Are Your Self-Directed IRA Investments Generating Unrelated Income?

For just about every retirement investor who uses a Self-Directed IRA, most of those investments are exempt from federal income tax. Internal Revenue Code 408, and Section 512 of the Internal Revenue Codes exempts most forms of investment income generated within your Self-Directed IRA from taxation. This exemption includes dividends, loan interest, annuities, rental income from real estate, and gains from the sale of stocks or real estate.

Most investors have never heard of a tax on unrelated income (UBTI) or on income stemming from a debt-financed property that is owned for income-producing purposes (UDFI). These taxes do not apply to them, and they need not concern themselves with them.

But for anyone with a Self-Directed IRA who is considering an investment in real estate, using a loan in a transaction, or investing in a private business operated through a pass-through entity, you should become familiar with the UBTI/UDFI rules.

How can activity in a Self-Directed IRA trigger the UBTI?

According to the IRS, UBTI is defined as gross income regularly generated by a tax-exempt entity via taxable activity unrelated to the entity’s main function. An example of this would be a large manufacturing company that your Self-Directed IRA owns. As long as all activities within the company are related to manufacturing, the income remains exempt. But suppose the company is leasing some of their equipment to other businesses, that lease income could generate UBTI.

Keep in mind the two factors that can potentially trigger the UBTI rules: whether the activity attains the level of a trade or business and whether it is regularly carried on. In the previous example, the manufacturing company was getting regular income from a business (leasing their equipment) that was not substantially related to the exempt status.

Here are some other examples of activities that the IRS could deem to be rising to the level of an active business that is regularly carried on and could be subject to the UBTI rules:

  • Business income from the operations of an active business–restaurants, stores, gas stations, etc.–that are operated through a pass-through entity, such as an LLC or partnership. (Remember, any income from a “C” Corporation will not trigger the application of the UBTI tax. This is why most investors are not affected by the tax).
  • Using a nonrecourse loan, which means a loan not personally guaranteed by the retirement account owner, to purchase a property.
  • Developing or subdividing land and selling a large number of homes or tracts of land from that development in a given period
  • Buying and selling a large number of real estate properties within a given year
  • Making hundreds of private loans in any given year

Which transactions generate the UDFI?

You can hold rental property in your Self-Directed IRA without creating UBTI. But if your IRA uses debt to purchases the rental property, you could create UDFI. The UDFI taxes would apply only to that portion of the rental income that was derived from the debt. In other words, if the Self-Directed IRA purchases property with 60 percent cash and 40 percent debt, then only 40 percent of the rental income is subject to UDFI. You would then be allowed to use 40 percent of the property expenses to offset rental income.

It is obvious that taxation on unrelated income can get complicated. It is in your best interests to work with professionals, including attorneys and tax advisors, to ensure that you understand the rules of UBTI and UDFI. Using your Self-Directed IRA to invest in real estate is an extraordinary tool as long as you follow the IRS guidelines.

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

Property Management Tips for Self-Directed IRA Investors

Lots of people want to be Self-Directed IRA investors. But few people want to take a 3AM phone call to fix a broken toilet. Fortunately, you do not have to. That is why we have property managers. For a relatively small fee of between 10 and 20 percent of rents collected, these real estate professionals handle the day-to-day tasks of maintaining and running your properties. All you have to do is make the strategic decisions, approve the purchase and sale of Self-Directed IRA properties, and ensure you are in compliance with applicable laws concerning prohibited transactions.

Here are the basic things all Self-Directed IRA investors should know about property management.

1.)  They should be licensed. With very limited exceptions, property management firms should have a real estate brokerage license valid in the state where you have your Self-Directed IRA

As part of their licensing requirements, real estate brokers must maintain adequate errors and omissions insurance. This helps protect you and your Self-Directed IRA against liability that         may arise because of mistakes the broker and his or her staff may make in managing your property.

2.)  You cannot pay them directly. If you hire a manager to run your Self-Directed IRA property, you cannot simply write them a check out of your personal account. Instead, you must make             all transfers to them via your Self-Directed IRA. If you pay them directly, you may face significant tax and legal consequences, including the disallowing of your Self-Directed IRA’s tax           advantaged status. This could result in significant immediate tax liabilities and penalties.

That means all maintenance reserves, special assessments, reimbursements and fees not covered by rent withholding must come from within your Self-Directed IRA. The same goes with           any real estate taxes due on the property.

3.)  Property managers cannot pay you directly. If you own the property in a Self-Directed IRA, they must transfer rent payments, deposits forfeited by the tenants and               any other                     moneys to your IRA, and not to you directly.

If they pay you directly, rather than transferring funds to your Self-Directed IRA, you may again run afoul of prohibited transaction rules, resulting in possible taxes and penalties.

4.)  The property manager cannot be a prohibited counterparty. Self-Directed IRA rules strictly prohibit you from transferring money from your IRA to your property manager if the money is           going to any of the following:

  • Yourself
  • Your spouse
  • Your children, grandchildren or great grandchildren or those of your spouse.
  • Your parents, grandparents or great grandparents or those of your spouse.
  • An attorney, financial planner, agent or other fiduciary who provides you advice concerning your Self-Directed IRA.
  • Any entities controlled by any of the above prohibited counterparties.

This also means you cannot hire yourself and pay yourself what you would otherwise pay a property manager to manage your own property.

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

Self-Directed Real Estate IRA Glossary

Basic Self-Directed Real Estate IRA Terms You Need to Know

Beneficiary. The individual named to receive the IRA assets and the IRA itself upon the IRA owner’s death. This has important tax and probate advantages. It is important to keep the beneficiary listed by name on your Self-Directed IRA, and keep it updated as appropriate.

Capitalization rate. Also called “cap rate.” The rate of return of a property based on expected rental income. The formula is net operating income (NOI) divided by the current market value or the acquisition costs, expressed as a percentage.

Catch-up contribution. Additional money you are allowed to contribute to a retirement account once you turn age 50 or older. For Self-Directed IRAs, you can contribute $5,500 (if you meet the income requirements, and another $1,000 each year in catch up contributions once you turn 50.

Disqualified Persons. Persons and entities prohibited by law from transacting directly with your Self-Directed Real Estate IRA. These include your spouse, your children or grandchildren, your spouse’s grandchildren, your parents and grandparents, your spouse’s parents and grandparents, and any entities they control. It also includes anyone advising you in a fiduciary capacity on your Self-Directed Real Estate IRA.

Fair Market Value. The estimated value of assets if they were sold to another informed third party in an arms-length transaction. The fair market value of IRA assets must be reported to the IRS as of December 31st each year.

Inherited IRA. An IRA inherited by someone other than a spouse. Special tax rules apply.

Form 5498. An IRS form you will receive each year from your retirement account custodians or administrators detailing your contributions to your retirement accounts.

Hard money loan. A short-term loan based on the assets within the IRA, typically at higher interest rates.

Non-recourse. Mortgages in Self-Directed Real Estate IRAs must be on a non-recourse basis. The IRA account holder cannot sign a personal guarantee, and in the event of default, the lender must have no security to collect other than the specific property bought with the proceeds of the loan.

Probate. A judicial process used to account for a deceased individual’s assets, pay off his or her creditors and distribute the proceeds to heirs. If you name a beneficiary on your Self-Directed Real Estate IRA or 401(K), however, these assets bypass probate and pass directly to your beneficiary. If you had owned them in your own name, however, or fail to name a beneficiary, these assets are subject to probate.

Prohibited investment. The law restricts Self-Directed IRA owners from investing in certain kinds of assets, including life insurance, collectibles, antiques, art, gems and jewelry, alcoholic beverages and certain forms of precious metal coins and bullion of insufficient or inconsistent purity. Investing in these assets could cause the IRS to strip your Self-Directed IRA of its tax-advantaged status. You may face taxes and penalties if this occurs.

Rollover. A tax-free transfer from one tax-advantaged retirement account to another. Each taxpayer is entitled to one tax-free rollover transaction per year.

Roth IRA. An IRA account that features tax-free growth, tax free withdrawals on assets that have been in the account at least five years but is funded with after-tax contributions.

Contributions are not tax deductible. These accounts can be held in self-directed or conventional IRAs.

Self-Directed IRA. An IRA in which the owner retains direct control of the individual investment decisions within the account, to include the selection of the custodian or broker. Self-Directed IRAs provide more flexibility in choosing alternative asset classes and fee structures. They can be traditional or Roth IRAs.

Self-Directed SIMPLE IRA. Savings Incentive Match Plan for Employees.

Unrelated debt-financed income. A tax that may apply to any realized gains or income within a Self-Directed IRA or conventional IRA, Self-Directed SIMPLE IRA or Self-Directed SEP IRA plan attributable to borrowed money.

At American IRA, we believe that Self-Directed IRAs, including Self-Directed Real Estate IRAs, are the best vehicles for growing your retirement account. And we have the experience to help you with your transactions.

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

Self-Directed Real Estate IRAs and Insurance

Most of us understand the basics of homeowner’s insurance. But there are certain aspects of insurance that are especially important for Self-Directed Real Estate IRA investors to understand:

  • The Self-Directed IRA, not you, has to be the payor and beneficiary of all insurance policies covering the property. This is because of the prohibited transaction rules that govern Self-Directed IRAs and other kinds of retirement accounts: You cannot mingle your own personal funds with those of the IRA. This means that all premiums have to be paid with funds from within the Self-Directed IRA. Furthermore, if you have a claim, you do not want the payout to go to you, personally, either. This would potentially trigger a taxable distribution, complete with penalties, and could endanger the tax-favored status of your account altogether.
  • You should have American IRA, LLC, handle premium payments. Just as rent payments need to go to the Self-Directed IRA itself, and not you, personally, you should have your Self-Directed Real Estate IRA administrator (such as American IRA, LLC!) or custodian send in your premium payments. If you send premiums in from your personal checking account, and the IRS finds out, you could again endanger your account’s tax-advantaged status. If it is revoked, you could have a major tax hit and a lot of penalties if you are not yet age 59½.
  • If you have tenants, you need landlord insurance. If you are renting out the property, or plan to, you should have a landlord insurance policy. A regular HO-3 homeowner’s insurance policy will not cover you adequately. Landlords take on a lot of risks that homeowner’s insurance is not designed to cover. For example, if your tenant causes damage to a neighbor’s property or injures a neighbor, landlord insurance’s liability coverage is designed to cover it. If your tenant accidentally sets fire to the house and the fire spreads to a neighboring property, or if a tenant trips on a loose stairstep, landlord insurance is designed to cover it. Homeowner’s insurance will not. If you try to get by with just a homeowner’s insurance policy, and the insurance company finds out it’s a rental property, they will probably deny the claim altogether.
  • Flood, sinkhole and earthquake insurance require separate policies. Most properties should have flood insurance, and mortgage companies typically require it as a condition of the loan. If you live in areas prone to earthquakes and sinkholes – or as the insurance industry calls them – catastrophic earth movement events – these also require separate insurance policies or riders. They are not covered under off-the-shelf insurance policies. And again, it should be your Self-Directed IRA listed as a beneficiary, not you.
  • Vacant properties need special coverage. If your Self-Directed Real Estate IRA property is vacant for 60 days or more, or you believe it will be, contact your insurance agent and arrange for vacant property coverage. Vacant properties represent a higher risk to insurers than companies with a tenant in them, since flooding, mold and other events can go undetected for weeks. They also tend to attract vandals and vagrants, and vagrants are frequent drug users and may also engage in criminal activity that may damage the home (e.g., meth production) and generate liability for the Self-Directed IRA as the property owner.

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

Avoid Getting Your Self-Directed IRA Disqualified by the IRS!

Self-Directed IRAs are powerful tools that help thousands of Americans accumulate money for a secure retirement, increase diversification and lower the risk of exposure to economic and financial shocks, and pass these assets on to their heirs. But there is a catch: Self-Directed IRA investors also have to comply with a series of strict rules that restrict what they can do with their Self-Directed IRA assets.

Failure to comply with these rules, detailed in IRC Section 408, Section 1361(b)(1) and Section 4975, may result in your Self-Directed IRA becoming disqualified, and triggering a series of bad things under IRC Section 4975.

You do not want your Self-Directed IRA to trigger bad things under IRC Section 4975.

Here is what happens:

If your Self-Directed IRA engages in a prohibited transaction, 4975(a) imposes a 15 percent tax on the entire amount involved in the prohibited transaction on the prohibited person.

So, if you or your spouse sell a house from your Self-Directed IRA directly to your daughter’s IRA for $200,000, your daughter would face a tax bill of $30,000. Under Section 408 of the Internal Revenue Code, your direct descendants and those of your spouse are both disqualified persons with respect to your own IRA, as are your parents and grandparents and those of your spouse, and any entities they control.

But wait… it gets worse.

Paragraph (a) imposes the 15 percent tax on any parties involved in the prohibited transaction.

Guess what! Your IRA’s a party to the transaction!

So, the IRS could impose a 15 percent tax on your IRA as well as the prohibited counterparty, on the entire amount of the transaction.

But wait… it gets even worse.

If you do not unwind the transaction within the tax year, Section 4975(b) potentially increases that tax to 100 percent of the transaction amount on certain parties.

More commonly, though, what really happens is that the transaction triggers IRC Section 408(e)(2), which means that the entire IRA is disqualified as of the beginning of the year. You no longer get to defer taxes in the IRA, and the IRS will deem all the assets in the account to have been distributed that year. That means you get to pay income taxes on the entire amount distributed (really, on the entire balance of the Self-Directed IRA), along with any penalties that may accrue from early withdrawal.

You do not get to stretch things out by taking substantially equal periodic payments under Section 72(t).

So be very careful when dealing with members of your own family, or with businesses or assets you or any other party that may potentially be a disqualified party under IRC Section 408, or any asset that may be disqualified as a collectible under Section 408(m), including art, antiques, metals (other than certain types of coin or bullion), gems, stamps and coin collections and alcoholic beverages. You also cannot buy life insurance contracts using a Self-Directed IRA, nor can you own an interest in an S-corporation, without risking triggering prohibited transaction penalties.

If you have any doubts, or if there is any possibility a contemplated transaction could run afoul of prohibited transaction or disqualified party rules, STOP! Call a tax professional or attorney or other qualified professional and have them review the transaction.

The rules are easy to follow if you know them, but if you are dealing with a checkbook control IRA or running a closely-held business within your Self-Directed IRA, they are very easy to accidentally break if you are not careful and you do not know the rules.

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

Secured and Unsecured Promissory Notes in your Self-Directed IRA: What’s the Difference?

You probably already know that owning alternative assets in your Self-Directed IRA gives you more options and better control over your tax-advantaged portfolio. You also know that it is a smart way to broadly diversify your funds beyond the traditional stocks and bonds that make up the bulk of regular IRAs.

But did you also know that more and more retirement investors are adding promissory notes to their Self-Directed IRAs? A promissory note is simply an investment that entails a legally-binding contract between a lender and a borrower. Your Self-Directed IRA is the lender, and the borrower agrees to repay a certain sum to the IRA within a specific amount of time. As with any loan, if the borrower fails to make the payments, it results in a default.

Promissory notes have been around for centuries, and today they appeal to investors who prefer the reliability of regular cash flow to the unpredictable gyrations of the stock market. In fact, notes usually come with a predetermined payment amount and interest rate.

Promissory notes typically fall into two primary categories: secured and unsecured. Here is more about each of them:

Notes secured by real estate or other property

Some promissory notes are secured by real property, such as mortgage notes and trust deeds. If the borrower defaults, the Self-Directed IRA is entitled to the underlying collateral. The repayment terms are stated in the promissory note. Repayment options might be fixed principal and interest payments amortized over a set term; a balloon payment of both interest and principal; or interest-only payments for a certain period to be followed by a final balloon principal payment.

Notes can also be secured with non-real estate property. Examples of these can include equipment, vehicles, company stock, or even manufactured homes. As with loans secured by real estate, there are repayment options from which to choose, and the terms will be stated in the note.

Unsecured promissory notes

If the borrower does not pledge any collateral to the lender, it is an unsecured promissory note. The loan is made strictly on the borrower’s ability to repay it. Here is an example: Your former college roommate needs a loan. There is no problem with his credit, but he would like a longer payback term than other lenders are willing to give him. He understands he will have to pay a higher interest rate since the loan will not be secured, and he is fine with that. You know him and trust that he will pay back the loan, so you agree to an unsecured promissory note.

Perform due diligence

It makes no difference if the loan is secured or unsecured. You still owe it to your retirement portfolio to perform due diligence. First, do your research on the borrower. Next, ask yourself if the risk you are taking is worth it. Can you envision any future problems with this loan? Are your investment goals being met by the rate of return you will be getting?

You should be asking these questions of any investment you make in your Self-Directed IRA, but it is especially significant when you are taking on the added risk of an unsecured promissory note. Talk with your lawyers, advisors, and any other professionals–such as a title company and servicing agent–with whom you regularly consult just to be sure you are not missing anything. The most trustworthy individuals with the best intentions could unwittingly create problems for your retirement portfolio if you are not cautious.

Add us to your list of professionals

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

How Active Should You Be with Your Self-Directed IRA?

The amount of time needed to build up a Self-Directed IRA is one of the first questions people ask about. Obviously, it requires more time than telling an outside account managing representative or banker once a year whether or not you wish to stay in a common fund with other employees for your Traditional IRA or 401(K).

When it is totally within your control to grow your funds, there is a greater sense of urgency to go along with the greater potential for wealth for your retirement years.

Control is the key word. You can also control the amount of time you spend in the process.

You can choose to be an “Active Investor”. There is no limit to the number of transactions you can have within your Self-Directed IRA, as long as each transaction meets all of the legal and IRS requirements already established.

Your investments could become a full-time or part-time job if you like. You could spend hours every day monitoring the price of precious metals, technical innovations, or real estate transactions geared toward flipping or wholesaling for a relatively quick turnaround.

On the other hand, you could choose to be a “Passive Investor” and have as few as one or two transactions which will provide for you in the long term. By doing so, your time commitment to your Self-Directed IRA could be less than one hour per month, enough time to deposit checks, pay any expenses associated with your transaction, and maintain your records for the IRS and your tax advisor.

There is no right or wrong answer, and you are not required to become either active or passive with your investing over the years. How you handle this could change with your life situation, or the right deal could come your way which makes you want to change course.

Suppose you invest in real estate. A passive investor could purchase one or more multi-unit buildings or apartment buildings, hire a property management company, and have monthly rental income lasting year after year. If you have a lot of years to go before you reach retirement, you could eventually use this rental income to purchase additional rental property and increase that monthly income. This method, as described above, would require only a small amount of time each month.

An active investor could be buying and selling one or more properties each month or as often as possible. Finding good deals which can result in a quick turnaround generally takes hours, as does the due diligence necessary to bring each transaction successfully to the closing table. Thus, is likely to be the time equivalent of a part-time or full-time job.

You do not have to categorize yourself as either an active or a passive investor. How you handle your Self-Directed IRA could have you somewhere in between.

Again, using real estate as an example, you could determine that you will add one property per year. You could take an hour here and an hour there searching for your best property deal under a self-imposed deadline which is months away.

Keep in mind that the amount of time you do or do not have available should not be the only factor in determining how active you will or will not be with your Self-Directed IRA.

Your personal level of expertise or experience could be a more important factor in making your decision.

Perhaps you already have experience at trading precious metals, and it is those funds which contributed to the funds for your Self-Directed IRA. If such were the case, you could do the same as you have been doing in terms of research and time commitments, with the difference being that you are growing your retirement funds instead of your taxable income for that month or year.

If you already own or transact real estate, the same concept applies. If you already invest in technology, you could use research you are already doing (or have already completed) toward purchasing and selling for your retirement funds.

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

Higher Rent Costs Could Help Your Self-Directed IRA

Several recent surveys show that the cost of renting apartments as well as houses has increased steadily over the past two years. While you can argue about the reasons it is happening, there is no argument that now is a good time to be or become a landlord.  This could help your Self-Directed IRA.

Among the benefits of having a Self-Directed IRA is your ability to use a percentage of your available funds to purchase rental property. Since, in most cases, you are not allowed to live in or manage real estate owned by your Self-Directed IRA, the result is that you could benefit from rental property located anywhere. It is a matter of finding the best investment opportunity, wherever it may be.

One of the primary reasons for the increase in renters is that fewer people own their home this year than has been the case in recent years. In some cities, home prices have risen to the point of being out of reach for first time buyers. Some will argue that the number of foreclosures and distressed properties in recent years has impacted the ability for millions of people to be able to qualify to purchase a home.

Another theory is that home prices no longer “automatically” go up over the years and that a home purchase is not the long-term investment opportunity it was considered to be 20 years ago.

For this purpose, it does not matter what the reasons are. What does matter is that renting is the best, if not the only, option for a lot more people. Because of this, landlords know they can charge more and still offer value compared to the cost of owning a home.

In communities where there are a lot of apartment and rental opportunities, the competition is heating up. Special amenities are now a factor for some renters, who may choose to live where they have a fitness center, indoor pool, lobby service, and other conveniences.

Other factors include the surroundings, such as proximity to bus or train, parking, grocery stores, restaurants, schools, and/or their work.

Rent costs are also determined by area property values, which means they are usually within range of the cost of ownership. A renter may prefer this over spending thousands of dollars on a down payment, facing a long-term mortgage, not having the flexibility to move every six months to one year, and not having to responsible for major maintenance costs.

To put it less diplomatically, some people would rather call somebody at 3 AM when the furnace goes down than have to pay the emergency repair or replacement costs themselves.

Your Self-Directed IRA provides the ability for you to hire a Property Manager to do all of the work for a rental property which you own. This includes services such as janitorial, maintenance such as lawn care and snow plowing, screening tenants, and collecting rents each month. You can factor such operating costs in with your monthly costs and income.

This means that you could own rental property hundreds of miles away, generate a monthly cash flow for your Self-Directed IRA. You would only need to spend a few minutes each month to pay the Property Manager (from the IRA and not your pocket) and to deposit the rent money you receive.

Since you can look for your best deal, you are able to research rents, availability, and income potential in a variety of cities and communities until you find the best deal for your situation.

Owning rental property also creates long term growth opportunities. Many real estate investors use their monthly cash flow toward purchasing additional rental properties and growing their portfolio. Some investors, for example, have a 20-year plan to then own 10 separate properties, each generating $1,000 per month in positive cash flow.

This means that by 20 years later, they would have at least $10,000 per month flowing into their Self-Directed IRA which is tax free.

With more and more people turning toward renting a house or apartment, it means more and more opportunities for you to gain by using your Self-Directed IRA.

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

Protect Yourself from Bear Markets Using Self-Directed IRAs

Case study: Armando L. rolled an old 401(K) into a Self-Directed IRA and began flipping houses. He only makes a modest amount on each flip – about 5-10 percent. But he does it several times a year, generating returns that have handily beaten the stock market over the past year, as of his last completed trade. And he is not worried about the stock market from day to day – he does not rely on stocks for his long-term financial security.

One of the recurring themes of this blog has been the need for diversification. No bull market lasts forever – in any asset class. Our most successful clients, long-term, are the ones who are able to use their Self-Directed IRAs to diversify into asset classes not normally captured in the usual mix of mutual funds and paper assets usually on offer from the big Wall Street investment firms and wire houses.

As of this writing – October 24th, 2018 – the Dow Jones Industrial Average fell 600 points, or 2.4 percent for the day, and the S&P 500 Index fell 3.1 percent – enough to totally wipe out the stock market gains for the entire year. The Nasdaq is now officially in “correction” territory, down 10 percent from its peak, thanks to a broad sell off among media and technology stocks after some disappointing earnings results.

But most of our Self-Directed IRA clients who own rental properties, closely-held businesses, private debt placements, tax liens and certificates, private mortgage loans and promissory notes and other common Self-Directed IRA investments will not be batting an eye: Their results are not closely correlated with the U.S. stock markets’ woes – and much of the time, the underlying value of these investments are zigging while the S&P zags.

For example – real estate – as measured by the NAREIT Equity REITs Index, is actually up by 2.43 percent over the past five days and is up by 5.41 percent year-to-date. You can find updated returns here.

Granted, the NAREIT Equity REIT index is a very broad measure. Specific, individual properties are going to vary widely in performance, though in the aggregate they tend to follow the fortunes of the broad market, because they are the broad market! But in the aggregate, real estate thus far has proven to be an excellent diversifier and stabilizing influence against a portfolio of stocks.

Historically, the bond market has been used as a diversifier against stock market volatility. But interest rates are on the rise, which forces bond prices down across the board. As long as the federal reserve is in tightening mode – and it is likely to stay in tightening mode for a while – investors should not count on strong long-term returns from the bond market and closely-related fixed-income vehicles.

With stocks and bonds both under pressure, investors are turning more and more to the Self-Directed Real Estate IRA solution, which makes it easy and tax-efficient for investors to diversify into important asset classes that can still offer strong expected returns going forward:

  • Tax liens and certificates
  • Equipment leasing and promissory notes
  • Rental real estate
  • Gold and precious metals
  • Farms and ranches
  • Timber
  • Oil and gas investments
  • Limited partnerships
  • LLCs
  • Closely-held corporations
  • Commercial real estate
  • Land banking
  • Private banking
  • Hedge funds
  • Venture capital
  • Foreign real estate

…And much more.

Self-Directed IRAs can be a valuable tool in protecting your hard-earned nest egg against devastating stock market losses and rising interest rates.

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