Self-Directed IRA Investment Options

Increase your earning potential by unlocking investment opportunities only available to SDIRA account holders.

Take Back Your Investment Power

Invest your hard-earned retirement funds how you see fit. Unlike IRAs offered through banks and brokers, where you simply check a box indicating which stocks and mutual funds you want, a self-directed IRA allows you to directly pick, buy, and sell assets in your account.

You also gain the freedom to invest in assets that you can’t invest in without a self-directed IRA. Here are just a few of your options.

Invest in Real Estate Properties of All Kinds

Real estate is the most popular investment opportunity in self-directed IRAs. You can invest in a range of properties: single- and multi-family homes, land, and commercial, rental, and international properties.

You also do not have to purchase properties outright. Although you can make a direct purchase using cash from your IRA, you can also use your IRA to get a non-recourse loan to buy investment properties or bring in another IRA or individual(s) to partner on the investment. Some investors establish a limited liability company (LLC) with IRA funds and use the LLC to buy the property.

Mortgage Notes

Want to invest in real estate without the hassle of looking for a property, renting it, and maintaining it? Mortgage notes, also called trust deeds, allow you to lend money to another individual to purchase real estate. Called private financing, this arrangement means the borrower will repay the lender directly instead of going through a bank. 

Mortgage note terms specify the principal amount, repayment schedule, interest rate(s), and type of interest (fixed or variable). If the borrower defaults, you can take collateral.

Real Estate Investment Trust (REITs)

A real estate investment trust owns and usually operates income-producing real estate, including residential, industrial, and commercial properties. Some REITs own real-estate debt, like mortgages.

Although you can buy shares of publicly traded REITs like any other stock, private REITs are not traded on any exchange. You can, however, buy and sell REITs with a self-directed IRA. 

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Invest in Companies that Offer the Potential for High ROI

Private placements are generally offered by privately held companies, partnerships, and small businesses to a small audience of investors. This allows business owners to gain access to capital without going through the bank, and it allows you, as the investor, to diversify your portfolio with the added potential of seeing a high return on investment.

Note: Private placements are not registered with the Securities and Exchange Commission. As such, they come without some of the protections (disclosures, regular reports) that apply to investments registered with the SEC.

Types of Private Placements

You can use your SDIRA to invest in private placements, such as:

  • Limited liability corporations (LLCs) 
  • C corporations 
  • Limited partnerships (LPs) 
  • Pooled investment funds 
  • Hedge funds 
  • Startups 
  • Small businesses 
  • Equity crowdfunding 
  • REITs (see Real Estate) 
  • Convertible notes 
  • Land trusts

Speed Your Transactions

Increase the speed and flexibility with which you make purchases. When you establish an LLC that is owned by your IRA, you get access to your IRA funds via an IRA-owned checking account.

IRAR Trust does not sell or create LLCs. You will need a licensed financial professional to create one. The IRS still requires you to have a custodian in order to have a Checkbook IRA, but you do not have to tell your custodian to make the purchase on your behalf. For time-sensitive transactions like foreclosures and auctions, the time saved can make or break the deal.

Reduce Your Investment Fees Even Further

With a Checkbook IRA, you stand to save on fees even further. Since the annual IRAR fee is charged per asset, your LLC is charged as one asset—regardless of the number of assets the LLC owns. You’ll also save on transaction fees because you’re taking on the record-keeping.

A Flexible Way to Lend Money

A promissory note is a promise to pay, making it a type of loan. If you find an individual or entity who wants to borrow money, you can lend money via a promissory note. You and the borrower have the flexibility to agree on the terms and how the payments will be made. Documentation is typically filed at a county recorder’s office.

There are two common types of promissory notes:

1. Secure notes: Backed by collateral. If your borrower fails to repay you, you can take the collateral (often real estate) to pay the note back. 

Mortgage notes are a popular type of secure note. As with other investment opportunities, you can include more than one lender on a promissory note. However, the first lender is the first to be paid back. If you are a subordinate lender, you are repaid after the first lender receives the full payoff.

Although you can lend funds directly from your IRA, you can also buy notes from brokers or private parties. All payments on the note go directly to your retirement account.

2. Unsecured notes: Not backed by collateral. These are riskier because you have no easy way of being repaid if your borrower doesn’t pay.

Additional Asset Types You Can Hold in a Self-Directed IRA

Beyond the asset types mentioned above, such as real estate and promissory notes, there are additional investments you may consider:

  • Energy, oil, gas 
  • Tax lien certificates 
  • Accounts receivable financing 
  • Building bonds 
  • Joint ventures 
  • Life settlements