One of the many advantages of adopting a Self Directed IRA investing strategy is that you can take a ‘go anywhere, do anything’ approach to investing. You aren’t limited to the asset classes that traditional investment advisors sell or even know about. This lets you add additional diversification to your portfolio while still giving you the flexibility to discover additional yield over and above what you can get from the run-of-the-mill investments your old boss would approve in a boring 401(k). But you can still go back to the old standbys when market conditions warrant it!

Here are some examples of solid-yielding investments or savings vehicles, – all of which are doable in a Self Directed IRA, and all of which may be appropriate for the income-focused investor.

• Rental real estate. Real estate has its ups and downs, like any asset class (ask anyone big into real estate between 2008 and 2010!). But over the long haul, rental real estate has been a proven wealth creator and income generator for centuries. Many of the worlds’ great fortunes have been built on land and rents. Real estate provides a unique combination of simplicity (anybody can understand it!), income and potential for capital gains – magnified by the ready availability of leverage for real estate investments.

• These are financial assets, but they are specifically designed to produce income – either now or at some point in the future. Assets in an annuity grow tax-deferred, similar to a traditional IRA, and are normally taxable when you take the money out. You can hold them in a Self Directed IRA or 401(k). While some advisors don’t like to double up the tax deferral benefit, some investors like the many guarantees that you can get with an annuity contract, such as an attractive guaranteed minimum income benefit. You can’t get those with mutual funds or stocks. For example, when you own a lifetime income annuity, you own a contractual guarantee that you will not run out of the promised income for as long as you live – subject, of course, to the continuing solvency of the insurance company.

• Closed-End Funds. These are mutual funds whose shares are bought and sold over the stock exchange, rather than issued directly to and from the fund company. As a result, the price of a closed end fund can and often does differ markedly from the net asset value of all the securities in the fund’s portfolio. As a result, you can often buy income-generating closed end funds at a discount. But you still get the entire dividend. The net effect: A nice boost to your yield.

• These are essentially stocks in real estate holding companies. But unlike C corporations, which pay taxes before they issue dividends (thereby reducing income to their shareholders, who have to pay income tax on those dividends), REITs are ‘pass through’ entities. As long as the REIT gets 75 percent of its income from its real estate operations and distributes at least 90 percent of its income to shareholders, the IRS gives REITs favorable tax treatment.

• Business Development Corporations. These are designed as pass-through income entities similar to REITs, but they invest in early stage companies rather than in real estate. They can pack a substantial income wallop, but they are, of course, subject to the same risks as any other fund devoted to small cap equity investment or lending. They invest in a similar space as a venture capital or private equity fund, though you don’t have to be an accredited investor.

• Tax Liens and Certificates. These can generate substantial current income, though it is pretty lumpy. Here’s how it works: When a homeowner doesn’t pay property taxes, the county may foreclose on the property to collect. However, the county doesn’t want to foreclose. They just want the tax money. So they allow investors to pay off the tax owed, in exchange for a lien on the home. Essentially, you are lending money to the homeowner, with the loan secured by the home. Interest rates on these loans can be quite high, which allows for the possibility of a substantial return on investment. If enough time goes by and the homeowner still hasn’t paid the tax, you can potentially foreclose on the property yourself. The downside is that you don’t know for sure when the homeowner will pay off the lien and you can recover your investment with interest.

• Muni Bonds. These oldies but goodies are popular among investors in high tax brackets – especially in states with income taxes. Municipal bond income is generally exempt from federal taxes, and from state income taxes, too, if the owner is a resident of the state in which the municipal bond was issued. Munis typically have a low nominal interest rate – but higher interest rates on an after-tax basis than other income investment alternatives.

Need help getting started or navigating the world of income investments? We’re here to help! American IRA, LLC is one of the leading Self Directed IRA administrators in the country. We have successful clients involved in all these types of investments. Give us a call today at 828-257-4949. Or visit us online and take advantage of our extensive library of educational information, booklets, pamphlets and seminars. We look forward to working with you.