Self-directed investing, as the name implies, often requires the account owner to have direct involvement with the investment process. Many self-directed plan investors combine their knowledge of real estate and IRS regulations to mold their accounts into formidable investing entities, capable of investing with the same speed and accuracy as their non-retirement (taxable) counterparts.
When purchasing real estate, the strength of your offer is in the details of your contract. Key items such as price, earnest money, inspection periods, objection deadlines, closing dates, and more will weigh heavily on the seller’s decision to move forward. Below are a few considerations explaining the importance of speed and how it can help best position your offer:
When a great deal hits the market, it usually doesn’t last. The quicker you can make your offer and get the property under contract, the better. NDTCO allows our clients to sign for the account (which is the true "buyer") when making offers, counter-offers, addenda, and disclosures. This empowers our clients to quickly pass through the negotiation and contract phases on favorable time and agreed to terms.
Earnest money is a standard feature of most real estate transactions. Many sellers evaluate earnest money when reviewing offers, especially in competitive environments. While sending earnest money out from your NDTCO account may take 1-2 business days, you can have a non-disqualified 3rd party pay the earnest money funds to satisfy a shorter time frame. NDTCO can reimburse the 3rd party with your account funds after the fact, keeping your timeline intact and your sellers happy as they are one step closer to closing.
Traditional home buyers use mortgages on their principal residence, a decision which adds significant time to close. Lenders typically require 45-60 days to perform their diligence, approve the loan, and make funds available at close, though even more can be required. Alternatively, most self-directed account investors are cash buyers and, with all required paperwork in order, your NDTCO self-directed plan can purchase property in as little as three business days. In the life of a real estate transaction, 60 days of uncertainty can be a long time to wait.
If there were a single administrative item that could slow your self-directed real estate investment process, it is the accuracy of the buyer’s name. For NDTCO clients, that name is:
NDTCO, Trustee, FBO [Client First & Last Name][Account Type]
For Example: NDTCO, Trustee, FBO John Client Roth IRA
Per the example above, this naming convention points to the fact that John’s Roth IRA, and not John himself, is the actual investor/buyer. If the contract is not made in the correct name of your account, you’ll need to draft a new contract. The IRS prohibits you from assigning a contract from you to your account by way of amendments or addenda. This mistake, while not common, is avoidable.
To set yourself up for the most success and avoid potential pitfalls, read our Real Estate Investing Guide. The guide covers the steps from offer to closing and includes links to all NDTCO forms you’d need to complete.