I looked at self-directed IRAs as an investment vehicle for rental property many years ago, and decided against it. There are significant limitations and restrictions which made it not work for us:
you can't finance the properties, you have to pay cash (well, technically you can, but you have to pay taxes on the portion that is covered by the financing - messy and complicated)
you lose all the deductions that make RE an advantaged investment - no depreciation deduction, RE tax and mortgage interest deduction, utilities deduction, etc.
you can't do anything yourself to manage the property - you can't use your own labor to do repairs or collect rents or pay bills. You can get around some of this by using an LLC but this has its own headaches and complications
the fees can be substantial, including things like a fee every time the custodian cuts a check to pay a utility bill or the plumber or landscaper.
all expenses must be covered by money in the IRA. If you have significant repairs the IRA better have some cash to cover it.
while tax-free growth of gains is nice, you are converting LTCG into regular income. This may or may not advantageous.
I have had a self-directed retirement account (it was a defined benefit plan) in order to make a specialized investment. The investment is over and the account has been rolled into traditional accounts (first DB and then 401K when I was about to hit the max on DB assets). What I do recall was that you had to shop around for trustee/custodians because some had much higher fees than others.
@notrichenough makes good points about the downsides of SDIRAâs. I completely agree that it would be a mistake to use them for rental real estate. We only use them for stocks, land, and to make mortgages.
We do own rental real estate, but for the reasons @notrichenough points out, not in our retirement accounts.
And while it is true that you could potentially miss out on the preferential LTCG rates, the flipside is that you donât need to hold anything for a year; a few years ago we bought multiple lots from a developer and resold one of them for a nice, quick profit a month later without needing to worry about a tax hit. And of course thereâs no tax at all if youâre doing this in a Roth.
For that reason we converted most of our IRAâs to Roths several years ago and are considering converting the rest now, while rates are likely lower than they will be in the future.
Another reason to go the LLC route, AKA a âcheckbook control IRAâ.
Does anyone have a recommendation on who you can get a really good rate with for a mortgage refinance? Iâm looking for around 2% ( 7, 10 or 15 year), maybe a bit higher. It seems you can find that for purchases, but itâs tough for a refinance. Seems ridiculous because generally a refinance is much safer for the lending agency than a new mortgage, but apparently they have too much refi business, so theyâre jacking up the rates.
Current mortgage is with DCU, and is a great rate at 3.25%, but my go toâs for refiâs (DCU, PenFed, Navy Federal) rates are higher than they should be. Maybe I just need to wait until the lenders arenât as busy.
I havenât found a legitimate rate close to 2%, although lots of teaser ads promising close to that. All the ones I investigated that were close to that had outrageous points and closing costs.
I wasnât looking for something as short term as 7 or 10 years though.
That seems to be the issue, @notrichenough . I have a hard time trusting some of these promises, because it always seems to turn out differently. Especially when they are so busy there is no way they can close by the end of the lock period.
Yes @Singersmom07, the first place I looked at was my current lender, whom I like a lot. They have so much business that they havenât reduced their rates enough to make it worthwhile. However, I had not thought about asking for a rate adjustment. Itâs worth a shot, who knows?
@busdriver11 I refinanced recently at 2.35% for a 10 year. That was as good as it got. Super low fees. Lender is Guaranteed Rate. Easy to work with. This is my second loan with them.
What lender was this, @itsgettingreal17? If things donât work out with my current lender DCU in getting a rate adjustment (Iâm calling that department tomorrow), I will contact them.
One has to include loan origination fee on the refinance consideration. A few years ago when rates had dropped I checked with all the financial institutions we are members of (have retained a small balance in various credit unions from prior work relationships). We had one with the lowest rate (2.5%) and very low loan origination - that was for 10 year (our home mortgage balance). We donât pay it off because we SWAN as is. We make better return on our investments. Neither H or I are hung up on having the mortgage balance.
Recently got interest free purchase on super nice refrigerator - pay $101 a month out of our checking account automatically over the terms of the loan (36 months) - that includes the 5 year warranty and delivery etc, all costs.
âNeither H or I are hung up on having the mortgage balance.â - Itâs great for a couple to have the same viewpoint. In our case, we have âdelighted to have it paid offâ agreement. Admittedly it took a long time to decide that was our preferred direction.
@busdriver11, Chase - surprise! - offered the lowest refi rate when we were looking, but we decided to pay the balance off because one of our stock holdings mushroomed out of the blue. I will look up contact information of their local mortgage banker and PM you.
Bumping this one up
We are almost done paying off our mortgage. We could do it but are thinking we might wait and see what happens with the tax laws for deductibles.