You hear it all the time— in endless blogs, books, and articles. The most important part of a successful real estate investor is the team behind you. When investing with your self directed IRA, your custodian is an essential part of that team, one that can help or hinder depending on the company.
Is your provider helping or hindering?
Can you get a hold of them? Are they worth the cost? Do they make your transactions easy and process with speed? With so many alternative asset custodians available to choose from, it can be hard to find one you can trust to handle your account with care, without overcharging you, and with an efficiency that allows you to relax.
To invest in real estate with your retirement savings, you must establish a self directed IRA with a custodian or trust company that handles alternative investments. The company holds title of your assets for safekeeping and annual reporting of your account. It may also do the account administration of your assets. Like any banking or financial institution, they are regulated through state and federal agencies.
Custodians are audited and held to specific guidelines based on written policies and procedures. During these audits or reviews, auditors do a thorough examination of the books, records, funds, policies and procedures of the company.
Because all custodians and trust companies are held to similar rules and regulations, how is one to determine how to choose the right one? Here are 3 important factors to help you determine if a self directed IRA custodian is worthy of your business.
“Trust, but verify… Ronald Reagan
Sometimes getting to know who the company directors are can provide insights as to how the custodian handles business. Researching a company’s background and its principals should be one of the first things to do.
Companies that invest money and time in their staff’s training are worth considering. Asking the right questions while speaking to staff can also lead to determining if a company is worthy of your business.
“Beware of little expenses; a small leak will sink a great ship… Benjamin Franklin
Before deciding on a custodian, you might want to check out their fee schedule. Some custodians charge based on value of asset and others per investment, or both. It is important to take this into consideration, because you could be overpaying as your assets grow in value. Recently, we spoke to a client that held a Real Estate Deed of Trust with a bigger competitor, where her annual fee was $1,700— because it was based on the value of her asset. By switching to our per-asset fee schedule, she is saving $1,500 annually. Assessing fees prior to making this very important decision can save you lots of money. As your assets grow in value, you should not be paying more in annual fees. That defeats the purpose of saving for retirement.
This template covers questions like:
“Lost time is never found again…" Benjamin Franklin
Servicing times are very important in choosing a self directed IRA custodian. You can lose a deal if your transaction is not funded in time. You can also incur late fees if your bills are not paid as they come in.
For your transactions to be completed in a timely fashion, the custodian must have systems in place to help expedite transactions and processes that are focused on meeting the client’s need. Asking about these servicing times won’t help. You will get a positive response, they’ll tell you what you want to hear.
The best thing you can do is to learn from existing clients. Clients that are extremely frustrated will post negative reviews— very seldom do happy clients post positive reviews, these usually come to the company in an email or letter… sometimes, they even come with flowers. But beware of overly positive reviews, as sometimes companies are hired to do the ‘dirty’ work of cleaning up a company’s rating. You can tell if you’re looking for it— there’s usually a pattern to the reviews and most don’t make sense.
A true source for company reviews is the Better Business Bureau (BBB). But don’t let the A+ rating fool you. Here’s what to look for:
Whatever your retirement investment strategy, you will always need a custodian for your self directed IRA, per IRS rules. Make sure that the company you chose is worthy of your business. If you have a self directed IRA and are not satisfied with your custodian, or if you’re interested in opening an account to invest in real estate, please give us a call. We’d be happy to help by providing excellent service at a cost-effective price.