As I have mentioned in earlier posts, self-directed
retirement accounts can be invested in almost anything.
IRA accounts cannot invest in life insurance or collectibles
and are not able to invest in the stock of an S-Corporation due to tax
laws. 401(k) plans cannot invest in
collectibles – all other investments are allowed.
In my experience, real estate is the most popular
investment. Most of my clients have at
least some of their self-directed retirement in real estate. At the head of the real estate list is raw
land. It is especially desirable because
financing is usually not necessary and frankly, not available for raw land in a retirement
account (only income producing property qualifies for financing). Raw land works well for the buy and hold
Next would be investments in startups. These are usually considered more aggressive
and higher risk investments. A national
company that specializes in raising money for de novo banks has reported that
approximately 35% of the invested money is from self-directed retirement
accounts. This is supported by my own
experience as a Board member, raising funds for a new bank in our community. We have experienced a similar percentage.
Another investment idea is found in the condominium market
for boat slips and parking spaces. Both
have the dual benefits of capital appreciation and income production. Boat slips are becoming scarce due to moratoriums
on their construction in many communities.
This trend will tend to increase their value over time. Some condominium communities have more
parking than the current residences need and sell off the parking spaces to
I have many clients invested in real estate notes, secured
by the underlying property or another piece of real estate provided by the
borrower. Many self-directed retirement
accounts become “hard money” lenders and are able to garner up front points as
well a premium interest rates for these loans.
Any of these ideas can be done through a retirement account
compliant LLC or other partnership structure.
Of course, any purchase of these assets or making loans
requires the same due diligence and financial analysis you would use on your