If you’ve heard of self-directed investing previously, it may have been via a presentation given by a custodian trying to earn your business.
At Wall to Main, we strongly advocate instead for checkbook control of your retirement funds vs. leaving your account funded at the custodian. Here’s why:
First, let’s go over the process from account setup, to deal funding:
We like to say, with checkbook control, you could find a deal at breakfast, and have it funded before lunch.
All jokes aside, this is the critical power of having checkbook control of your funds. Having the agency to fund a deal instantly is critical in real estate investing.
It is not uncommon when working with a custodian for paperwork approval for an investment to take nearly five weeks. Occasionally, this has seriously jeopardized an investor’s ability to take part in a deal, with funds transferring at the 11th hour, just prior to wire cutoff.
We hate to see this happen time and time again. This is one of the main reasons we started Wall to Main. To fully enable you and your retirement.
We should also note, the delay with custodians is not based in compliance checks, it is most often a result of paperwork overload on the custodian’s behalf. In fact, custodians don’t even legally ensure your compliance! The “compliance checks” they offer are to cover themselves. At the end of the day, it’s still up to you to follow IRS guidelines.
Next, let’s cover the costs associated with each method, from startup to funding your first investment.
We’ll assume the account is being opened with a $250,000 balance.
After setup and the first deal, the custodian is the winner. But let’s say you invest in a second deal in Year 2:
Because a custodian will invoice you every time you interact with them, checkbook control quickly emerges as the cost effective option for the long haul.
If you’re interested, take a look at how a checkbook account is structured.
First up, we have a Self-Directed IRA with checkbook control.
Now let’s see how a Solo 401k operates.
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