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ATTOM > Real Estate Investing > Alternative Assets Find a Home in Self-Directed Retirement Accounts

Alternative Assets Find a Home in Self-Directed Retirement Accounts

by | Sep 29, 2017 | Mortgage & Finance, Real Estate Investing, Real Estate News - Recent Articles

With​ ​the​ ​stock​ ​market​ ​soaring, ​​it​ ​might​ ​just​ ​be​ ​the​ ​time​ ​to​ ​look​ ​for​ ​alternative​ ​assets​ ​before​ ​a market​ ​shift.​ ​​ ​That’s​ ​exactly​ ​what’s​ ​happening​ ​in​ ​the​ ​world​ ​of​ self-directed​ ​IRAs.​ ​​

Taking​ ​the reins​ ​of​ ​your​ ​own​ ​financial​ ​future,​ ​investment​ ​performance,​ ​lifestyle​ ​in​ ​retirement,​ ​and​ ​legacy can​ ​be​ ​far​ ​easier​ ​than​ ​many​ ​realize. Alternative​ ​assets​ ​(assets​ ​not​ ​correlated​ ​to​ ​the​ ​stock​ ​market)​ ​fit​ ​hand-in-glove​ ​with​ ​the self-directed​ ​IRA.​ ​​ ​Since​ ​1975​ — when​ Employee Retirement Income Security Act ​(ESRI)​ ​laws​ ​went​ ​into​ ​effect —​ ​investors​ ​can​ ​use​ ​their​ ​IRAs to​ ​invest​ ​outside​ ​of​ ​Wall​ ​Street.

Those​ ​with​ ​existing​ ​retirement​ ​accounts​ ​can​ ​roll​ ​their​ ​accounts​ ​over​ ​into​ ​self-directed​ ​variations. Individuals​ ​just​ ​starting​ ​out​ ​​can​ ​choose​ ​from​ ​several​ ​types​ ​of​ ​self-directed​ ​individual retirement​ ​accounts​ ​(SDIRA’s)​ ​which​ ​can​ ​be​ ​set​ ​up​ ​at​ ​any​ ​time.​ ​This​ ​includes​ ​salaried​ ​workers, small​ ​business​ ​owners,​ ​independent​ ​entrepreneurs,​ ​and​ ​spouses.​

​Self-employed​ ​people​ ​can​ ​also use​ ​a​ ​Solo​ ​401k​ ​if​ ​they​ ​have​ ​no​ ​other​ ​full​-​time​ ​employees. The​ ​option​ ​to​ ​use​ ​SDIRA’s​ ​has​ ​gained​ ​increasing​ ​attention​ ​in​ ​the​ ​media​ ​from​ ​Bankrate​ ​to​ ​Fox Business​ ​to​ ​Forbes​ ​and​ ​beyond.

​This​ ​traction​ ​has​ ​been​ ​compounded​ ​as​ ​investment​ ​promoters​ ​and registered​ ​investment​ ​advisors​ ​(RIAs)​ ​have​ ​caught​ ​on​ ​to​ ​how​ ​much​ ​more​ ​attractive​ ​their opportunities​ ​are​ ​if​ ​clients​ ​are​ ​using​ ​tax​ ​protected​ ​accounts.​ ​It​ ​can​ ​potentially​ ​bolt​ ​on​ ​an additional​ ​20 percent or more​ ​in​ ​net​ ​returns,​ ​which​ ​is​ ​compounded​ ​every​ ​year.

With​ ​the​ ​assistance​ ​of​ ​a​ ​reputable​ ​IRA​ ​administrator,​ ​such​ ​as​ ​uDirect​ ​IRA​ ​Services,​ ​individuals can​ ​select​ ​from​ ​a​ ​much​ ​broader​ ​range​ ​of​ ​investment​ ​options —​ ​either​ ​leveraging​ ​professional​ ​advisors and​ ​asset​ ​management​ ​or​ ​invest​ing ​directly​ ​to​ ​slash​ ​fees​ ​and​ ​retain​ ​more​ ​of​ ​their​ ​gains —​ ​all​ ​while insulating​ ​themselves​ ​from​ ​the​ ​tax​ ​man,​ ​legally.

Alternative​ ​assets​ ​like​ ​BitCoin​ ​make​ ​news​ ​every​ ​day.​ ​​ ​If​ ​an​ ​IRA​ ​is​ ​going​ ​to​ ​own​ ​BitCoins​ ​it needs​ ​to​ ​use​ ​an​ ​IRA-owned​ ​LLC.​ ​The​ ​IRA-owned​ ​LLC​ ​is​ ​able​ ​to​ ​establish​ ​a​ ​wallet​ ​and​ ​invest that​ ​way.

This​ ​type​ ​of​ ​investing​ ​is​ ​new​ ​and​ ​there​ ​is​ ​not​ ​a​ ​lot​ ​of​ ​legislation​ ​surrounding​ ​it​ ​yet.​ ​The​ ​IRS issued ​IRS​ ​Notice​ ​2014-21​ addressing​ ​the​ ​taxation​ ​of​ ​Bitcoin​ ​and​ ​cryptocurrency.​ ​Investments held​ ​in​ ​an​ ​IRA​ ​are​ ​typically​ ​tax free​ ​or​ ​tax deferred.

Many​ ​SDIRA​ ​custodians​ ​and​ ​administrators​ ​find​ ​this​ ​asset​ ​type​ ​not​ ​to​ ​be​ ​administratively feasible​ ​but​ ​you​ ​don’t​ ​need​ ​a​ ​self-directed​ ​IRA​ ​to​ ​invest​ ​in​ ​publicly traded​ ​assets.​ ​​ ​​You​ ​will​ ​find some​ ​publicly traded​ ​funds​ ​that​ ​include​ ​BitCoin​ ​like​ ​​Bitcoin​ ​Investment​ ​Trust​ ​(GBTC).

Medical​ ​marijuana​ ​is​ ​rising​ ​in​ ​popularity​ ​as​ ​well.​ ​​ ​​​IRAs​ ​are​ ​regulated​ ​by​ ​the​ ​Department​ ​of Treasury​ ​and​ ​the​ ​Department​ ​of​ ​Labor.​ ​​ ​Because​ ​marijuana​ ​is​ ​not​ ​legal​ ​on​ ​a​ ​federal​ ​level​ ​you’ll have​ ​a​ ​harder​ ​time​ ​getting​ ​such​ ​an​ ​asset​ ​into​ ​a​ ​self-directed​ ​IRA. Allowable​ ​investments​ ​at​ ​uDirect​ ​IRA​ ​Services​ ​include​ ​the​ ​following:

  • Residential​ ​real​ ​estate,​ ​including:​ ​apartments,​ ​single​ ​family​ ​homes,​ ​and​ ​duplexes
  • Commercial​ ​real​ ​estate
  • Undeveloped​ ​or​ ​raw​ ​land
  • Managed​ ​Futures
  • REITs​ ​(Real​ ​Estate​ ​Investment​ ​Trusts)
  • Real​ ​estate​ ​notes​ ​(mortgages​ ​and​ ​deeds​ ​of​ ​trusts)
  • Promissory​ ​notes
  • Private​ ​limited​ ​partnerships,​ ​limited​ ​liability​ ​companies,​ ​and​ ​C​ ​corporations
  • Tax​ ​lien​ ​certificates
  • Oil​ ​and​ ​gas​ ​investments
  • Private​ ​stock​ ​offerings,​ ​private​ ​placements
  • Judgments/structured​ ​settlements
  • Gold​ ​bullion
  • Car​ ​paper
  • Factoring​ ​investments
  • Accounts​ ​receivable
  • Equipment​ ​leasing

Nationwide​ ​the​ ​vast​ ​majority​ ​of​ ​self-directed​ ​IRA​ ​investments​ ​are​ ​in​ ​real​ ​estate​ ​of​ ​some​ ​sort. We​ ​​see​ ​people​ ​using​ ​their​ ​retirement​ ​savings​ ​to​ ​invest​ ​at​ ​a​ ​grass​ ​roots​ ​level​ ​to​ ​restore​ ​the communities​ ​destroyed​ ​by​ ​natural​ ​disasters.​ ​​ ​Not​ ​everyone​ ​wants​ ​to​ ​stay​ ​put​ ​after​ ​a​ ​hurricane​ ​or earthquake​ ​and​ ​investors​ ​will​ ​be​ ​there​ ​to​ ​help​ ​them​ ​move​ ​on.​ ​​ ​The​ ​disaster​ ​victim​ ​can​ ​start​ ​over, the​ ​investor​ ​can​ ​make​ ​a​ ​profit,​ ​and​ ​people​ ​are​ ​put​ ​to​ ​work​ ​to​ ​rehabilitate​ ​communities.​ ​​ ​This restoration​ ​will​ ​be​ ​fueled​ ​in​ ​part​ ​by​ ​the​ ​retirement​ ​accounts​ ​of​ ​Americans​ ​who​ ​know​ ​how​ ​to​ ​use this​ ​well-established​ ​investing​ ​tool.

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