A self-directed IRA has some distinct differences from an IRA held at a traditional type of custodian. Generally, with traditional custodians, investments are limited to stocks, CDs, bonds, mutual funds, and other related types of investments. However, a self-directed IRA provides a broader range of choices, allowing account owners to diversify their holdings with a variety of investments.
1. Real Estate
You can use your self-directed IRA to invest in real estate, but there are stipulations to keep in mind. You can’t take up residence on the property, even part-time, and you cannot use personal money to pay for any portion of the investment. Taxes, insurance, repair costs, and everything else must be funded by your self-directed IRA account.
2. Promissory Notes
Promissory Notes are an agreement between lender or borrower. They can be secured or unsecured. Secured meaning there is some type of collateral should the borrower default. There are also other types of notes, for example, Convertible notes: where once the note matures the lender has the option to either take the earnings or convert it to shares of the company. Typically we see notes secured by real estate where the lender will lend X amount to a borrower and charge interest-only payments or an amortized schedule to pay off the principal plus interest. The notes are always completely drafted based on the lenders and borrowers terms.
3. Private Companies
Another possibility that should be considered is investing in a private company. You can use your self-directed IRA funds to invest in a commercial business, such as a gas station or retail store, but make sure to consult your financial planner throughout the process. Much like investing in real estate, this option requires that you obey the guidelines published by the IRS. One example is that you can’t earn profits in the present; any gains must go directly into your retirement account.
To learn more about any of these options, or to discover more of the investment opportunities your self-directed IRA provides, contact us to get in touch with an IRA specialist. With a Quest self-directed IRA, you may discover a more profitable way to diversify your investments and start building a better future.
Does Quest handle brokerage of stocks? If so, might you point me to the information on this site to see associated charges and fees?
Thank you,
Great Question! Quest does not handle the brokerage of publicly traded assets. What we see a lot of our clients do is have an account at a brokerage firm for stock trading and one with us for their private investments. This is a great way to diversify your portfolio as well. If you would like clarification on the process to transfer money in and out , do not hesitate to give us a call.