An LLC can be a valuable investment. Not only does it add some protection from liability, but it can make your investments simpler and easier to manage. Perhaps no one knows this fact better than the Self-Directed IRA LLC holder—someone who creates a “Checkbook IRA” by holding an LLC within their IRA. With the LLC’s checking account under control of the IRA, this gives the original investor the power of writing checks from within the IRA. It’s a powerful, flexible way to invest—and it can make you feel a heck of a lot smarter. Here’s how Self-Directed IRA LLCs can make retirement investing smarter.

Use Self-Directed IRA LLCs to Gain Checkbook Control—And Make Faster Decisions

We touched briefly on the concept of checkbook control. What is it? Imagine it this way: with checkbook control, you’re able to make investment decisions on the spot, without waiting for your custodian’s approval. This can be especially valuable when dealing with time-sensitive investments like real estate transactions, or auctions.

By gaining checkbook control, you also bypass some of the custodian fees typically charged for each transaction, making your investment process more streamlined and cost-effective.

Diversify Beyond Traditional Assets

The traditional approach to IRAs restricts you to traditional assets. For instance, if you have an IRA through your work offerings, you’ll typically find that their traditional broker only allows you to invest in specific mutual funds and stocks. But you can expand your horizons. With a Self-Directed IRA, you can invest in real estate, private companies, tax liens, cryptocurrency, and more. This level of diversification can help mitigate your risks. After all, if the stock market drops but you have plenty of real estate assets, you might not panic. By diversifying your portfolio with alternative assets, you reduce the impact of market fluctuations and create a more balanced retirement strategy.

Reducing Custodial Fees and Paperwork

In a traditional, LLC-less approach to the Self-Directed IRA, each investment decision requires custodial approval, often accompanied by hefty fees and paperwork. That’s not a bad arrangement. It’s common among our clients, for example. But with a Self-Directed IRA LLC, you manage your account directly. This will significantly reduce costs and any custodial burden if you don’t want them.

While a custodian still oversees the IRA’s compliance with IRS rules, the day-to-day investment management is up to you. This means you can make investments quickly and streamline the entire approach.

Invest Directly in Real Estate

Real estate is a popular investment option for Self-Directed IRA LLC holders. That’s for good reason. With checkbook control, you can directly purchase properties, manage rental incomes, or engage in commercial real estate projects. Instead of waiting for custodian approval, you can make offers, pay expenses, and handle repairs directly through your IRA LLC’s funding.

This strategy is ideal for investors who want to capitalize on real estate’s potential for consistent cash flow and long-term appreciation, while simultaneously enjoying the tax advantages of an IRA.

Avoid Prohibited Transactions

True: a Self-Directed IRA LLC offers added control. But it’s also essential to avoid prohibited transactions as outlined by the IRS. Certain transactions (such as purchasing property for personal use or selling assets to your IRA) are prohibited and can lead to severe penalties, maybe even resulting in the disqualification of the IRA’s tax-deferred status.

To ensure compliance, it’s important to understand IRS rules regarding disqualified persons, including yourself, family members, and business partners, who cannot directly benefit from the investments held within your IRA.

But if you want a smarter approach, you should have no problem avoiding these transactions. Ready to try it out? Reach out to us here at American IRA by dialing 866-7500-IRA today.