Fine, it’s not the Universal Hall of Fame; just my own Hall of Fame. I need a catchy title so Hall of Fame it is.

I did research on Self-Directed IRA on the internet and I found a few companies that offer the IRA. I got a few recommendations from friends as well. I evaluated each company to see which one suits my situation better. One of the main criteria that I looked at was the annual maintenance fee. Since they provide similar service, the fees will be the deciding factor.

1. Entrust Group

Entrust Group has 2 options for annual maintenance fee. The first one is based on number of assets and the second one is based on the asset value. The application fee is $50. Purchase, sale, or exchange of any asset is $95. The termination fee or asset transfer fee is 0.5% of the asset value being transferred with a minimum of $150.

  • Number of Assets

Annual maintenance fee is $250 per asset. The fee is paid when the asset is acquired. There is no maximum annual maintenance fee.

  • Asset Value

This option uses a tier system (based on your asset value) with a maximum annual maintenance fee of $1850.

2. Sunwest Trust, Inc.

A friend of mine used Sunwest Trust and recommended it to me. The company is based out of Albuquerque, NM. The breakdown of the fee is pretty straight forward. Application fee is $50 and the annual maintenance fee is 0.5% of your asset value with a minimum of $190. The fee includes one transaction per year and $10 per transaction thereafter.

(Update 11/02/2009) As of January 1, 2010, the annual maintenance fee is $225 and the additional transaction is $25.

3. Equity Trust Company

This company is based out of Elyria, OH. The application fee is $50. The company uses a tier system for the annual maintenance fee with a minimum of $190 and a maximum of $1850 depending on your asset value. There is no transaction fee. Termination fee is $200.

4. Pensco Trust Company

Application fee is $50. The annual maintenance fee uses a tier-system based on the asset value with a minimum of $200 and no maximum. The maintenance fee is assessed quarterly. Purchase/sale/re-registration of property is $100 for domestic and $1000 for foreign ($100 if done through domestic LLC.) Termination fee is $150 + $50 per deed.

5. Guidant Financial Group (Auriga)

Auriga is a product offered by Guidant Financial Group. It gives investor check-book control on the Self-Directed IRA account by setting up an LLC that is attached to the Self-Directed IRA account.

I couldn’t find the fee information on the internet so I called them up. I asked how much it costs to setup an account with Guidant Financial and the first thing he said was ‘Right now, we have a $500 discount special’. I know immediately it is going to cost a fortune just to setup an account and I was right. It costs $4000 (who cares about the discount at this point) to open an account with them. I don’t remember what the annual maintenance fee is. If I have a $10 millions in my IRA account, I might consider it but as it stands, no way.

As for my personal choice, I go with Sunwest Trust. For the amount of money I want to invest, it provides the best value for my money. You should evaluate each options before deciding which plan is better for you. Most (may be all) of the accounts have a termination fee. At this point, I am not going to worry about that simply because I will use the account for a few years. By then I will save enough money from the annual maintenance fee that the termination fee will not matter.

I spoke with a representative from Sunwest Trust and she told me I should setup a Limited Liability Company (LLC) and have my Sunwest Trust account acts as the sole owner of the LLC (Others suggest against it so please consult your tax professional before deciding which way to go.)

The fund can be moved to the LLC immediately upon availability. The LLC provides greater flexibility than the IRA account does. When the fund is deposited into your LLC account, you can treat the LLC account like your checking account. You can write a check to purchase the investment immediately. If your fund stays in your Self-Directed IRA account, you will need to notify your plan administrator whenever you want to spend the fund in your account. That process will take time. So if time is of the essence, LLC can be the difference between investing and losing out on a deal.

(Update 06/19/2007) I did some research on setting up an LLC and how much it costs annually. It is expensive. Since I will only invest in one asset at this time, the cost of setting up an LLC is not justified. Please evaluate your own situation before deciding whether LLC is suitable for you.

(Update 06/25/2008) I added the review for Sterling Trust Company based on the comment.

6. Sterling Trust Company

At Sterling Trust, they don’t use the term Self-Directed IRA. They use Flex IRA and it also allows you to purchase precious metals like gold. The application fee is $25. The annual maintenance fee is $75 for the first year and 0.1% of the account value thereafter with a minimum of $75 and maximum of $550. In my case that maintenance fee would translate into $50. Sounds like a better deal than the $250 I paid over at Sunwest Trust.

But here is the kicker. There is a processing fee for purchasing a property AND there is a fee for holding the property in the Flex IRA account. Processing fee is $175 per property and Sale fee is $100. The holding fee is $100 per property ($200 per debt-financed property.) I am assuming the $100 is for free-and-clear property (no mortgage) while the $200 is for property with a mortgage.

All those fees add up pretty quickly. The low annual maintenance fee is pale in comparison to what I have to pay in real-estate processing and holding fee. This account is suitable for someone who buy and hold the property (minimal transaction) and have at least $50,000 worth of asset in real-estate.

Termination fee is $200; pretty comparable to other accounts I have reviewed here.

Case Study 1: You have $50,000 to invest in ONE property (with mortgage)

With Sunwest Trust, you would pay $250 (0.5% x $50,000) in annual maintenance fee.

With Sterling Trust, you would pay $75 (0.1% x $50,000 = $50 but there is a $75 minimum) in annual maintenance fee and $200 in Holding Fee (1 property) for a total of $275. (excluding the $175 one-time processing fee for purchasing the property)

In this case, the better option is Sunwest Trust.

Case Study 2: You have $100,000 to invest in ONE property (with mortgage)

With Sunwest Trust, you would pay $500 (0.5% x $100,000) in annual maintenance fee.

With Sterling Trust, you would pay $100 (0.1% x $100,000) in annual maintenance fee and $200 in Holding Fee (1 property) for a total of $300.

In this case, the better option is Sterling Trust.

If you own 2 properties, your annual fee with Sterling Trust will go up by $200 in holding fee; which make Sunwest Trust a better option because you do not need to pay the Processing Fee for purchasing the property (free 1 transaction per year.)

Conclusion: The higher the value of your account, the lower the annual maintenance fee you would pay with Sterling Trust (0.1% vs 0.5%); although you need to take into account the number of properties you own since you are paying $200 per property with Sterling Trust and NONE with Sunwest Trust.

Please evaluate your own situation to find which option better suits your need.

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