What is a Self-Directed IRA?

From a legal standpoint, a self-directed Individual Retirement Account (IRA) is not different from any other IRA. The term "self-directed" simply indicates that you choose your IRA's investments and that you don't limit yourself to the packaged products available at traditional IRA custodians. Most brokerage houses and banks tend to offer self-directed IRAs that are within their own product/service portfolio, so you are somewhat limited if you do business with a specific bank or brokerage company.

Which products can a Self-Directed IRA be invested in?

The rules governing products in which an IRA can be invested in are exclusive—not inclusive. In other words, the rules only specify products in which you cannot invest. Therefore, there is a virtually unlimited array of possible investments that fall well within the permissible boundaries. The Internal Revenue Service only defines the following assets as excluded (prohibited):

  • Life insurance products (for example, a life insurance policy in the name of the IRA owner),
  • Collectibles (for example, antique rugs, cars, stamps, furniture, etc.), and
  • Capital stock in an "S" corporation.
Can I buy real estate using my IRA?
How do I buy real estate with my IRA?
What type of return on investment (ROI ) can I expect?
What is the first step?
Can I roll over my 401(k) into real estate?
Can I roll over my IRA into real estate?
Why should I take money out of the stock market and put it into real estate?
Can I use property that I purchase?
Is it legal to own real estate in your IRA?
How can I take funds out of my IRA to buy real estate without paying taxes and penalties?
Can I purchase stocks or certificates of deposit in my self-directed IRA?
Why haven’t I heard of this before?
Does the establishment of a self-directed IRA replace my current 401(k) and will I lose my employer match?
What kind of real estate can I own in my IRA?
Are smaller investments possible?
What is the minimum investment?
Can I co-invest with my friends and relatives?
If I combine with some friends and still don’t have enough to make an all-cash offer, is there a way to get a loan for the balance?
Can I use my IRA for a down payment?
What if I want to invest in a large commercial property and I need support from other parties? Are there ways to simplify the purchase and management of the property?
If I buy rental property with my IRA, can I manage it?
Can I collect the rent checks for my IRA rental property?
Can my IRA get a mortgage on the property?
Are the gains on income taxable from IRA real estate investments?
What is a Solo(k)?
Am I eligible for a Solo(k)?
What are the benefits of a Solo(k) vs. a SEP IRA?
Why should I self-direct my Solo(k)?
How do I learn more?

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