Best Flipping Markets for a Self-Directed IRA

If you are a property flipper, you already know some areas are better for Self-Directed IRA returns than others. Flipping is the practice of buying real estate, making improvements to unlock value in the property that may have been hidden to the previous owners and to other buyers.

It works well in rising markets, of course, but it is at its heart a market neutral strategy that can provide good results even in flat and falling real estate markets. The reason: Skilled flippers can add value through improvements faster than a falling market can suck value away.

A new survey from the National Association of Realtors lists the top ten markets for real estate flippers. And several of them are right here in the southeast, near many of our Self-Directed IRA clients in or near the Carolinas. And many of these metro markets are at reasonable entry prices. Do not have $758,800 to buy the median-priced home in Los Angeles? Head north to Fresno, or scout out properties in Nashville, New Orleans or Lubbock.

Here are the top 10 most profitable flipping markets this year, according to   If you use a Self-Directed Roth IRA potential profits as stated below by would be tax free forever.

1.)  Nashville, Tennessee

Median home list price: $367,900
Ratio of flips to all home sales: 4.1%
Average flip profit: $87,200

2.)  Fresno, California

Median home list price: $311,700
Ratio of flips to all home sales: 3.5%
Average flip profit: $53,200

3.)  Palm Bay, Florida

Median home list price: $267,600
Ratio of flips to all home sales: 3.3%
Average flip profit: $71,500

4.)  North Port, Florida

Median home list price: $350,000
Ratio of flips to all home sales: 3.3%
Average flip profit: $85,300

5.)  Baton Rouge, Louisiana

Median home list price: $237,800
Ratio of flips to all home sales: 3.2%
Average flip profit: $70,000

6.)  Chattanooga, Tennessee

Median home list price: $257,500
Ratio of flips to all home sales: 3.1%
Average flip profit: $65,800

7.)  Los Angeles, California

Median home list price: $758,800
Ratio of flips to all home sales: 3%
Average flip profit: $169,400

8.)  Lubbock, Texas

Median home list price: $240,000
Ratio of flips to all home sales: 2.7%
Average flip profit: $46,000

9.)  Medford, Oregon

Median home list price: $410,000
Ratio of flips to all home sales: 2.7%
Average flip profit: $51,200

10.) New Orleans, Louisiana

Median home list price: $280,100
Ratio of flips to all home sales: 2.6%
Average flip profit: $93,400

The best thing: When you flip a property within a Self-Directed IRA, you do not have to pay immediate taxes on the profits. As long as the money remains in the account, you can execute an unlimited number of flips each year, and there will be no taxes due, except potentially unrelated debt-financed income tax on the gains or income attributable to money you borrowed to purchase or improve the property.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Or visit us online at

Self-Directed IRA Tips: Conducting Due Diligence on Partners and Developers

Self-Directed IRAs are a proven wealth builder and income generator. No other asset class delivers such a potent combination of current income, capital gains potential, leverage – thanks to the possibility of increasing rents over time and finding additional revenue streams – inflation protection.  But of course, no real estate investment is a sure thing. Investment carries risk, and sometimes Self-Directed IRA investments fizzle. Due diligence is a critical skill for any real estate investor. This is especially critical if you are committing Self-Directed IRA funds to an investment along with others. Not only do you need to conduct a sober assessment of the value of the property and its potential for profitability; you must also assess your fellow partners and other stakeholders.

Ask these questions before committing Self-Directed IRA money to an investment.

Does the promoter have skin in the game?

Consider a ham and eggs breakfast: The chicken was involved. The pig was committed.

The difference is key: When you are investing in a real estate deal along with others, you want other partners and your managing partner to be like the pig, not the chicken. You want them as committed to making the deal work as you are.

Obviously, a professional real estate agent cannot be personally invested in every deal he represents. But real estate developers should be, or you should exercise extreme caution: If the opportunity is good enough for your money, why is it not good enough for them?

Real estate developers and promoters should eat their own cooking. Look for projects where the promoter and general manager (for limited partnerships and LLCs) has a significant portion of his or her own wealth invested alongside yours. You want a true managing partner, and not just a manager, at the helm.

Furthermore, if the investment goes south, a promoter with no equity of their own in it is not likely to stick around and make it work. They may just move on to the next project, leaving you and your fellow investors who actually do have your own money invested holding the bag.

What is the commission?

There is nothing wrong with sales commissions. But you should have your eyes open about how much you are paying when you are investing hard-earned Self-Directed IRA assets through a broker. If they take too much money up front in fees and commissions, you have much less money working for you in the investment, compounding for you over time.

Furthermore, it will take that much longer for you to recoup your investment, because you are starting out well underwater. It could take years to break even.

How experienced is the management team?

Have the managers been through the wringer before? What is their track record? Have they developed and managed properties of this type before? If this is their first venture, who were they working with before? Were they learning from some of the best in the industry, or did they leave a bad firm?

Also, where is the management team located? Are they near the property or do they have to buy a plane ticket to visit the property they manage?

How much are they borrowing?

Leverage is a powerful tool in real estate investing. But it is a risky one, too: The more money they are borrowing, the more even a small fluctuation in property values can hurt you, and even leave you upside down in your position for years.

It is important that the property meet your risk tolerance criteria, after accounting for leverage.

Furthermore, if the partnership or LLC is using a lot of borrowed money, you may not want to borrow money yourself, in addition to their own built-in leverage. That is just adding leverage on top of leverage. It feels nice in a strong market, but a downturn could be very painful indeed.

What is the exit plan?

Real estate is highly illiquid. It is the nature of the beast. But there should be some planning for a profitable exit, even if it is a few years in the future. The developer could have plans to sell the entire development at a profit after some wise investments enhancing the value of the property. They should be able to give you a rough timeline.

Even if the developer plans to hold indefinitely, there should be some way for you to sell your interest at some point. If not, then you should be paying a lower price to compensate you for the lack of liquidity.

Larger projects have little trouble helping a small investor out of their position, in time. For smaller, less established firms, it is much more difficult.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Or visit us online at

Prohibited Transactions and Disqualified Persons in a Self-Directed IRA

The Self-Directed IRA can be one of the most transformative tools any investor employs in their quest for a secure retirement. But while taking advantage of the tax protections in an IRA to invest in alternative retirement assets like precious metals and real estate can be incredibly freeing, it is important to recognize that there are also restrictions in retirement accounts—and those restricts are important to pay attention to if you do not want to be hit by steep penalties.

That is why we have taken the time to compile some of the common prohibited transactions and disqualified persons rules in the Self-Directed IRA. The more you know about your limits, the better you will be able to experience the freedom that comes with investing through a Self-Directed retirement account:

Prohibited Transactions in a Self-Directed IRA

What do we mean by prohibited transactions? These refer to those types of investments you will be expected not to make when you are using a Self-Directed IRA. Remember: while you can use an IRA for a wider variety of investment classes than stocks and bonds, there are some strictly-regulated and prohibited transactions you will need to avoid, including:

  • Alcoholic beverages. Wine is a particularly popular investment, as it keeps well, and rare wines can increase in value over time. But investors cannot use a Self-Directed IRA to protect wine investments, or any alcoholic beverages for that matter.
  • Life insurance. Putting a life insurance policy within a Self-Directed IRA is not possible.
  • Some precious metals. When you do invest in precious metals within a Self-Directed IRA, it is important to work with a reputable dealer and to double-check that the specific bullion or coins you are purchasing are in line with approved metals for an IRA.
  • Antiques and similar items could fall under the category of “collectibles,” making them prohibited transactions for the purposes of investing with a Self-Directed IRA.
  • Fine art is a popular investment for those who want to diversify their assets out of the stock market and other assets tightly tied to the global economy. However, these investments will have to be made without the tax protections of the Self-Directed IRA.
  • Using a Self-Directed IRA for loan collateral is another type of prohibited transaction. Sheltering retirement investments from outside influences also means sheltering them from the possibility of being collected after defaulting on a loan. Since collateral is not the purpose of IRAs, any such transaction would be strictly prohibited.

There is a great deal of freedom within an IRA to invest in the type of assets you want to own—but it is important to keep the above in mind before you get started.

Disqualified Persons in a Self-Directed IRA

In addition to prohibited transactions, there are prohibited individuals who are not allowed to take part in an IRA. What does this mean exactly? Let’s break it down:

  • You, your spouse, and descendants/ascendants or any entities they control can lend to your Self-Directed IRA or borrow from it.
  • Prohibited individuals cannot buy or sell assets directly to your Self-Directed IRA—including any entity they control.
  • The same rule as above applies to the buying or selling of services.
  • Using Self-Directed IRA assets for direct personal benefit—such as living within a house owned by the IRA—is strictly prohibited, and this rule applies to you, your spouse, and descendants/ascendants.

Understanding the limitations of the Self-Directed IRA maybe is not the most fun part of developing your own retirement strategy. But it is integral if you are going to do it the right way and ultimately take advantage of the fantastic opportunities offered within self-direction.

For more information on prohibited transactions and disqualified persons within a Self-Directed IRA, continue reading the information here at or call us at 866-7500-IRA.

What investments can be done with a Self-Directed Real Estate IRA?

The much shorter answer to the question “What investments can be done with a Self-Directed Real Estate IRA?” is almost anything. In addition to actual real estate, you can instead purchase other investment vehicles such as tax liens, mortgage notes or real estate options. These investments allow you to profit from real estate without owning the land.

The IRS does not publish a list of permitted investments, but only the short number of fellow investors or people you may not do business with who are called “disqualified persons.” These forbidden people are yourself, your spouse, parents, children, grandchildren and spouses of your children or grandchildren. However, because IRAs are legally independent entities, you may do business with anyone’s Self-Directed IRA. Also, neither you nor any disqualified persons may benefit from the property in any way. This includes staying there, even for one night. A disqualified person cannot stay on the property even if that person pays rent. You also cannot directly buy from or sell any property to a disqualified person nor employ them for any reason such as maintaining or managing the property. Neither you nor any disqualified person can perform any services on this real estate, even if you do it for free. This labor would be seen as benefitting the Self-Directed IRA through an in-kind transaction, so it is forbidden.

However, certain family members such as siblings, aunts, uncles, and cousins are not considered to be “disqualified persons.” Therefore, they can invest in, purchase, use, or work on the property held by your Self-Directed Real Estate IRA without any restrictions.

All income from the property or expenses to improve and maintain it must also be paid by the Self-Directed IRA, not from your personal funds. Legally, you never see any of this money, as it all remains within the Self-Directed IRA. Although you may not do any business with a disqualified person, your Self-Directed Real Estate IRA can “partner” with them when investing in it. The purpose of partnering is to increase the amount of capital which the Self-Directed IRA has access to. However, when partnering all funds must be kept separate from each partner when buying, selling or using the property in any way. This prohibition also extends to changing the percentage of ownership controlled by any investor, as that is considered a sale or purchase.

Although there are significant tax benefits from using a Self-Directed IRA, there are some taxes which do have to be paid. As they say, nothing is perfect. For example, you may have used financing for the investment in your Self-Directed Real Estate IRA. Such financing is permitted as long as the loans are non-recourse. This type of loan is secured by collateral, such as property. Should you default on the loan, the lender may seize the property, but cannot look to the borrower for any other compensation if the value of security is insufficient to pay the entire loan balance. This protects the rest of your Self-Directed IRA assets from being seized by the lender.

Although you are prohibited from personally benefitting from property held in your Self-Directed Real Estate IRA while you are still of age to deposit into the account, after you retire you can then use the real estate as a home or benefit from it in any way. Also, after you begin making withdrawals from your Self-Directed Real Estate IRA, you can take real estate as an “in kind” distribution instead of cash.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Or visit us online at

Using Private Stock with Self-Directed IRAs

One of the most attractive aspects of using Private Stock with Self-Directed IRAs is the diversification it brings to your retirement portfolio. The IRS does not put many restrictions on the assets that are allowed in your Self-Directed IRA—life insurance, jewelry, collectibles and some precious metals are not permissible—but your custodian might not give you access to the widest range of investments.

With Self-Directed IRAs, you open yourself to alternatives like real estate, tax liens, precious metals and, of course, that asset class that is usually available only to the wealthy: private equity.

It is a basic tenet of investing that you never put your money into anything you do not understand. So, here is a primer on using Private Stock with your Self-Directed IRA. Your custodian will fill in any blanks and help you get started:

How does private stock differ from common stock?

Unlike common stock, private stock cannot be purchased by the public on the open market. Typically, the offerings are made to pre-qualified individuals, and these offering must comply with the securities Blue Sky laws in the state in which they are issued.

While publicly traded securities are subject to public disclosure laws, private equity is not. This means that private equity investors must utilize their research skills, personal knowledge, and experiences before choosing a private company.

Be sure to study the offering materials carefully and seek out professional help if you are not clear on any parts of them.

What are the benefits for the investor?

Private Stock with Self-Directed IRAs provide the same tax advantages as Traditional or Roth IRAs. Furthermore, as mentioned earlier, investments in private companies add true diversification to your retirement account.

From an investment standpoint, private equity can be financially rewarding. According to recent studies, private equity outperformed the Standard & Poor’s 500 Index by over 5% from 2005 to 2015. But even though it diversifies your retirement savings and can be quite lucrative, it is critical that you understand where private stock fits in with your risk tolerance.

Are there risks associated with private stock?

There are risks with every investment. Even certificates of deposit have inflation risk (your interest rate is lower than the inflation rate) and interest-rate risk (you are stuck in a long-term CD when rates go up). So, “risk-free” does not exist in the world of investing.

But, those investing in Private Stock with a Self-Directed IRA will be raising their risk profile. The higher risk is offset somewhat by the possibility of a higher reward, but it is still important that a portfolio that contains private equity should be balanced with more conservative investments.

Be sure to follow the rules

Aside from the limits and rules that govern all IRAs, here are some rules specifically for investing in Private Stock with your Self-Directed IRA:

  • The Self-Directed IRA, not the IRA holder, is the owner of the private equity
  • Your Self-Directed IRA cannot purchase private stock that you already own
  • The Self-Directed IRA holder participates on behalf of the stock that the IRA owns
  • All investment earnings must flow into the Self-Directed IRA account
  • Disqualified persons, which includes the Self-Directed IRA holder, may not be employed by the company

While this list of rules is not all-inclusive, it should prompt you toward due diligence before you invest.

Purchasing private stock

Investing in Private Stock with a Self-Directed IRA is not all that difficult. Open an account with a reputable and experienced custodian. Identify the business you want to include in your portfolio. Direct your custodian, using a buy direction letter, to purchase the shares on behalf of your Self-Directed IRA. That is all there is to it.

At American IRA, we have the experienced professionals to make your private equity transactions go smoothly and quickly. With our simplified process, you can effortlessly diversify your Self-Directed IRA account with any private stock you wish to own.

For more information on purchasing Private Stock with Self-Directed IRAs, call us today at 866-7500-IRA (472) or visit us at

Everything You Need to Know to Get Started in Self-Directed Gold IRAs

Gold is not your typical investment. As a matter of fact, some financial gurus will tell you it is not really an investment at all. Because it is a tangible asset, they say, you could look at gold more as an insurance policy. You hold it in case there is a financial crisis, and your other investments are in turmoil.  No matter how you choose to look at gold—investment or insurance—it should be part of your portfolio in a Self-Directed Gold IRA. Hard assets, which could also include other precious metals like silver and platinum, can provide a hedge against inflation. They are negatively correlated with traditional investments like stocks and bonds. In other words, when stocks and bonds take a downturn, tangible assets such as gold tend to appreciate.

While no one can say what percentage of your portfolio should be in a Self-Directed Gold IRA without first looking at your situation, typically you will see hard assets taking up from 5% to 20% of an investor’s retirement portfolio. But regardless of the amount you hold, the arguments for having some of your retirement funds in a Self-Directed Gold IRA are compelling.

Here are a few:


Diversification is always first on the list of suggestions for protecting and growing your retirement funds, which makes it essential that a Self-Directed Gold IRA be part of your strategy. Hard assets offer true diversification by working in a different direction than your financial assets and helping you create a tactically-balanced portfolio.

It is easy for investors to feel comforted because they have their stocks spread over various sectors or asset classes or their bonds split between Treasuries, corporates, and high-yield offerings. In truth, these methods provide only limited diversification. The lack of correlation that comes from tangible assets adds a much more diverse element to your account.

Potential for Growth

The same economic factors that cause stocks and bonds to diminish can help gold to increase in value. For example, over the last 15 years, gold has increased by 315%. Over that same period, the Dow Jones Industrial Average went up 58%, and investment-grade bonds returned 127%.

Taking a longer look, however, gold has gone up 335% over the past 30 years, while the Dow has gained 1255% and bonds have returned 672%. All of these figures show the growth potential for gold, but, even more importantly, underscore the need for diversification within a long-term portfolio.

Tax Advantages

A Self-Directed Gold IRA provides the same tax benefits as a conventional IRA. Contributions to your Self-Directed Gold IRA may be claimed as tax-deductible, depending on your tax bracket, of course.

And any gains made from selling gold within the IRA are not taxed until you take a distribution. In many cases, investors will see higher after-tax returns with a Self-Directed Gold IRA than with a conventional non-retirement brokerage account.

Financial Insurance

Financial assets like stocks, bonds, mutual funds and cash will make up the lion’s share of your retirement portfolio. So, holding a portion of your retirement account in physical gold can be viewed as taking out an insurance policy on your retirement.

That is because gold, unlike common stock in a company, can never be worthless. Gold does not go out of business, and that helps to offset some of the risks in your non-tangible assets. And, while stocks and bonds are vulnerable to inflation, gold acts as a hedge against it. Yes, you could call it an insurance policy–insurance against the inflation that could eat away at the future buying power of your retirement account.

Under your Control

“Self-Directed” says it all. You are in control of your asset mix rather than having it pre-determined by a fund manager. You have the flexibility to add a Self-Directed Gold IRA to diversify as you see fit and the opportunity to take control of your retirement savings with a wider range of investment options.

At American IRA, we have the experienced professionals to guide you through the simplified application process and get you on your way to earning tax-deferred and/or tax-free income within your retirement account.  To download your free Self-Directed Gold IRA guide, click here.

For more information on opening a Self-Directed Gold IRA account, call us today at 866-7500-

C Corporation UBTI (Unrelated Business Taxable Income) Blocker Technique May Help Reduce Self-Directed IRA Taxes

The Tax Cuts and Jobs Act – the sweeping series of Tax Cuts Congress passed at the tail end of December 2017 – included a bit of Christmas cheer for dedicated Self-Directed IRA investors.

Normally, as most readers are aware, there are no current year tax consequences for dividends, rental income or capital gains as long as the money remains within a Self-Directed IRA of any type. The income or gains continue to grow tax-deferred, or in the case of Self-Directed Roth IRA accounts, tax-free (as long as it stays in the account at least five years).

But that tax benefit does not apply to income or capital gains that are attributed to borrowed money. Instead, a special tax on what is called UBTI (Unrelated Business Taxable Income) applies.

You see, you only get the tax advantage on your own invested money – not on money you borrow from other people!

So, if you have 45 percent equity in a given property within a Self-Directed Real Estate IRA and you have a mortgage covering the other 55 percent, then 55 percent of your income from the property, and 55 percent of any capital gains from that property are federally taxable – at a punitive maximum rate of 37 percent!

The same principle applies to stocks and other securities in a Self-Directed IRA that are bought using a margin loan, and in certain cases, investing in an active business or trade via an LLC or other pass-through entity, such as a limited partnership. (S-corporations are pass-through entities, of course, but you cannot own them within a Self-Directed IRA, so they do not apply to this discussion).

Some Self-Directed IRA investors try to limit the impact of taxes on UDFI (Unrelated Debt Financed Income Tax) by creating a C corporation, and then using the C corporation to make the investments. It is a tax planning tool called a C corporation blocker.

Here is how it works: C corporations benefit a great deal from the Tax Cuts and Jobs Act, which reduces the corporate income tax rate from 35 percent to 21 percent. The corporation itself releases the dividends to the retirement account, rather than to the taxpayer directly, and they do not come from the property itself.

Obviously, there is a big difference between a 21 percent tax rate and a 37 percent rate, or even the old maximum income tax marginal rate of 35 percent.

Meanwhile, the real estate or other leveraged investment does not pay its income and gains directly to the Self-Directed IRA. Instead, they go to the C corporation.

When set up correctly, this is a big improvement compared to paying the marginal rate on your personal income tax returns, which is where your unrelated business income tax would wind up.

American IRA, LLC does not provide individualized tax advice. The information in this article is for general informational purposes only and should not be construed to be tax advice in your individual case. Readers should engage the services of a qualified tax professional, such as a CPA or enrolled agent before taking action.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Or visit us online at

Partnering with your Real Estate Self-Directed IRA

When you have a Real Estate Self-Directed IRA, you may want to take advantage of the benefits which can come when investing with a partner. These can include access to more capital, which allows one to make larger investments with greater profit potential. Despite this, there are also disadvantages to a partnership such as making sure to select the right partner, changes in your future goals and any of the myriad problems that can come when investing with other people.

In order to avoid these potential difficulties with fellow investors, you can consider partnering your Real Estate Self-Directed IRA with family members such as parents, spouses or children who might otherwise be prohibited from doing business with your Self-Directed IRA.  Although they may partner with your Real Estate Self-Directed IRA, after the initial purchase has been made the prohibited individuals can no longer do any business with your IRA. Essentially, they become prohibited people again. This means you cannot change the ownership percentages of these assets once the partnership has been formed.

In addition to these family members, since your Real Estate Self-Directed IRA is a separate legal entity, the perfect, completely trustworthy partner who is guaranteed to have compatible goals is always available – yourself.

Benefits of Partnering with your Self-Directed Real Estate IRA

In addition to greater access to capital from partnering with your Real Estate Self-Directed IRA, there are other advantages. Not only can you purchase more real estate with the larger pool of money, there is also the chance of further enhancing your ability to purchase by possibly qualifying for more leverage.

As well as giving your retirement account the opportunity to make more money, by partnering with your Real Estate Self-Directed IRA yourself you can make additional (although, unfortunately not tax-advantaged) money. The portion of the money which comes from your Real Estate Self-Directed IRA still derives the same tax advantages on its gains as any other investment it makes.

If you partner with family members, more income is made by your loved ones. Even better, if you partner with your family members Real Estate Self-Directed IRA, their income will be tax-advantaged.

Regulations when Partnering with your Real Estate Self-Directed IRA

The are a number of rules when it comes to the operation of your Real Estate Self-Directed IRA. The title for the real estate transaction must state what percentage each of the partners controls. All income and expenses are allocated by the same percentage. All income derived from ownership of the property and its sale must flow in and out of your Real Estate Self-Directed IRA and not your personal funds – unless you are a partner, in which case the percentage you own yourself is directed to your own accounts.

In addition to following the above financial guidelines, there are a number of other rules which apply, even if your Self-Directed IRA owns only a miniscule percentage of the property. Some of them include:

  • Neither you nor any other disqualified person may use the property for your own personal benefit. That can mean only staying there for one night.
  • You cannot rent the house to yourself or any disqualified person.
  • Your Self-Directed IRA cannot contract for goods and services with you, nor with any disqualified persons. For example, you cannot buy a property in the Real Estate Self-Directed IRA and then hire yourself or any other disqualified person to do the landscaping, make repairs or manage the property.

You must always obey the rules which ensure individuals who might be considered prohibited from doing business with your Real Estate Self-Directed IRA remain eligible and avoid significant tax penalties.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Or visit us online at

A Brief Glossary of Self-Directed IRA Commonly Used Terms

If you are new to Self-Directed IRA investing, to include Self-Directed Real Estate IRA and Self-Directed Gold IRA investing, you may hear a number of terms bandied about that you are not yet familiar with. Here is a brief glossary of terms commonly used in the Self-Directed IRA world.

AUM fees: A fee, charged as a percentage of assets a custodian or administrator holds on your behalf, that is generally deducted from your account on a monthly or annual basis. The term AUM stands for assets under management. Many investors can save money by switching from an account with an AUM fee to an administrator such as American IRA, LLC, which charges based on a flat rate menu of common services and procedures. People who buy and hold and do not trade frequently can save hundreds or thousands of dollars each year in fees by switching to a flat rate, menu-based fee structure.

Commingling. In the Self-Directed IRA context, commingling refers to combining assets from your personal account in the same account as an IRA investment or vice versa. Commingling may be construed to be a prohibited transaction and result in your Self-Directed IRA being disqualified. Keep your assets and your retirement assets strictly segregated.

Self-Directed Coverdell Education Savings Account: A special tax advantaged college savings tool, popular among tax sensitive parents. Also called “Education IRAs.” You can self-direct these assets as well.

Fair market value: The estimated value of an asset based on an “arms length” transaction from a disinterested and neutral but informed buyer. Self-Directed IRA owners must provide a year-end fair market value estimate for all assets in their self-directed accounts.

Self-Directed Gold IRA: A Self-Directed IRA that is primarily invested in gold.

Non-recourse loan: A loan secured entirely by the property lent on. Under the terms of a non-recourse loan, if the borrower defaults, the lender must have no recourse to sue the Self-Directed IRA owner or attach any assets besides the property in order to satisfy the debt. All mortgages on property held within a Self-Directed IRA or Self-Directed Real Estate IRA must be non-recourse loans. Self-Directed IRA owners and disqualified persons cannot provide a personal guarantee on the loan, or the transaction may be considered a prohibited investment.

Prohibited investment: An investment into an asset not allowed by law. Self-Directed IRAs cannot be invested in life insurance, art, collectibles, alcoholic beverages, gems and jewelry, and gold coins and bullion of insufficient or inconsistent purity.

Prohibited transaction: A transaction prohibited to Self-Directed IRAs or other retirement accounts by law. For example, a Self-Directed IRA cannot buy or borrow from, nor lend or sell to his or her children or grandchildren, his or her spouse’s children or grandchildren, nor to his parents or grandparents or those of his spouse. Self-Directed IRAs also cannot transact with any entities controlled by any of these individuals, nor with any advisors acting in a fiduciary capacity with respect to the Self-Directed IRA investment, nor any entities he or she controls.

Self-Directed Silver IRA: A Self-Directed IRA primarily invested in silver.

Small business retirement plan: A pension plan designed for entrepreneurs, self-employed individuals and businesses with a small number of employees. Examples include Self-Directed SIMPLE IRA plans, Self-Directed SEP IRAs, and Self-Directed Solo 401(K)s

Self-Directed Solo 401(K): A streamlined type of 401(K) plan designed specifically for businesses with just one owner, or an owner and his or her spouse, and no other full-time employees.

Self-Directed Spousal IRA: A Self-Directed IRA established in the name of a spouse who does not have adequate earned income in his or her own name.

Unrelated business income tax: In the Self-Directed IRA context, income attributable to leverage, rather than to investment from the Self-Directed IRA account holder himself, or herself.  Closely related to unrelated debt-financed income tax.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Or visit us online at

Incorporating Self-Directed IRAs and Self-Directed 401(K)s into Your Retirement Strategy

Throw around phrases like IRAs and 401(K)s and people will start to feel their eyes glaze over. Add on a hyphenated word — Self-Directed IRAs and Self-Directed 401(K)s—and you will get the same reaction. Yet that simple compound word can mean a major difference for those who are planning on retiring in abundance and security. It only makes sense for those who are currently weighing their retirement options to know what they are getting into.

What are Self-Directed IRAs and Self-Directed 401(K)s and how do they differ from regular IRAs and 401(k) plans? Let’s have a look at the key differences, the key limitations, and whether or not these plans might be right for your particular retirement strategy.

Self-Directed IRAs and Self-Directed 401(K)s: A Brief Overview

The concept of Self-Direction is relatively simple: rather than outsourcing the work of investing and management to a financial advisor, you make your own choices. A Self-Directed IRA, for example, is nothing more than an IRA that you control. It will have the same overall contribution limits and characteristics that any other IRA otherwise would. The same is true of the Self-Directed 401(K).

But that control does make for a great deal of difference in how the retirement plan will be administrated. For many investors, their first involvement with a 401(k) is through an employee-sponsored plan. They then have limited options according to this plan and make do with the options available to them. In the concept of self-direction, it is possible to utilize a large variety of investment options even through a 401(k) plan—provided that the correct administrative framework has been established. This is true for both Self-Directed IRAs and Self-Directed 401(K)s.

Gaining More Control Over Your Retirement Investments

Why bother with Self-Direction? It allows you more control to make the investments you deem appropriate. For example, while your options may be limited in employee-sponsored plans, Self-Directed IRAs and Self-Directed 401(K)s allow you to invest in a wide degree of asset classes, including:

  • Real estate
  • Precious metals
  • Private lending/notes
  • Private companies
  • Tax liens and deeds
  • Joint ventures and partnerships

Although there are still some limitations—you will be expected not to invest in fine art as part of a Self-Directed IRA, for example—these options afford even the average investor with plenty of leeway for diversifying the assets in their portfolio beyond the usual medley of stocks and bonds.

How to Utilize Self-Directed IRAs and Self-Directed 401(K)s

If you are looking at an employee-sponsored plan and wonder how you can start to take control over your finances—or if you do not have a retirement plan in place at all—the idea of Self-Directed IRAs and Self-Directed 401(K)s can be quite intimidating. You are not sure which account type or investment type is right for you, and you do not know the next steps. We at American IRA, however, have created a few different pages that should guide you through what to expect:

  • Our overview of Self-Directed Accounts will steer you through the various account types – Self Directed Solo 401(k), Self-Directed SEP IRA, etc.—to get a better sense of which one might match your particular situation. It is important to do plenty of research and read up on the individual account types to get a sense of which is best for you.
  • Pay particular attention to the Self-Directed Solo 401(K) site to see if you are eligible for this type of account. A Self-Directed Solo 401(K) comes with high contribution limits, which is highly advantageous for anyone with excess money to stow away for retirement.
  • You might start by reading up on the Self-Directed IRA, or Self-Directed Traditional IRA. Even if you do not plan on opening up this particular type of account, you will find that this is a great way to get started reading up on your various retirement accounts and how they can fit into your retirement strategy.

Want more information on how a Self-Directed IRA might be administrated? Call us at American IRA at 866-7500-IRA or visit  If you would like to schedule a training session for your staff please call 828-257-4949.