Cost Advantages of Purchasing Real Estate with a Self Directed IRA

There is just no getting around it real estate purchases are complex. You may find a deal now and then that goes smoothly and seems to take no time at all, but the majority of the time there will be long waits followed by bursts of activity and paperwork. This holds true for commercial real estate deals as well as for residential real estate deals. You can also count on having to pay a number of different fees along the way.

With a traditional IRA (where your IRA custodian has to sign off on the deal and you have to pay a fee to get their permission and another fee to get them to write a check), real estate transactions can be grueling. Additionally, once your IRA owns the property, any repair or renovation expenses must come from the IRA and therefore your custodian is able to collect more fees from you. It is no wonder real estate was such a small part of IRA holdings.

With a self directed IRA the IRA owner is empowered to make their own decisions and pay all expenses directly from the IRA. This simple change can save the active real estate investor large sums of money over time. This holds true only for truly self-directed IRAs, though. You should avoid any "self directed" IRA plan that does not give you, the IRA owner, absolute checkbook control over the account.

One of the major advantages of a self directed IRA is the avoidance of fees, but some companies that offer self directed IRAs implement their own excessive fee structures. They include set-up fees, transaction fees, asset fees, management fees, annual fees, and any other fees they can come up with. Fee structure should be one of your main concerns when shopping for a self directed IRA provider. Be sure you ask what fees are required during the initial conversion, annually and if there are any other fees charged when you make purchases or pay bills from your IRA.