What is a Checkbook IRA?

Updated: Jul 4, 2020

Today on the Passive Cash Flow Podcast we'll look into what a Checkbook IRA is, how to setup a Checkbook IRA, and overall best practices and rules. Find out more today on the Passive Cash Flow Podcast! The Passive Cash Flow Podcast is for beginner or experienced investors. Learn how you can diversify out of the stock market, own a part of an apartment building & start earning Passive Cash Flow! Peoples Capital Group has been helping passive investors build wealth in NJ real estate for 10 years. Visit to find out if you qualify to start earning passive income and pay less taxes via investing in real estate. IRA's and 401K's are accepted. -- #NJRealEstateInvesting #AaronFragnito #PassiveCashFlow #PCG


Aaron Fragnito: All right, ladies and gentlemen. Welcome back to the Passive Cash Flow show. I'm going to talk about, what is a checkbook IRA? I'm your host Aaron Fragnito, co-owner of Peoples Capital Group. We come out with a new episode every Friday at 8:00 AM, so subscribe to our YouTube channel. Peoples Capital Group on YouTube for videos every week and also to get more Passive Cash Flow shows here from Peoples Capital Group. Let's jump into today. What's our topic? Our topic is, what is a checkbook IRA? A lot of people have questions about self-directing their IRA into real estate or other asset classes and how is that done, what's the difference between a checkbook IRA account that you self-direct your IRA into or just leaving them with a custodian, what are the benefits of those two options. We're going to really dig into how to self-direct your IRA, the benefits of taking an extra step. If you need to do that as well, do you even need to create a checkbook IRA account or can you simply self-direct your IRA to a custodian who then moves into a passive investment, say, here at Peoples Capital Group? If you want to learn more about those passive investments by the way, go to We have more information there on how you can apply and try to qualify for one of our upcoming investment opportunities in a New Jersey apartment building to get awesome cash flow and tax depreciation, a nice strong equity cash-outs upon the refi cash-outs. Let's go into the details here. What is a checkbook IRA? I teach every month, multiple times a month really, how to self-direct your IRA. The process is quite simple. Let's say your IRA is with Merrill Lynch. If you have a 401(k), you can convert it into an IRA. Let's say you have 401(k) and convert it into IRA and it's sitting with Merrill Lynch right now. It's right in the index fund. It's making a solid 68% a year. What could possibly happen? It's the stock market, right? Well, we all know the stock markets had a good run and you want to diversify, diversify, diversify, so who knows where the next few years are going to bring us? That's what we do here at Peoples Capital Group. We help investors diversify out of the stock market into tangible real estate here in New Jersey. We buy within an hour in Manhattan. Not in Manhattan, but outside of Manhattan in New Jersey, in North Jersey. We play off the Manhattan market. We have a management company in-house, so our investors get a completely passive investment opportunity in New Jersey apartment buildings and get all the benefits of owning those buildings such as cash flow, tax depreciation, and large checks upon the refinance. How do investors do that? Well, a lot of them invest with their IRA. If your IRA is with Merrill Lynch, you're going to move it in your IRA custodian. You need to contact an IRA custodian first. There's plenty of IRA custodians. There's Next-Generation Trust. We do webinars with them. There is New Direction IRA. In fact, if you apply to New Direction IRA and let them know Peoples Capital Group had sent you over, they will wipe the $50 application fee, so there you go. This podcast just saved you $50. There's other IRA custodians. You have Equity Trust and you have other IRA custodians that are available and have different rules. Now, Equity Trust does not allow you to create a checkbook IRA account, which is the next step and other custodians do. Make sure when you're hiring IRA custodian, if you decide that you want to create an LLC that's owned by your IRA and managed by you that's called a checkbook IRA LLC account, make sure your IRA custodian allows you to do that because some of them don't allow you to do that because there's added risks to doing that. What a checkbook IRA LLC account is, an LLC that's owned by your IRA and it's managed by you. Let's say your IRA is with Merrill Lynch. You're going to call it Merrill Lynch. You're going to say, "Hey, Merrill Lynch. I hired a New Direction IRA." You've called up a New Direction IRA before this and you decided to hire them. You went over their fees. It's very affordable, generally less than $300 to start an account and move your capital into an IRA custodian. You contact a New Direction IRA. You hire them New Direction IRA and you are going to contact Merrill Lynch. Merrill Lynch are going to send the money over to New Direction IRA. Now, your IRA is sitting with New Direction and you have a couple of options with what to do with the capital at this point, with your IRA. You can invest in a passive apartment building with Peoples Capital Group. New Direction IRA will review the operating agreement. They'll have you sign off on the operating agreement and then wire the funds to the settlement company closing on the apartment building. Your IRA will own a piece of that apartment building and cash flow checks will go back to your IRA custodian every quarter and tax benefits that are a wash-through, but some benefits through an IRA and, of course, a big check upon the refinance. Basically, at that point, you don't have to go ahead and take this next step and create an LLC that's owned by your IRA and managed by you, but you can. That's called the checkbook IRA LLC account. That's what we're talking about tonight. Basically, your IRA custodian will move the capital into their IRA custodian account. At this point, you're going to guide them, do you want to start that LLC account? What's the benefit of that? Why would you even need to make this extra step? Because I just explained a scenario where you can self-direct to the IRA custodian and move into a passive investment that's a one-time transfer and then we're going to transfer funds back to your IRA custodian, build your portfolio, build your IRA over time in a more aggressive rate by investing in New Jersey apartment buildings of Peoples Capital Group. Let's say you want to flip a house and you want to invest passively at Peoples Capital Group. Okay. Well, if you want to flip a house, you're going to need money. You&#x