REAL ESTATE & RETIREMENT
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SELF-DIRECTED INVESTING FEES
ABeginner’s Guide to the Fees and Costs Associatedwith Self-Directed IRAs READ THE FINE PRINT & PLAN ACCORDINGLY.
by Mike Ventry
A
s a self-directed IRA administrator, I find that one of the biggest issues that prevents people from setting up a self-directed IRA is that they believe these accounts are extremely expensive. They’re used to paying fees and percent- ages of their investments to traditional investment managers whether they make money or not in their traditional ac- counts. In reality, self-directed accounts can have a very low overhead, although that will depend partly on your adminis- trator and also on your account activity. While different administrators and custodians have dif- ferent types of fee structures, I will explain here some of the typical fees and structures: FLAT FEES Many self-directed IRA administrators charge a fee if you conduct a transaction. Fortunately for real estate investors, who tend to do big deals in their accounts, those fees are often flat, meaning they are the same no matter the size of the transaction. Be aware, however: Since real estate transactions may be complicated, they may have a different flat fee than if you are doing something that does not require a closing. For example, you might pay $95 for any transaction, but $145 for a real estate transaction where the administrator also must coordinate a closing. ADMINISTRATIVE FEES Most self-directed IRA custodians and administrators will
charge some sort of fee for managing your account. You are going to have to pay that fee somewhere, because you cannot have a self-directed IRA without an administrator or a cus- todian involved. These may be flat fees or percentage based, and some groups will let you choose the option that is a better deal for you, personally. Some will even let you switch back and forth from year to year or even quarter to quarter, so ask about this option. For real estate investors in particular, the ability to shift fee plans “midstream” can be very valuable since sometimes you might be holding a lot of assets and other times you might have only a few. ADDITIONAL TRANSACTION FEES Sometimes, financial transactions get complicated. It’s your IRA account manager’s job to help you get those transactions completed, and occasionally a deal will require extra steps that may have extra fees associated with them. In general, that legwork will be covered by an additional, flat fee as we described above. However, some IRA administrators and custodians will add on more costs if your transaction gets extremely complicated or if they end up involved in multiple closings on the same deal. •
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Mike Ventry works with Advanta IRA Administration, a self-directed IRA custodian. He may be reached at mventry@advantaira.com.
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