Three Ways to Get Your Self Directed IRA Started for Less Than $3,000

Once you become interested in self directing your IRA, your next question probably will be “Where do I start?” While there is a wealth of information available online regarding different types of non-traditional assets, it’s difficult to know where to start – especially when you don’t have six-figures – or even four- or five-figures – to invest.

It’s easy enough to find case studies about people who made millions off their first property investment, but that’s easier to do if you have a nice chunk of change in your pocket to start.

Unfortunately, we can’t all be that lucky – or that financially stable. So why should we even bother considering a self directed IRA? One of the benefits of self directed investing is that you don’t have to land a windfall in order to get started and begin growing your wealth. There are quite a few options available that are perfect for beginning investors or for individuals who simply don’t want to put all of their eggs in one basket.

A few of the more common investments, which often require less than $3,000 to get started, include promissory notes, real estate and lease options, and tax liens. More information on these options is below:

Promissory Notes are secured or unsecured loans of any amount that you can make to an individual. You can charge interest on the loan and collect both the principal amount of the loan and interest when the note comes due.

Real Estate and Lease Options provide the buyer with the right to buy a property for a specified price during a specified period of time. The lease option allows the buyer to rent or lease the property during the time he or she owns the option. The buyer of the option can decide either to purchase the property or sell the option to another individual for a profit. Because the buyer enters into an agreement with the current owner of the property, the purchase price of the option is negotiable.

Tax Lien Certificates are another option to explore if you have limited funds or are new to the self-directed investing world. A tax lien certificate is a first lien on property for which the current owner has not paid property, assessment or other state and federal taxes. As an investor, you can purchase the certificate, usually through a county auction, and collect your original investment plus interest when the owner or other interested party pays taxes on the property.

All of these are viable first investments because the amount needed to purchase them is negotiable – and usually under $3,000. If you have friends who might also be interested in self-directing, you can explore the private bank concept in order to build your investing power.

So even if you don’t think you fit the idea of the prototypical self-directed investor, you can still benefit from what a self directed IRA has to offer. With the proper guidance, you could be on your way to a four-, five- or even six-figure or more portfolio.

Disclaimer: Equity Trust is a passive custodian and does not provide tax, legal, or investment advice. It does not endorse or recommend any contributor, company, or specific investments. Any information communicated by Equity Trust Company is for educational purposes only and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with your legal, tax, and accounting professionals.