When investors first hear about the kind of freedom they can have with a Self-Directed IRA, it’s common to get excited. After all, using an IRA opens multiple avenues for investing, including allowing investors to make use of their real estate experience with their retirement money. But because many people who invest in Self-Directed IRAs are looking to diversify their assets, they inevitably run into one question: can they use multiple asset classes in the same IRA?
The answer to that question has a significant bearing on your strategy and your willingness to open a Self-Directed IRA, which is why we are going to cover all angles for you:
Can You Make Multiple Types of Investments in a Self-Directed IRA?
Short answer: yes.
Long answer: what most people are asking when they ask this question is not whether they can own multiple investments. For example, someone might own two real estate properties. But what they are asking is whether a Self-Directed IRA allows for making multiple types of investments—across different asset classes. For instance, can an IRA investor hold real estate as well as precious metals?
The answer to that question is also: yes.
The IRS is happy to allow investors to put their retirement money away in a manner they see fit. Their primary concern is that the retirement money is not used as personal money, which is where the restrictions come in. For example, someone who uses the real estate within their Self-Directed IRA to rent out a room for a disqualified person (such as a son or daughter) would be using their retirement assets for their personal benefit. That makes this a prohibited transaction, which the IRS does not allow with retirement assets.
However, there are tremendous freedoms with the types of investments allowed in a Self-Directed IRA. An investor who wants to diversify across multiple asset classes can do that with one account if they so choose. That means they can use private notes and real estate within the same retirement account, provided that these investments follow the same rules as any other IRA.
What Investment Assets are Available with a Self-Directed IRA?
Knowing that you have that kind of investment freedom available with a Self-Directed IRA means that you inevitably come to the next question: what types of investments should you include?
This answer may be different for different investors. For some investors, a Self-Directed IRA is an ideal vehicle to make use of their investing expertise in a particular field, such as real estate. For other investors, a Self-Directed IRA may be part of a retirement strategy of hedging against inflation, such as including precious metals within the IRA.
But it’s important to know the options. A Self-Directed IRA can include a broad range of investment assets such as real estate, precious metals, tax liens, private notes and loans, or even owning a Single Member LLC, which allows an investor to exercise checkbook control through the IRA. In a Single Member LLC, an investor can purchase various assets as easily as they would when writing a personal check—there are just some administrative hoops to jump through first.
A Self-Directed IRA is a flexible retirement strategy, and investors often choose this strategy because they like the freedom it affords. One aspect of that freedom is the ability to make multiple investments within the same account. This gives investors options for designing a retirement plan that is in sync with their goals.