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Author: katiewa Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76082  
Subject: Re: self-directed IRA custodian Date: 4/10/2011 6:29 PM
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You would also be missing out on all the tax advantages like being able to take deductions for depreciation, property taxes, some maintenance, etc.

For us, rental real estate provides no tax advantages against our earned income.

For most asset classes you can easily find index funds with expense ratios of less than 0.25%.

One of the funds I will be transferring into my self-directed IRA is my Vanguard Index Fund, which has returned about 50%--over 15 years. I believe that is around 3%/year. It currently lists an expense ratio of .18%--pretty low. My best performer over that same 15-year period is my INVESCO Leisure Fund--10%/year, with an expense ratio of 1.4%

I worked up a spreadsheet to evaluate the fees at each of 5 custodians for my best-guess, hypothetical rentals and sales over a 5-year period, based on several interesting properties available right now. Entrust and Millenium worked out to .98% the first year, Pensco came in at .58%, APS at .72%, and Equity Trust at .29%. In all cases, the rate goes down as the value of my portfolio increases. With our local real estate market what it is, I should be able to do at least as well as my Vanguard Fund (probably as well as my Leisure Fund) without counting any appreciation on the real estate.

For us, real estate is something we enjoy. Our "comfort factor" is that we don't have to do all that well to out-perform our standard IRA holdings. Our safety net is that we still have a significant portion of our IRA's in the market.

Kathleen
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