How to make your money grow: Five ideas for your self-directed IRA

Many individuals end up accumulating more money in their Individual Retirement Accounts than in any other retirement savings vehicle (and sometimes even more than in any other non-retirement investment accounts) they have. How can you make your money grow like that?

Because of the increased number of investment opportunities within a self-directed IRA, particularly a Roth IRA with a custodian such as Quest Trust Company, self-directed accounts can be a great way to make your money grow. Here are five ideas on how to make your money grow in your self-directed Roth IRA.

Buy Tax Liens. One of the primary sources of revenue for local governments is residential and commercial property taxes. Unfortunately, many property owners are unable or unwilling to pay their taxes on time. In order to make sure that local government operations are not hampered by these delinquencies, liens are issued against the properties for these debts, and the liens are sold to investors. In this way, the government can get their money right away, while the investor collects the taxes plus an interest rate that accrues up to the time of payment. It’s unlikely that a property owner would be so late in their tax payments that an investor could eventually foreclose and take authorship of the property, but it is a possibility for even larger returns. This is a creative way to help make your money grow.

Invest in Farmland. While real estate is a popular investment option for self-directed Roth IRAs, many investors focus only on residential and commercial properties. Even investors who look towards undeveloped properties are likely to focus on purely speculative investments. But there is another option – farmland. High-quality farmland (and any other land put to an agricultural or grazing use) has the potential to make your money grow for current income as well as for the possibility for long-term capital growth.

Invest in Foreclosed Properties. Another popular real estate option for self-directed IRA investments is foreclosed real estate. Depending on what’s happened over the past decade in your local real estate market, and what you believe is likely to happen in the future, foreclosed properties could provide you with an opportunity to make your money grow for long-term capital gains,  as well as for a current income stream. Keep in mind that investing in foreclosures can involve commercial properties as well as residential real estate.

Make Loans. Making loans to third parties is another investment opportunity that’s permitted by the IRS regulations, but which traditional IRA custodians don’t allow their clients to do. These loans may be secured by real estate (i.e., mortgage loans) or by business or personal assets of the borrower.

Buy a Franchise. Franchising can be a good way to build long term value in your IRA. One of the big reasons that franchises are not as popular as other investments is that they can sometimes require significant up-front capital investments. If your self-directed Roth IRA balance is large enough, this might be a good way to achieve a measure of diversification in your overall portfolio.

Regardless of how you invest within your self-directed IRA, make sure you understand all of the legal and long-term tax consequences that may apply.

Quest Trust Company helps change people’s lives and financial future through self-directed IRA investment education. Quest Trust Company helps people invest in what they know best and build their financial future on their own terms.