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Put Yourself in the Driver’s Seat with a Self-Directed IRA

One of the benefits of self-direction is the ability to diversify your portfolio beyond traditional, publicly traded assets. At Quest Trust Company (QTC), you can truly self-direct your IRA and invest in a multitude of private investments, locally and even internationally, putting the control back in your hands. In just 5 easy steps, you can open an account, fund it, and invest in what you know best!

Open an Account

With a Self-Directed IRA (SDIRA), you gain the power to steer your investment destiny and invest in a wide range of assets that suit your unique investment goals and risk tolerance. SDIRAs empower you to tap into alternative markets and explore different avenues.

As you venture into the realm of SDIRAs, our website is here to guide you through the complex world of alternative investing. From comprehensive educational resources to expert guidance and tailored solutions, we aim to equip you with the tools and knowledge necessary to make informed choices.

What are Alternative Assets?

  • Real estate and foreign real estate
  • Non-listed stocks/bonds (private equity and private debt)
  • Promissory notes
  • Tax deeds, tax liens, real estate investment trusts (REITS), oil and gas (mineral or water rights)
  • Cryptocurrencies
  • And much more!

5 Easy Steps for Purchasing Assets

  1. Open Your Self-Directed IRA
  2. Fund Your QTC Account
    • Make a contribution
    • Rollover an employer plan (401k, 403b, TRS, TSP)
    • Transfer funds from an existing IRA
  3. Find Your Investment 

QTC gives you the freedom to purchase almost any type of investment allowed by the IRS. With a QTC Self-Directed IRA, you are fully in control of your retirement assets. Remember to do your due diligence! QTC does not sell, recommend or endorse any investments. 

  1. You Direct QTC to Fund the Investment
    • Prepare the offer in the name of the IRA
    • Work with our highly trained transaction specialists to get your investment funded
    • The custodian (QTC) of the IRA has the sole authority to legally act or execute for the IRA
  2. Manage Your Investment

Use the QTC Investment Hub to manage your assets, pay expenses, and satisfy annual requirements. Borrowers and renters can make payments on our Online Payment Center.

 

Client Portal
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Explore the Power of Real Estate Investments in Your IRA

Overview

Real estate is one of the most popular alternative investments for your Self-Directed IRA. The stock market can be very unpredictable, and real estate allows investors to diversify their portfolio and mitigate risk. With a Self-Directed IRA, you can invest in what you know best, whether that be land, single family homes, mobile homes, and more. Enjoy the flexibility to find the right type of real estate investment to meet your needs with your Self-Directed IRA. 

Purchasing real estate with your IRA has many benefits, and while it may be a newly discovered investment opportunity for investors, it’s been a possibility for investment since the 1970s with the creation of IRAs. When the IRA invests in real estate, it holds title to your assets, and any earnings on your investment will return to your IRA free of capital gains taxes because it is owned by the retirement account and not the individual. Depending on the type of retirement account that you have, you may not pay taxes on earnings until you take a distribution during retirement. Using a Self-Directed IRA to invest in real estate is also a great way to pass down generational wealth to your children or grandchildren, and with a Self-Directed Roth IRA, the asset can be passed to the beneficiary tax free. Don’t forget to consult with a tax professional for specific questions.   

Because these accounts are self-directed, investing in real estate with your Self-Directed IRA comes with some responsibilities. As the investor, you are responsible for finding the deal and doing the proper due diligence to protect your investment. Also, you must understand who are the disqualified persons you are prohibited from dealing with in your IRA. 

Types of Real Estate:

  • Residential Rental Property
  • Fix-and-Flips
  • Commercial Property
  • Improved or Unimproved Land
  • Tax Liens
  • Deeds
  • Mortgage Notes (See Private Lending Page)
  • Real Estate Auction
Asset Purchase & Management

Asset Purchase

Preparing the Offer

Once you have identified the investment property, work with an attorney or real estate broker/agent to prepare a real estate purchase contract listing the IRA as the buyer.  The contract, deed, or legal documents should not list you personally as the buyer, but should instead list Quest Trust Company FBO [Account Holder's Name][IRA or HSA or CESA] #[Account Number]. Quest will sign and execute on your behalf after we’ve acquired your “read and approved” on the documents. Ready to purchase an asset? The QTC Investment Hub makes it easy to start the funding process! Click here to get started. 

Submit via QTC Investment Hub. 

Clear to Close 

Once an offer is accepted, closing documents are prepared to close the purchase of real estate. Remember that the deed should be titled in the IRA’s name. When the documents are ready, upload them via the QTC client portal. Pursuant to the terms of the contract, QTC will execute the documents and then wire the funds for the purchase.  Submit via QTC Investment Hub. 

Buying Debt-Financed Real Estate

Real estate property can be purchased with a non-recourse loan. Investment profits from a debt-financed property may incur UBIT/UDFI. Neither you nor any other disqualified person is permitted to guarantee the debt in your IRA. QTC is not a lender and does not provide financing.

Asset Management

Use of Property Manager vs.  Do it Yourself

The most important thing to know is that all income, including rental or profit from sale, and all expenses related to the investment, must be paid to and from the IRA.  Whether you choose to enlist a property manager or take on property management yourself, it is critical to be well-versed in the prohibited transaction rules. Make informed decisions to manage your self-directed IRA assets to safeguard your investment and future gains. 

Other Responsibilities to be Aware of:

  • Annual Fair Market Valuations (FMV): To comply with the regulations of the Internal Revenue Service, a Fair Market Valuation must be submitted for each non-cash asset in your account annually.  Fair Market Valuations are based on the value of each investment as of December 31st of the reporting year. You can submit your Fair Market Valuation and supporting documentation online by logging into your Client Portal.
  • Income from Investment: When your IRA owns an asset, all profit/earnings must go back into your IRA. IRA Earnings cannot be deposited into your personal accounts. Your payees can make deposits online by visiting the QTC Payment Center.
  • Expenses: All expenses associated with this investment (e.g., property taxes, utilities, HOA dues) must be paid through the IRA. It is good practice to leave a small balance available for recurring expenses (property taxes) and unexpected events. Authorize payments and manage expenses with the QTC Client Portal.  
  • Property Insurance: Insurance for a property held in your account is a layer of protection you may want to consider. There are many types of insurance such as hazard, flood (where necessary), or title insurance to review. Owning properties in your Self-Directed IRA  is different than owning in your own name and comes with some special considerations. All expenses related to your IRA owned investment can be managed with your QTC account.
Asset Sale & Resources

Asset Sale

Investing in real estate with an IRA offers a few different exit strategies. You can choose to sell your property, owner finance to a new owner, or even distribute the property to yourself. Each strategy has its own benefits and considerations, allowing you to be in the driver’s seat to reach your financial goals and enjoy the potential long-term benefits of self-directing your IRA.

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Take Control of Your IRA: Loaning on Your Terms

Overview

Promissory notes are popular investments for self-directed IRAs, and come in the form of creating new notes, purchasing performing or non-performing notes, investing in convertible notes with private companies and more. When loaning from your Self-Directed IRA, you become the bank. A promissory note is a loan, or in other words a written and signed promise to repay a sum of money. These investments can not only be profitable from passive-style investing, but they also allow you to use your expertise and negotiate the terms including the loan amount, interest rate, initial payment date, maturity date, and payment or amortization schedule. Once you have the terms set, you can direct QTC to fund the loan on behalf of your account. 

Types of Financing:

  • Mortgage Note/Note and Deed of Trust
  • Business Loans
  • Equipment Financing (UCC-1)
  • Fix-and-Flip Loans
  • Convertible Notes
Asset Purchase & Management

Asset Purchase

With any investment, it's important to remember that the IRA is the investor. With that in mind, your QTC account would be the lender. It is important that all paperwork is prepared to reflect the rightful ownership. The lender should be listed as Quest Trust Company FBO [Account Holder's Name][IRA or HSA or CESA] #[Account Number] and use our EIN number and corporate address.

Promissory notes typically include the amount loaned, date of loan, monthly payment amount and due date (or lump sum due date), interest rate being charged and type of rate (annual, simple or compound interest), default clause, acceleration clause, attorney and collection fee provisions, place of payment (Custodian or servicer), late penalty fee, and description of collateral securing the loan. 

If the loan is secured by real estate, you may consider obtaining a title insurance policy in favor of the IRA (lender) protecting the title position of the deed of trust/mortgage. 

 

Ready to purchase an asset? The QTC Investment Hub makes it easy to start the funding process! Click here to log in.

Top 4 Considerations When Lending From Your IRA

  1. An IRA cannot loan money to the IRA owner or family members (disqualified people).
  2. Do not loan on something you wouldn’t want to own. 
  3. Do not loan to someone you would feel uncomfortable foreclosing on.
  4. If the loan goes into default, act immediately.

Asset Management

The most important thing to know is that all income, including note payments or payoffs must be paid to the IRA.  Whether you choose to enlist a note servicer or take on the management yourself, it is critical to be well-versed in the prohibited transaction rules. Make informed decisions to manage your Self-Directed IRA assets to safeguard your investment and future gains. Quest Trust Company is a recordkeeper and will notify you of deposits being made, but does not monitor the payments for timeliness. 

Note Modifications:

After funding a promissory note, there may be circumstances that call for a note modification. Once you and the borrower have agreed to the modified terms, you can update the terms and conditions and provide your custodian with a copy of the modification. 

Other Responsibilities to be Aware of:

  • Annual Fair Market Valuations (FMV): To comply with the regulations of the Internal Revenue Service, a Fair Market Valuation must be submitted for each non-cash asset in your account annually.  Fair Market Valuations are based on the value of each investment as of December 31st of the reporting year. You can submit your Fair Market Valuation and supporting documentation online by logging into your  Client Portal.
  • Income from Investment: When your IRA owns an asset, all profit/earnings must go back into your IRA. IRA earnings cannot be deposited into your personal accounts. Your payees can make deposits online by visiting the QTC Payment Center.
  • Expenses: All expenses associated with this investment (e.g., property taxes, utilities, HOA dues) must be paid through the account. It is good practice to leave a small balance available for recurring expenses (property taxes) and unexpected events. Authorize payments and manage expenses with the QTC Client Portal.
Secured vs Unsecured & Resources

Secured vs Unsecured

The main difference between secured and unsecured loans is collateral. As the name implies, a secured loan requires collateral to back the loan. If the borrower defaults, the lender is able to sell the collateral to satisfy the amounts owed. Unsecured debt is not backed by collateral. If you default on unsecured debt, the lender has no property to seize to recoup its losses. While all investing involves a certain amount of risk, unsecured loans pose additional risk and should be closely evaluated.

Wind Turbines and solar farm

Unlocking Opportunities: Passive Investing in Private Entities Through Your IRA

Overview

Private entities refer to companies or businesses that are privately held and not publicly traded on stock exchanges. These entities are not available for trading by the public, and their shares are not listed on any stock market. Instead, ownership of these companies is limited to a select group of individuals, founders, employees, or private investors. 

Private entities can include startups, small businesses, and even larger corporations that have chosen to remain privately held. Sometimes private entity investments come with higher risks and liquidity constraints, but investing in private entities can offer opportunities for higher returns, as these companies often have significant growth potential.

A note on due diligence: You must always do your due diligence before investing your IRA in any entity. Your custodian will not make any attempt to investigate the entity or its managers, directors, officers, or trustees. Even if you go with your custodian because of a referral by an investment advisor or provider, due diligence is 100% your responsibility.  

Common Private Entities:

  • Limited Liability Companies (LLC)
  • Limited Partnerships (LP)
  • Regulation D Investments
  • Hedge Funds
  • C Corporations 
  • Joint Ventures (JV)
  • Real Estate Investment Trusts (REIT)
  • Start Ups
  • Stock Options/Non-Publicly Traded Company Ownership
  • Intellectual Property Patent Interest
  • Private Placement Memorandums
Asset Purchase & Management

Asset Purchase

The first step in funding this transaction is to make sure you have the vesting or titling placed in the name of the IRA. Any subscription agreements/operating agreements must be titled as follows: Quest Trust Company FBO [Account Holder's Name][IRA or HSA or CESA] #[Account Number]

An IRA should not buy shares/units of a company owned 50% or more by disqualified persons. IRC 4975(e)(2)(G). IRA holders should also be cautious to avoid a self-dealing prohibited transaction if investing into a company where they (or other disqualified persons) have significant ownership or serve as an officer, director, or highly compensated employee.

IRAs invested into operational business that do not pay corporate taxes may be subject to a UBIT tax. Ready to purchase an asset? The QTC client portal makes it easy to start the funding process via the QTC Investment Hub! Click here to log in.

Asset Management

The most important thing to know is that all income, including dividend payments or payoffs must be paid to the IRA. Make informed decisions to manage your self-directed IRA assets to safeguard your investment and future gains. 

Other Responsibilities to be Aware of:

  • Annual Fair Market Valuations (FMV): To comply with the regulations of the Internal Revenue Service, a Fair Market Valuation must be submitted for each non-cash asset in your account annually.  Fair Market Valuations are based on the value of each investment as of December 31st of the reporting year. You can submit your Fair Market Valuation and supporting documentation online by logging into your Client Portal.
  • Income from Investment: When your IRA owns an asset, all profit/earnings must go back into your IRA. IRA earnings cannot be deposited into your personal accounts. Your payees can make deposits online by visiting the QTC Payment Center.
  • Expenses: All expenses associated with this investment (e.g., property taxes, utilities, HOA dues) must be paid through the account. It is good practice to leave a small balance available for recurring expenses (property taxes) and unexpected events. Authorize payments and manage expenses with the QTC Client Portal.
UBIT & Resources

UBIT

If your IRA operates a business, rents personal property, or owns debt-financed property either directly or indirectly through a non-taxed entity such as a grantor trust, a partnership, or an LLC taxed as a partnership, the IRA may be subject to tax on the profits from that entity. It is not illegal to own a business or debt-financed real estate in an IRA, it's just taxable. This can still be a great way to build your retirement wealth. 

If UBIT or UDFI tax is due, the IRA owner must file a 990T tax return for the IRA to the IRS. The IRA is responsible for the tax.

Resources

Accredited Investors: For an IRA to qualify as an accredited investor, the IRA owner must qualify. Here are some additional resources for you as you complete your private entity investment.

Watch tutorials on our YouTube page.

Investor Awareness: Due Diligence with Private Entities

IRS Notice 2004-8 Prohibition on Roth IRA Value Shifting

cryptocoins on gold background

Navigating Crypto Investments with Your IRA

Overview

Diversify your retirement portfolio by investing in cryptocurrency with your Self-Directed IRA. Cryptocurrency is a form of virtual or digital assets that can be used for monetary purposes without reliance on banks.  In recent years, cryptocurrency or “crypto” as it has been widely known, has increased in popularity for investors. Cryptocurrency functions on a network distributed across many computer servers and uses cryptography to secure and verify transactions, existing only electronically. The peer-to-peer aspect enables anyone to send and receive payments from anywhere. Cryptocurrency can be an attractive investment because of its ability to diversify one’s investment portfolio way beyond the usual publicly traded assets, however as with many investments, cryptocurrency has faced ups and downs and volatility.

Common Cryptocurrencies:

  • Bitcoin
  • Ethereum
  • Litecoin
  • And much more
Asset Purchase & Management

Asset Purchase

Quest Trust Company has partnered with the Chicago Board Options Exchange “CBOE” to allow our clients to diversify their nest egg and invest in Cryptocurrency. When you are ready, you direct QTC to fund a trading account with CBOE. Once that account is established, you can trade and hold cryptocurrency through CBOE. 

Steps to Get Started Investing in Cryptocurrency in Your Self-Directed IRA:

  1. Establish your account with Quest Trust Company (QTC).
  2. Complete the CBOE onboarding process online and select QTC as your IRA provider on the compliance questions.
  3. Use the information you receive in your welcome letter from CBOE when submitting funding instructions to QTC. 
  4. QTC will process your investment and send funds to your CBOE account
  5. Invest in cryptocurrency in your CBOE account

Asset Management

The most important thing to know is that all income, including dividend payments or payoffs must be paid to the IRA. Make informed decisions to manage your Self-Directed IRA assets to safeguard your investment and future gains. 

Other Responsibilities to be Aware of:

  • Income from Investment: When your IRA owns an asset, all profit/earnings must go back into your IRA. IRA Earnings cannot be deposited into your personal accounts. Your payees can make deposits online by visiting the QTC Payment Center.
  • Annual Fair Market Valuations (FMV): To comply with the regulations of the Internal Revenue Service, a Fair Market Valuation must be submitted for each non-cash asset in your account annually.  Fair Market Valuations are based on the value of each investment as of December 31st of the reporting year. You can submit your Fair Market Valuation and supporting documentation online by logging into your Client Portal.
Oil Derrick

Financial Freedom Awaits: Explore the Possibilities of Other Alternative Investments

Overview

Looking to diversify your investment portfolio? Consider exploring the world of SDIRAs and unlock a plethora of alternative investment opportunities beyond the traditional options like real estate, private entities, and promissory notes. The possibilities are endless!

Take the leap into the world of asset diversification with an SDIRA, and uncover a universe of investment opportunities beyond the mainstream options. Start your journey towards financial freedom, explore new markets, and unleash the full potential of your retirement funds today.

Examples of Other Investments:

  • Oil and Gas 
  • Mineral Rights
  • Auction Requests
  • Options
  • Mobile Homes (not attached to Real Estate)
  • Buy and Lease Medical Equipment
  • Livestock
  • Theatrical/Movie Productions 
  • Food Trucks
Asset Purchase & Management

With any investment, it's important to remember that the IRA is the investor. With that in mind, your QTC account would be the buyer or investor. It is important that all paperwork is prepared to reflect the rightful ownership. The buyer should be listed as Quest Trust Company FBO [Account Holder's Name][IRA or HSA or CESA] #[Account Number] and use our EIN number and corporate address.

Ready to purchase an asset? The QTC Investment Hub makes it easy to start the funding process! Click here to log in.

Asset Management

The most important thing to know is that all income, including dividend payments or payoffs must be paid to the IRA. Make informed decisions to manage your self-directed IRA assets to safeguard your investment and future gains. 

Other Responsibilities to be Aware of:

  • Income from Investment: When your IRA owns an asset, all profit/earnings must go back into your IRA. IRA Earnings cannot be deposited into your personal accounts. Your payees can make deposits online by visiting the QTC Payment Center.
  • Annual Fair Market Valuations (FMV): To comply with the regulations of the Internal Revenue Service, a Fair Market Valuation must be submitted for each non-cash asset in your account annually.  Fair Market Valuations are based on the value of each investment as of December 31st of the reporting year. You can submit your Fair Market Valuation and supporting documentation online by logging into your  Client Portal.

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Log into your Client Portal to access all your SDIRA investments and account information. Upload new investments, manage old ones, and prepare for any upcoming deadlines online HERE.

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Managing your Solo 401k is quick and simple. Click here to access your online dashboard to manage your 401k account and submit your investments.

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