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

Once you become interested in self-directed investing with 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 alternative assets, it is difficult to know where to start – especially when you don’t have six-figures – or even four- or five-figures - to invest.

It is 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 access to a large amount of money.

Unfortunately, we can’t all be that lucky – or that financially stable. So, why should we consider a self-directed IRA? One of the benefits of self-directed investing is that you do not have to wait for 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 or lease options, and tax liens. More information is available below:

Promissory Notes are secured or unsecured loans of any amount that you make to an individual. You charge interest on the loan and collect both the principal amount of the loan and interest monthly or 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 self-directed investing. 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 is negotiable – and usually under $3,000. You can explore the private bank concept with friends or family in order to build your investing power.