What Type of Investments Qualify for a Self-Directed IRA? Real Estate - An investor could purchase vacant land, residential or commercial property, rehab properties, properties in the foreclosure process with IRA. Any income (sale or rental) would flow back to the IRA, tax deferred. Any expenses, such as property taxes, association maintenance dues, etc. would be paid by the IRA Private Mortgages – Self-Directed IRA may hold a mortgage. All mortgage payments flow back to the IRA, tax deferred. Most hard money loans are made at 70% or less of the fair market value of the property. If you foreclose on a hard money loan, the IRA will have acquired a property with substantial equity while the investor did all the work of finding and rehabbing the property! Promissory Notes - An IRA can loan money via promissory note. These notes can be secured or unsecured. Secured notes are backed by collateral, providing the lender increased assurance of return of the loan amount and interest, such as mortgages and deeds of trust. Unsecured notes are not backed by collateral. Partnerships / LLC’s - IRA investment in conjunction with other investors. In many cases, the group of investors will form a partnership or LLC. Partners in a “partnership” share equal responsibility for the company's profits and losses, and its debts and liabilities. The partnership itself does not pay income taxes, but each partner has to report their share of business profits or losses on their individual tax return. Investors in a LLC, on the other hand, share in company profits or losses based on the percentage of ownership in the corporation. Private Stock - Private or closed corporation stock offerings are not available to the public on the open market. Normally, they are made to pre-qualified individuals. These offerings must comply with the securities Blue Sky laws in the state in which the offering is made. Foreign Currency Trading - Brokerage accounts with a foreign currency trading company. The client either makes trades him/herself or the client has given power of attorney to someone who specializes in foreign currency trading. In either case, any gains are non-taxable because the account is set up in the name of the client’s self-directed IRA account. US Treasury Gold / Silver - Certain Gold bullion, US Treasury Coins, or Palladium are also allowed by the IRS for IRA investment. Oil and Gas - Many people are unaware numerous oil and gas programs are recognized as investments. Why? Real estate ownership can include mineral rights at a fractional interest of a long term lease. This type of investment has several attractive qualities, including potential returns, lack of maintenance and unwavering demand for these products. Other Investments - Aside from all of the options listed above, an IRA can invest in hedge funds, futures trading, Options trading, lease options, tax deeds, contracts, foreign property, factoring (accounts receivable) and more. |