Questions Every Investor Should Ask

Questions Every Investor Should Ask

Before Investing Self Directed IRA Dollars

 This information is offered by The IRA Club, Chicago IL 888-795-7950.

Countless people have enjoyed successful investments with their Self Directed IRA dollars and most investment sponsors and business borrowers are competent and ethical.  However, it is still a good idea to take precautions at the beginning and during the term of your investment.

Don’t feel intimidated. The money in your Self Directed IRA is “your money” and you have every right to ask questions until you are satisfied. If your questions are not given the respect or time you believe they deserve, walk away. There will always be other opportunities. Remember that you are in the driver’s seat. You control your Self Directed IRA and it’s your IRA money that the investment sponsor is asking for.

Write down the answers to the questions you ask and keep a copy of your notes.

  • Does this investment match your time table? (I.e. if you will need the money in five years don’t invest in a 15 year project)
  • Did the sponsor fully explain the risks?  (Every investment has risks)  Are the risks within your “risk tolerance”?
  •  Are the returns you are being offered “too good to be true”?
  • Ask for a “Use of Funds” statement or letter. (You want to know how they will be using your money)
  • Ask the “Order of payment”. (We know that business expenses must be paid first. After that, where is your return in the order of payments?)
  • Ask if the investment is registered with the SEC, or more likely with your State regulatory body. (If not, why not?)
  • Ask for the names and contact information of any other principles in the company. Don’t hesitate to ask the name of the company’s attorney.
  •  Do you understand how the business earns a profit?
  • Will you receive a “Dividend”, “Interest” or some other form of return?
  • Are there sales cost related to your investment? You want to know if less than 100% of your investment will be put to work. I.e. Will a portion go to selling costs?
  • How long has the Sponsoring Company been in this business? How much experience do they have?
  • Do you want to speak with former investors?
  • Does their business model make sense to you? Is this a workable business plan?

 

During the term of the investment:

  • Stay in touch: Call, visit and communicate with the sponsor. Keep informed regarding the progress of your investment.
  • Ask for regular Financial Statements. Don’t tolerate the sponsor saying “we are trying to save money so we don’t do monthly or quarterly statements”.
  • Be very wary of rolling investments. (I.e. This is when a payment is due to you or to your IRA and the sponsor offers to give you another note with a later maturity or offers you company stock as a substitute for a cash payment .) Insist on being paid the money you are owed and explain that once you have the money you will decide if you want to reinvest.

 

For more information on Self Directed IRAs call toll free 888-795-7950

 

IRA Club, 333 N. Michigan Ave  Suite 2220,  Chicago, IL  60601

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