“How is that possible?” you may ask. Well, what used to be a secret
is now one of the hottest opportunities around, and it is being used by
regular folks everywhere! It is the “Self-Directed IRA.” There are a
million posts about self directed IRA’s already online. Most people by
now already know what a self directed IRA is, but if you don’t, here is a
simple definition. A self directed IRA is, by definition, an IRA
account where you can make investments in non-publicly traded investment
vehicles. Instead of being limited to stocks, bonds, mutual funds,
etc., you can buy real estate, invest in tax liens, private placements,
and much more.
So, what can’t you invest in?
The IRS defines a prohibited transaction as follows:“Generally a prohibited transaction is any improper use of your IRA account or annuity by you, your beneficiary or any disqualified person. Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of lineal descendant).”–Source IRS Publication 590 . In other words, you can’t make loans to yourself, your family, or buy real estate for personal use.
Why use a self directed IRA?
The number one reason for a self directed IRA is to provide private funding for real estate deals. The funds from a self-directed IRA can provide private lending for the real estate deals of others. Your money can be secured in first position on investment properties at a safe loan-to-value ratio like 60 or 65%. You can buy rental property to hold and rent, make high yielding loans to real estate investing professionals (Deeds of Trust), and of course join the millions of others in America making high returns in the fix and flip market.
How do I choose a Self-Directed IRA Company?
Although there are many to choose from in today’s crowded market, I still prefer to go with companies that have been doing this the longest and offer the lowest fees. The annual fees and per-investment fees can really get you so it is important to do your own research. I’ve found the following companies to be the best in my experience.
Equity Trust: visit "trustetc" site
Pensco: visit "penscotrust" site
Sterling Trust: visit "sterling-trust" site
How do I find good investment options for my-self directed Ira?
To learn more about self directed Ira’s, I suggest going directly to one of the 3 IRA company links I posted above. There you will find lots of explanations and tutorials on self-directed IRAs. Once you have settled on a custodian for your account, review the private lending area on Invesdoor site to get some good ideas.