Self-Directed IRAs

An overview of Self-Directed Individual Retirement Accounts and how they can be used for real estate investing.

An IRA (Individual Retirement Account) is an entity that an individual can establish to hold and maintain funds that they intend to use for retirement.

The mainstream financial services industry has led most people to believe that funds in IRAs are limited to investments in stocks and bonds. False!

You can invest IRA funds in a wide variety of investments such as private placements and limited partnerships. IRAs can also loan money for mortgages, buy notes, own real estate, and just about any other type of investment. Your IRA investment options are only limited by the custodian that's managing your IRA. The key is using a Self-Directed IRA custodian. A self-directed IRA is an IRA in which the IRA owner is able to make investment decisions without having to get the custodian's approval.

The advantage of investing with a self-directed IRA is that all gains generated by the investment are either: tax-deferred until a distribution is taken (Traditional Self-Directed IRA); or completely tax-free (Roth Self-Directed IRA).

In a real estate private lending transaction where you're loaning Self-Directed IRA funds for a mortgage, you have the opportunity to secure the loan with that piece of property. This means that if the mortgage defaults, your IRA takes possession of that property and you can decide to sell it or lease it out, providing you with additional funds within your IRA. Returns are typically fixed based on what terms are negotiated at the origination of the loan.

In a real estate private placement, you're investing your Self-Directed IRA funds in an entity (typically an LLC) whose sole purpose is to own an investment property like an apartment building. Your IRA would have an ownership stake. Your IRA would receive a portion of any cash flow distributed back to the owners from the investment. Returns will vary based on the performance of the property and the managing partners.

If you're interested in opening a Self-Directed IRA, learning more about how they work, what you can and can't do by law, or the related tax implications, you should speak with a professional Self-Directed IRA custodian, attorney, or CPA. We can't help you with that.

However, if you're interested in investing Self-Directed IRA funds passively in real estate through private lending or an equity investment in an apartment complex, then that's something we can help with. Join our mailing list or reach out to us to learn more about what we do and how we structure real estate investment opportunities.

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