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Investor Insights Blog

Passive Investment Opportunities for Your Retirement Account

July 29, 2020
15-Minute Guide to Private Entity Investing with a Self-Directed IRA
I don’t know where else I can get 10-percent ROI with the level of risk I’m getting.
Guy, Equity Trust Client

Some examples include mortgage notes, car loans, or rehab/construction loans.

Promissory notes allow individuals or organizations to receive funds for a project or business without necessarily having to go through a bank. Investors may find promissory notes to be a beneficial investment as a more passive strategy.

For example, Equity Trust client, Guy, wanted a more hands-off approach to investing and found a hard money lending opportunity online.

Read Guy’s Note Investing Story

Notes can be structured in several ways:

1. Secured

Secured notes have an asset pledged as collateral, and collateral can be claimed to recoup the money borrowed, in case of a default.

Security for the loan can be real property, mobile homes, corporate stock, etc..

2. Unsecured

If a note is unsecured, there is no collateral to repossess in the event of a default.

3. Draw Notes

Provides the borrower funds through multiple payments, also known as draws. Draw notes may be secured or unsecured. Also commonly known as construction loans.

Peer-to-Peer Lending (P2P Lending)

Peer-to-peer lending is a way for investors to provide personal loans to another individual, unsecured. It can also be called “social lending” or “crowd lending.”

There are various P2P lending websites that connect lenders directly to borrowers, like crowdfunding, and investors can choose to invest as little or as much money as they want.

Rental Properties

Possibly one of the most popular passive income investments is real estate because it provides investors with extra cash flow. Rental properties specifically offer investors passive income with a monthly fixed amount of money.

As a general example, if a real estate investor rents out a single-family home for $1,000, he/she can guarantee they will receive that $1,000 each month for the duration of the lease. Different variables may come into play in these situations and it’s important to perform due diligence on your investments and vet out any potential tenants before choosing who will be your renter.

Why Utilize a Self-Directed IRA for a Passive Income Investment Opportunity?

A self-directed IRA, Roth IRA, HSA, CESA, or small business plan offers the opportunity to invest in a broader spectrum of investments, such as the passive income investments listed above, while keeping the investments in a tax-advantaged environment.

To set up a self-directed retirement account with Equity Trust visit myEQUITY and start the process today. You can also visit How to Get Started for more information. Or simply schedule a free, one-on-one consultation with an Equity Trust Senior Account Executive.

Some advantages of self-directed IRAs include:

  • Tax-deferred or tax-free profits
  • Investment diversity (it is possible to invest in an array of assets in your retirement account)
  • Potentially building wealth for future beneficiaries

After you open your account with Equity Trust, the first step of transferring your funds involves contacting your current custodian regarding the transfer. If you don’t have that information, an Equity Trust specialist can contact your current custodian while you are on the line. If the current custodian requires Equity Trust to initiate the transfer process, you must complete and submit an Equity Trust Transfer From along with a recent statement from your current custodian. The Transfer Form can be submitted when opening your account at Equity Trust, or any time thereafter. You must include a Medallion Signature Guarantee Stamp. Once the Transfer Form has been received, Equity Trust will sign and submit the form to the transferring custodian.


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