It’s so often true, the more we do something the more we learn — and realize how much we still might not know. I’ve been a licensed agent then broker for 40 years now, and I still, even after 33 of those years on the investment side of the business, learn something new or at least different almost weekly. I’m not nearly as smart as I was when I first started. 
I’ve known about and dealt with Self Directed IRAs since around the mid-’90′s. Have clients who’ve done pretty well with ‘em — either on the cash flow side or capital growth. Don’t mistake anything I say about IRAs or their 401k cousins as an endorsement of the reason for their existence. Those who’ve read my thoughts on the topic aren’t confused about where I stand — I think they’re a scam, a bait ‘n switch con Uncle Sam thought up to get into Boomers’ Levi’s upon their retirement.
What does that hafta do with Self Directed IRAs and their ability to invest in real estate you ask? Not a dang thing I can think of. I’ve concluded there are those who’re too deeply into their various plans, which when combined with the penalty for exiting now forces them to remain in the plan. My mission has always been to deal with the facts as they are.
So, a Self Directed IRA is one for which you have total control of where your funds are invested, and pretty much whatever you say goes.
Wrong Wrong Wrong. A myth if there ever was one.
Over time I’ve learned the characterization ‘Self Directed’ is in fact more of what one of the experts I use, an with whom I recently spoke, described as a ‘marketing phrase’ more than a reality. But what does that mean to you?
As usual, it’s found in the nitty gritty of the details. Wanna call the IRS and ask them about Self Directed IRAs? Don’t waste your time, cuz there’s literally no answer to which they can refer in the IRC. It’s not an ‘official’ government term.
Then what the Aunt Fanny is it then?!
Well again, as usual, it depends. On what? The administrator you chose. As ‘custodian’ of your Self Directed IRA, they tell you upfront exactly what they’ll ‘let’ you do. Kinda takes the fun outa ‘Self Directed’ doesn’t it?
This is why ya don’t go off all willy-nilly and half cocked settin’ up a Self Directed IRA before all the info is in. It’s not a guarantee for example, that the custodian will allow you to invest your funds into real estate. They may also not like certain other investment vehicles — which brings to mind one of my favorite axioms.
BawldGuy Axiom: It’s not the answers to the questions you ask that will get you into trouble. It’s the answers to the questions you never knew to ask that will almost always bite you on the butt.
Imagine your surprise when you learn your definition of ‘Self Directed’ doesn’t jive with your new plan. Guess who’s gonna win that argument?
Bottom line? Give me a call and let’s look and see if you’re eligible for a Self Directed IRA. Isn’t it time to begin makin’ up for those losses? 619 889-7100 Have a good one.
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For those who are stuck in IRAs (I don’t care for them myself and don’t have one), the “self-directed” IRA is a great way to free that money, to an extent, to take back control of what you’ve worked so hard for. According to administrators I’ve talked to in the past, there is a lot of interpretation that goes on when considering what you can direct your money into as well as how they direct it and distribute the income. Just make sure you have a competent custodian with experience to back up their word.
Truer words were never said. That’s why I use the biggest, most repsected administrator around for my clients.
Gentlemen, I will go one step further. First, if you go the IRA route, you use a custodian that will allow you to administer your own plan. Of course, you still need a custodian, but you invest into a correctly established LLC that is owned by the IRA….take those “calls” out of the hands of the custodian and leaves total decision making to you….assuming, of course, you follow all IRS rules. Now, Jeff, I know you don’t like the 401Ks, but they are a reality. They are even better. 401Ks do not require a custodian, account holder can be established as Trustee and full control.