Self-Directed IRA & Small Business Financing Blog

MarketWatch released an article on May 21, 2009 that suggested most investors should avoid self-directed IRAs. In “Why Most Investors Should Avoid Self-directed IRAs,“ Robert Powell details three main reasons:

• It is unclear who is regulating this industry;
• The IRS guidelines are complex; and
• There are very few “experts.”

While we appreciate his perspective, we do not feel it is as simple as to suggest this type of investing is only for the wealthy. We believe that individuals have the ability to make good wealth-building decisions when provided correct information.

The rules for investing in alternatives investments using retirement funds have been outlined within the Internal Revenue Code - IRC 4975. He is right – they are complex and subject to facts and circumstances. That is why you need to work with a company (not just an individual) that really understands how these rules apply to the assets you are interested in investing in. There is no space between us on this one.

But then he is also correct that there are very few experts in the field. Unfortunately, there are a lot of self-proclaimed self-directed IRA experts using social media and paid advertising to assert their position as a leader, but don’t be mislead. Do your due-diligence and involve your tax professional and investment advisor to find a firm you feel is most qualified to help you properly facilitate self-directed IRA transactions. Please consider that just because you saw them on Twitter, read a blog post about them or they have written a book does not make them an expert. Here are a couple of things to consider:

• How long have they been around?
• How many clients do they have? (If they have 2 – run!)
• How big is their company? (Size does not necessarily mean better…but it’s indication of their potential experience and strength)
• What value do they provide? (Do not shop purely based on price! If you accidentally run afoul of the rules for self-directed IRA investing, your entire IRA could be distributed. If you have a $100,000 self-directed IRA – you could be forced to take that as income, plus penalties, and pay 40-50% to the government. Saving a few hundred bucks to work with a discount provider is not a good strategy. )
• Are they registered with the Better Business Bureau and what does their history provide?
• Have they been honored, recognized or endorsed by other reputable organizations?

We have always asserted that self-directed IRAs allow people to invest in what they know and understand. It would be difficult to argue that the stock market was safer to invest in than real estate (if you know what you're doing)…especially after this year. Even spirited money man Jim Cramer recently said that real estate is a better investment than stocks today.

Self-directed IRAs allow you to decide that investments you feel are most prudent for your retirement plan. If you feel the stock market is better – buy stocks! If you like real estate…invest in that. The same goes for tax liens, private mortgages and gold. Self-directed IRAs let you invest in your core competencies and there are safe and effective ways to do it.

If you want to learn more about self-directed IRAs or real estate IRAs – contact us!

In an article called 10 Questions for Jim Cramer, Time Magazine reported the spirited money man said that real estate was a once in a lifetime opportunity. He explained that because mortgage rates and affordability were the best he had seen in his life, coupled with the fact that there are no competitive buyers, real estate is a better investment than stocks right now.

We agree! The economic environment has created new opportunities for tax liens, private mortgages, foreclosures and income producing rental real estate. If you do your due-diligence there are some tremendous deals out there. Be patient and make sure you build a good team that can help you identify, evaluate, purchase and maintain those investments!

Have you considered buying real estate or other alternative assets inside a self-directed IRA? Guidant Financial Group is a leading provider of self-directed IRAs, facilitating hundreds of transactions annually, and the only 2008 Inc. 500 company in this industry! If you believe that real estate is a great place to invest all or part of your retirement funds - call us. We will gladly spend time necessary to help you understand how a real estate IRA works and how it could ultimately help you achieve your financial objectives.

Many of our Guidant 401k clients are either current franchisees or seriously considered purchasing a franchise during their due diligence process. Why? Because franchises offer a lot of benefits to any entrepreneur.

Earlier this week, The Wall Street Journal published an interview with experienced franchise consultant Britt Schroeter (see The Franchise Decision), which includes many insights into who franchising works best for, why it is so prolific in a down economy and what to keep in mind when considering a franchise.

As Ms. Schroeter, who has worked with Guidant in the past to obtain financing for her clients, tells the WSJ, “franchising is entrepreneurship with training wheels.” And, during these uncertain economic times, when the entrepreneurial itch comes along, many prospective new business owners take no issue with starting something with some extra safety rolled in.

We definitely think that the interview with Ms. Schroeter is a very useful resource … even for those who are considering purchasing an existing business, and not necessarily a franchise.

Some suggestions Ms. Schroeter has for prospective franchisees, which (we think) are helpful for anyone considering a business purchase:

“As for general guidelines, I advise my candidates to always shop within
their means. People assume that it takes a lot of money to make a lot. Not true.

“There are franchising opportunities with low investments that have some of the strongest [returns on investment] around,” she tells the WSJ.

“The emergency-restoration industry [that services flood, fire and other catastrophe victims] is one. Commercial cleaning also can be a very low-ticket business.”

“Consider options where you can keep your job and start a franchised business on the side. That way you have the security of your job and can move into your new business full time when it’s financially viable.”

“I’ve always taken “fast growth” with a grain of salt. You need to make sure you select the franchise based on reality, not hype. Climbing on board a fast-moving train is great, as long as the track is solid. Rapid growth can be a sign of a healthy system—most of the time.

"But because a lot of others are getting into a franchise doesn’t mean you need to be any less careful. Do full diligence. Do your homework. Think for yourself.”