As a passive investor, my favorite time of the month is when the distributions start flowing into your bank account or your self-directed IRA (SDIRA) custodian account. It’s kind of like payday for a W-2 or the first of the month as an active investor when your tenants pay their rent, but it’s even better: YOU DON’T HAVE TO DO ANY WORK TO GET THESE DISTRIBUTIONS other than the due diligence on the front end before your initial investment. This month, I had four new distributions start hitting my accounts, and I can’t tell you the excitement my wife and I had when we saw the totals on the right of our tracker.
In this brief article, I’ll outline what my monthly tracking process looks like, and when you can expect to receive your distributions.
How I Keep Track of My Investment Distributions
First, it’s important to note that each of your operators will likely give you a portal to manage your specific investments with them, but I’ve not found a good online solution to capture all of this information for multiple operators so I’ve created my own manual tracking process.
Each time I make a new investment, I capture the investment details in a simple tracker in Excel. I list the operator name, investment amount, anticipated returns, hold time, estimated first distribution date, last distribution date and amount, and total returns. I also have a notes section to capture specifics that could be important later.
As I receive monthly or quarterly email communications from my operators, I update the tracker with anticipated payment dates and amounts, and then I verify when those deposits hit my checking account or my SDIRA custodian account.
That’s it! A few simple tasks each month to verify everything is going as planned, and you can leave the rest to the operators.
When Should You Expect to Receive Distributions?
It’s important to ask the right questions on the front end of the investment. Transparently, I didn’t even know to ask these questions early on, and I’ve learned a few lessons from those errors.
In my experience, most operators pay either monthly or quarterly distributions. Personally, I prefer monthly distributions because it is easier to manage cashflow now that I’ve left my W-2 employment. What seems to vary the most is how quickly you will start to receive distributions. I have some investments that I’ve not received a distribution in in over eight months and others where I received the first distribution within six weeks of my wired funds.
There is not a right or wrong way for operators to schedule their distributions, but it is important to know what the planned distribution schedule will look like for each investment. It’s also important to note that the timeliness of your distributions will also impact your internal rate of return (IRR).
Whether you choose to use a tracker similar to mine or not is up to you, but I suggest that you have some type of strategy in place and use it regularly. Over time, distribution time will become more and more exciting as you continue to decrease your dependence on your W-2 and shift a larger portion of your traditional investments over to this space.
