Self-Directed IRAs in the Spotlight

By Heather Taylor0 Comments
Self-directed IRAs continue to receive attention in the mainstream media, a possible sign that more investors are discovering this retirement account and using it as a way to diversify their portfolios.

A recent Fox Business online article calls self-directed investing a “secret IRA method that opens up new ways to save for retirement.” It describes how investors can “go outside the box” with this type of retirement account and invest in assets including real estate, tax liens and private loans. 

The article outlines an example of a self-directed real estate investment:

Consider a rental home, for example. If you bought a home for $100,000 with self-directed IRA funds and netted $500 per month — or $6,000 per year — in rental income after expenses, this profit could be tax-deferred if you have a traditional IRA or tax-free if you have a Roth IRA. Your net profit upon selling the home would also be tax-deferred or tax-free.

Self-directed IRAs and real estate: A step further
An article by bestselling author Dean Graziosi on the Huffington Post website goes into further detail about how investors are using self-directed IRAs for real estate, describing how turnkey real estate provides investors with a way to invest in rental real estate without the added work of being a landlord.

Basically, these companies buy a property, rehab it, and then sell it to an investor who rents it out as a long term investment. Some also place a tenant before the sale with rent that will generate a positive cash flow, even with a mortgage. These companies also manage the property. The investor who wants to invest in rental property without searching out homes, doing rehab, finding tenants and handling management find this an attractive option.

These investments, when made in a self-directed retirement account, can be beneficial because of the tax advantages the accounts provide. Graziosi also points out that these accounts are only available through certain custodians properly regulated to hold them. Traditional IRA providers such as Fidelity and Merrill Lynch don’t offer self-directed IRAs.  

As with any investment, due diligence is prudent when using your IRA for real estate investments, Graziosi says. You’ll want to know a little about the company you’re dealing with, as well as the state of the rental market where you’re investing.
Discover how self-directed investing could help diversify your retirement savings. Schedule a free, no-obligation one-on-one IRA checkup with one of our Senior Account Executives to learn about all of the options available.