different. Give us a call at 866-7500-IRA to find out how you can work with us and achieve a stronger retirement nest egg.