SDIRA QUICK-START GUIDE
In my opinion, EVERYONE needs a Self-Directed Individualized Retirement Account. It’s a tool with which to invest in virtually everything. Once it’s set up, you purchase assets in the name of this tax-free entity. Here’s just a few of the things you can buy:
- Public stocks, bonds & mutual funds
- Bank CDs, Government securities
- Public real estate investment trusts (REITs)
- Public limited partnerships (LPs) or limited liability companies (LLCs)
- Precious metals
- Real estate (commercial, residential and raw land) – directly owned
- Trust and mortgage deeds
- Private, closely-held stock
- Private real estate investment trusts (REITs)
- Private limited partnerships (LPs) and limited liability companies (LLCs) – no single member LLCs
- Oil and gas investments – no working interests
- Promissory notes – secured notes only
- Private corporate debt offerings
- Structured settlements
There’s one big rule with SDIRAs, you can’t actively manage the property owned by it. As long as you hire a servicer or manager to baby-sit (or work) the asset, you’re in the clear.
STEP 1: OPEN A SELF-DIRECTED IRA
I use CAMA Plan with no issue, so I will be giving you links to their forms (no, they don’t pay me anything for this I just want to make it easier for you). The process will be virtually the same with any custodian.
Here’s the application form, you’ll want to set up a ROTH SDIRA.
STEP 2: MAKE A CONTRIBUTION
As long as you’re annual income is under $118,000 it’s a great idea to max these $5,500 contributions. I held my first two contributions in cash before pulling the trigger on a $10,000 performing mortgage note. [optinlink text=”CASE STUDY INCLUDED” id=”6″]
|Contribution Limit (50+)||$6,500|
|Roth IRA Income Limits (for single filers)||Phase-out starts at $118,000; ineligible at $133,000|
|Roth IRA Income Limits (for married filers)||Phase-out starts at $186,000; ineligible at $199,000|
All you gotta do is fill out a deposit slip! Mail it in and include a check, your account will be funded and ready to deploy in a few days.
STEP 3: PURCHASE AN ASSET
Once you have agreed with a seller on an asset to purchase (in my case a mortgage note) you put together the documents below and send the package to CAMA to execute:
- purchase contract under the name of your SDIRA (you sign underneath “READ & APPROVED”)
- a completed asset purchase directive and existing note acknowledgement
- the note, mortgage, assignment and allonge for your mortgage note
STEP 4: MANAGEMENT
Finally, you set up a turn-key cash-flow. With a short email, have CAMA send their wiring instructions to your loan servicer (Land Home Financial in my case) and payments will be directly credited to your account every month!
AND THAT’S IT!
Post a comment below with any questions, I would be happy to elaborate on the nitty-gritty details.