Self-Directed IRA Due Diligence

Self-Directed IRA Due Diligence When Investing With a Self-directed IRA and/or Self-directed 401(k)– Where do I Start?

With a self-directed IRA and/or a self-directed 401(k) you are always hearing that you must do your ‘self-directed IRA due diligence’. At American IRA, we discovered that many clients did not know how to do their ‘due diligence’.  While we cannot give investment advice at American IRA, we can offer a detailed summary of ‘due diligence’ items that our clients can use as a guide. This list gives our clients a healthy starting point that they can use during discussions with their professionals. In this article we share with you ‘due diligence’ items related to real estate acquisitions. As every investment is different, you should consult with your professionals about whether there are ‘due diligence’ items you need to consider in addition to what we share in this article.

Self-Directed IRA Due Diligence – Real Estate Acquisition – The Basics

These are the basics that you look at if you’re buying any property whether you are buying it with your real estate self-directed IRA or self-directed 401(k) or whether you are buying it outside of your IRA. These are some items you absolutely must look at:

  • Location – is the real estate located in a desirable location?
  • Financing – you want to make sure you get the type of financing you need, whether it’s owner or bank.
  • Property values and comps – you absolutely ‘must’ obtain these so you are educated about what you are purchasing and what its true value is in the market place.
  • Homeowner’s association rules and fees – it is critical that you know these in advance. Did you realize that some homeowner’s association rules actually ‘prohibit’ you from renting or leasing the home?
  • Property liability insurance – make sure the real estate is insurable and find out how much that insurance costs. There are some wonderful homes that are sold cheap and would make great vacation rentals in places such as Florida…but they are either uninsurable or the insurance premiums are so high that their current owners are selling.
  • Title insurance and title issues – always make sure a title search is done on the real estate before you purchase it and always follow-up by protecting yourself with title insurance.
  • Surveys – it is critical to obtain a survey to make sure the real estate you are purchasing as well as the land it is situated on is free from encumbrances.
  • Property condition – a home inspection is a great way to properly assess the condition of the real estate.
  • Rental values – check the rental values in the area to make sure that you can obtain enough in rent to cover all your expenses and still make a profit.

Self-Directed IRA Due Diligence – Real Estate Acquisition – The Don’ts

When investing in real estate via your real estate self-directed IRA or self-directed 401(k), it is critical to avoid some common mistakes.

  • Do not trust the seller’s numbers.
  • Do not take too long to decide. Good deals do not last.
  • Do not trust appraisals unless you ordered it, paid for it, and gave the appraiser instructions.
  • Do not fudge, play with or use ‘hope that this will happen with’ the numbers.Do not underestimate the time to flip.
    • I hope that I can rent it for $1,100. You need to know that you can rent it for $1,100. If you don’t know, use $1,000. Use the number that you know.
  • Do not overestimate the rental market
  • Do not underestimate the repairs.
  • Do not underestimate the “as is” value.

 Self-Directed IRA Due Diligence – Real Estate Acquisition – Key Thoughts

Here are some final thoughts to keep in mind when investing in real estate:

  • Do good deals.
  • Follow through and deliver as agreed to with whatever person you’re dealing with.
  • Use professionals. Many times you think ‘I don’t need that professional’. Trust me when I tell you that I have seen many things that had a professional been involved, they would not have the problems they have.
  • Stay on top of the numbers/bookkeeping.
  • Do not cut corners. I have been punished every single time I’ve cut a corner. The corner-cutting gods come down with lightning bolts and they strike.
  • As soon as you think you are smarter than everyone else, you will find out “The Hard Way” that you’re not.
  • Slow and steady beats fast and sloppy – ALWAYS!
  • Have a plan and work your plan.
  • Do not get tangled up in the bigger better deal mentality.
  • You’ve got to be prepared to walk away at any point in time that the deal does not match up to what you want or what you believe is in your best interest.


The self-directed IRA due diligence items listed, the examples, and the references in this article are merely examples. This is not an all-inclusive list of what you need to include in your real estate investment portfolio; this is absolutely for illustration purposes only.

American IRA, LLC does not give investment advice.  We do offer guidance as to the rules and regulations related to their self-directed accounts and the benefits of different account types so that our clients can take that information to their professionals to discuss the ramifications of various decisions on their individual situation.

For more information, or to explore your options, call American IRA today at 866-7500-IRA(472). We look forward to working with you.


Location: Since these are webinars, you can attend from anywhere as long as you have a computer and a phone or alternatively a computer with speakers.


Have you ever looked at your retirement account statements and thought, “At this rate, I will NEVER be able to retire.”

Come join us for an information packed webinar to learn how you can take control of your financial future by “Self-Directing” your IRA or 401k.

In this webinar we will explain:

  • Why most Americans are not on track to retire.
  • What is a Self Directed IRA/401k?
  • How to UNLEASH your IRA or 401k to invest in what you UNDERSTAND.
  • The process to make an investment with your Self-Directed IRA/401k.
  • Strategies that clients are using to get quality returns.

How to Join:

Please register for the meeting at one of the times listed below.

July 17th @ 12:00PM
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July 23rd @ 12:00PM
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July 31st @ 12:00PM
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Cost: These webinars are open to the public and free to all!

Self-directed IRA Private Lending

Self-Directed IRA Private Lending Explained

If someone wants to just simply hold the paper secured by an asset in their self-directed IRA, their self-directed IRA is actually going to be a private lender for that asset. That’s right…self-directed IRA private lending simply means a private individual is using their self-directed IRA to loan the money rather than a bank or lending institution.

Self-Directed IRA Private Lending…The Numbers

In this example, Jack Brown has $100,000 he rolls over into his self-directed IRA. He wants to loan it to an investor as a first mortgage on a property worth $135,000.

Self-Directed IRA Private Lending…Determining the Value

Perhaps Jack’s realtor, an appraiser or some resource told him, or perhaps he’s sophisticated enough to look at the deal and say I’m comfortable that the deal is worth $135,000. We always suggest doing your ‘due diligence’ and using professionals to assess the value of an asset you are going to loan money on.

In this case, we’re looking at an LTV – Loan to Value – of 75%. This is not a hard and fast rule, with self-directed IRA private lending, the Loan to value is negotiated between the private lender and the private borrower.

Self-Directed IRA Private Lending…The Terms

The two parties – the lenders as well as the borrower – agreed to a 9% interest rate with interest only payments over five years and no amortization of the loan. With self-directed IRA private lending, the interest rate is negotiated by the private lender and the private borrower. They agreed on a straight interest-only payment, just to make it really clean and easy.

The property is going to be secured by a mortgage and a promissory note, and it’s going to be recorded with an attorney.



Self-Directed IRA Private Lending…Preparing for the Closing

Jack is going to send us what we call a buy direction letter. It’s an internal document that he completes to tell us the details of what he wants his IRA to invest in.

Jack will then review and approve all the closings documents. He’s the account holder and the decision-maker. He needs to understand the deal, and it’s only going to be funded if Jack is comfortable with it.

Self-Directed IRA Private Lending…The Closing

Even though this loan is being made through his self-directed IRA, this is going to be a regular closing that we’re used to as real estate investors. The documents are going to be recorded, and the only difference is that the original documents are actually going to be held by our office in our fireproof safe at American IRA.

As you can see, we’re not making the decisions. The client is directing us all along the way as to how and when to make the investment. In this case, because it’s a Traditional IRA, the interest is going to be tax deferred in a monthly amount of $750. That’s just 9% of $100,000 broken down into monthly payments.

Self-Directed IRA Private Lending…The Profits

At the end of the five years the loan is repaid, and the interest accrued over those five years is $45,000!

All self-directed IRA private lending investments have inherent risks. With proper due diligence and a professional team, risk can be managed but not eliminated-that is our job as investors. If you don’t want to take a risk whatsoever, tongue in cheek I say “Put it in U.S. Bonds or FDIC Insured CDs…though as you all know…Bonds and CDs are offering very low returns”.


American IRA, LLC does not give investment advice.  We do offer guidance as to the rules and regulations related to their self-directed accounts and the benefits of different account types so that their clients can take that information to their professionals to discuss the ramifications of various decisions on their individual situation.

For more information, or to explore your options, call American IRA today at 866-7500-IRA (472). We look forward to working with you.

Self-Directed IRA for Retirement

Turbulent stocks or even the rapidly shifting bond market.What’s the difference between an old fashioned traditional retirement account and a 21st century self-directed IRA account? If you’re familiar with the old adage of “not placing all your eggs in one basket,” this classic advice still rings true. The difference is that an old fashioned retirement account is primarily securities based and a 21st century self-directed IRA truly allows you to diversify the assets in your retirement account.

A self-directed IRA account from American IRA, for example, enables you to invest in assets that offer much more diversity. Rather than pouring all of your hard-earned savings into turbulent stocks or even the rapidly shifting bond market, you can instead focus on private lending, real estate, joint ventures, and other asset classes. The long term effects of this flexibility are quite striking – if a given asset class is constantly shifting, your self-directed IRA’s other assets can go a long way toward reducing account volatility.

So in a nutshell, what we’re calling a “self-directed IRA” is one that allows you to make the most of your investing knowledge by giving you the ability to invest in what you understand.

Are you an experienced tax lien investor? Do you regularly buy and sell real estate? Would you like to start your own private company with many of the benefits that a self-directed IRA brings? Self-direction is an amazing way to enhance your portfolio’s diversification!

If you have any questions about opening a new account, contact us at 1-866-7500-IRA(472) or If you’d like to transfer your existing portfolio, contact us at 1-866-7500-IRA(472) or


Self-Directed IRAs a Social Security Solution

A Bright Future with Self-directed IRAsCurrent news headlines are full of retirement-related stories and specials. The world’s most developed nations have benefited from greater nutrition levels, more effective healthcare treatment, and generally more resources as a whole. The result of this higher standard of living directly impacts retirement plans. As the massive Baby Boomer generation enters retirement and stresses our economic system, self-directed IRAs are an important Social Security Solution.

Whether or not you’re a Baby Boomer, this large age cohort will soon start drawing social security benefits and impacting the nation’s finances. Current Congressional Budget Office reports are predicting that the program will peak in the year 2016 – in other words, the Trust Fund will run out unless Congress passes major reforms. Here’s what this means for you: your Social Security benefits may be greatly reduced, and you should immediately start preparing for this eventuality.

Self-directed IRAs are a highly-effective way to account for Social Security’s current insecurity. For example, with a self-directed IRA from American IRA, your IRA can invest in real estate and rent out a property for recurring income. Combining this fairly consistent revenue source with such investments as private loans and tax liens can help you protect yourself against an uncertain future.

Self-directed IRAs don’t rely on the fluid world of politics and policy; instead, they allow you to control your future and determine the success of your own retirement. Self-directed IRAs unlock your full potential as an investor, so why not protect yourself against Social Security’s unknown future today?

 Click here for a free IRA analysis. You can’t afford to wait!

 If you have any questions about opening a new account, contact us at 1-866-7500-IRA(472) or If you’d like to transfer your existing portfolio, contact us at 1-866-7500-IRA(472) or



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