Hello 10X – Here is my question:
Q: I’ve heard of self-directed IRAs – what are they and how do you use them?
Thanks, Darryl M, Boston, MA
A: Hi Ted,
A self-directed IRA is a financial retirement product that provides a way to use retirement savings to invest in alternative assets, such as real estate, notes, tax liens, etc. Most IRAs and 401ks invest in mutual funds and bond funds, with very limited control given to the account holder. Self-directed IRAs are for folks who want to control their retirement and become an active participant in their future.
A custodian which manages self-directed IRAs holds the asset, and tracks transactions for the IRS. NOTE: These are very particular products which must be understood to avoid pitfalls. Proper research is recommended.
There are two ways to approach self-directed IRAs:
First, to open up an account for yourself. There are many options for these which allow you to purchase real estate with the funds you’ve deposited.
Second, to use the money in someone else’s self-directed IRA to invest in real estate. In essence, you’d use their funds to close on your property and they would hold a note which receives payments from you.
Research and attend your local real estate meet up. There may be investors with self-directed IRAs who may be willing to lend money to you.
By Matt Savage
Founder, 10X Real Estate
Investor & Realtor, contributing ‘Expert’ at 10X.
Email: [email protected]