Searching for a real estate IRA custodian that doesn’t break the bank? It helps to know what you’re looking for. The things that cost real estate investors the most don’t always matter as much to the average person with a self directed IRA. If all you do is read the “getting started” guides you find on every custodian’s website, you might not even know the right things to ask (until it’s too late).
Our blog will help you see, first hand, which custodian will help you save big on fees for your self directed IRA. An excellent custodian for real estate investors will allow you to save in all sorts of ways for your retirement future.
Fees That Impact Real Estate Investors
The surest way to save on your real estate IRA is to find a custodian that charges in a way that makes sense for your account. Most providers tend to charge three types of fees: annual recordkeeping fees, asset holding fees, and transaction fees— all of which can hit real estate investors harder than most.
Relevant: How to Pay Low Fees & Get the Best Service for your Real Estate IRA
Recordkeeping Fees
Custodians have a few ways they charge annual fees— most charge a percentage based on the total value of your account (not just the available cash). Some (like IRAR) charge a flat fee based on the number of assets. Even fewer charge an all-inclusive fee that covers a limited number of transactions each year, but this is not common.
The average IRA is about $100,000— this average investor would be paying up to $1,000 a year at the most expensive (closer to $400 a year at a less-expensive) per-value custodian.
If your account is worth $100,000, you could save at least $200 a year by switching to a provider that charges per-asset— more if your account value is higher.
Asset Holding Fees
On top of these recordkeeping fees, these per-value custodians often charge an additional fee for holding each asset. This is sometimes an annual, semi-annual, or even quarterly fee (on top of other annual and transaction fees).
The charge for holding real estate is often one of the most expensive, ranging from $20 up to $600 per asset. Look out for other fees like this, such as quarterly fees for non-recourse loans, as some custodians aren’t always transparent about how much their accounts can cost.
Transaction fees
You’ll also notice most custodians charge additional fees for various transactions and processing— but there’s not really a consistency to how or what they charge for. There’s generally a cost to issue checks/wires and we do have to pay someone to process your transactions (so these charges make sense), but some custodians seem to go out of their way to charge for everything— from paper statements to income deposits— and some of those things really impact real estate investors.
For example, handling of Earnest Money Deposits— some providers charge for these, some do not. Another example, some providers charge a fee to process a deposit or income payment, and others do not. It’s worth checking before opening your account to save on fees in the long run.
These little fees add up.
Relevant: How to Manage Real Estate IRA Income and Expenses
To Save BIG, Do the Math:
It’ll save you a lot of money just to do a real, in-depth cost analysis of your chosen custodian— one of IRAR’s clients switched from a per-value competitor and ended up saving over $700 in annual fees alone, based on her account value. You could end up saving even more.
Anticipate not just your present costs at your current account value, but what your costs will look like if your strategy comes to fruition— what works for you now may end up costing you down the line at some providers.
If real estate’s your specialty, you should be looking for a certain kind of IRA custodian— or you can end up frustrated, losing deals, and overpaying for a standard of service that doesn’t meet your needs. Though there’s more to a good IRA custodian than just low fees (a provider who won’t answer your calls or process your transactions doesn’t do much good), we all know that when saving for retirement— fees matter.
Our company mission is making self direction affordable for all investors. We’d love to help you get where you’re trying to go. If you need more information about our fees, process, or self directed IRA strategy, we’re here for you. Sign up for a free consult— our CISP certified experts would love to answer your questions.
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