When I first started investing in real estate, I only knew to save enough money for a downpayment. My first rent check from my tenants got me hooked on owning more real estate.

I was now a “real estate investor”, but how am I supposed to scale up faster saving just a small chunk of our salary towards the next purchase?

No matter how you look at it, investing in real estate involves some capital. Time is capital. Money is capital. Some can get creative and put little to no money down. With simple know-how, you can do the same!

Lucky for you, the IRS allows you to use several types of self-directed plans such as IRA and 401K to invest in alternative assets. A self-directed IRA plan allows you to control what you invest in with your retirement funds beyond publicly traded assets.

What makes self-directed plans more powerful than the rest?

• • The freedom to choose your own investments. Is your retirement account down more than 20% in 2023 and you feel like you have no control? Self-directed plans give you control over tangible assets to invest in when the time is right without having to be at the mercy of the stock market.
  • You can add diversity to your portfolio using a large variety of alternative assets. You can use self-directed plans to invest in real estate, private equity
    placements (like a real estate syndication), IRA LLCs, private notes, precious metals, and much more.
  • Many alternative assets can earn income at a faster pace than investing in the stock market.
  • Income generated from self-directed plans can defer capital gains. Income from rental property and even capital gains from the sale of real estate grow on a tax-deferred basis in your account. This increases the amount of capital you have to reinvest.

What are the different self-directed plans?

• • Traditional IRA, Roth IRA, Simplified Employee Pension Plan (SEP IRA), Savings Incentive Match Plan for
    Employees (SIMPLE IRA)
  • Traditional 401k, Roth 401k, Solo 401k
  • Health Savings Accounts (HSA)
  • Education Savings Accounts (ESA)

Regular IRAs may say you can “self-direct” (think Vanguard, Fidelity, and Schwab); however, they only allow you to invest in stocks, bonds, ETFs, and mutual funds.

What can’t you invest in a self-directed plan?

• • The IRS does not permit investments in life insurance or collectibles such as works of art, antiques, coins, gems, and stamps. The asset must be titled to the self-directed account and you can’t take possession of the asset.
  • Funds cannot transact with disqualified persons, which includes you, your spouse, your kids, and your
    parents.

How do I get started?

There are many self-directed custodians out there. It is important to choose a custodian wisely. Pay extra attention to the fees you are charged and make sure the company is reputable. One of our favorites is Advanta IRA due to the level of hands-on service they provide.

1. 1. Research, select, and reach out to a custodian and their representative to start asking questions.
   2. Open an account following their application process
   3. Talk to your existing custodian to fund your self-directed account. Rolling over funds may take a couple of weeks to months. Your current custodian may say they “cannot” do this. Honestly, who wants to hand over funds and lose account balances?

Note: There is no tax implication when you are moving funds between your current custodian to the self-directed
plan custodian. Just make sure to roll over the funds within the specified timeline.

How do I invest in a real estate syndication?

Each custodian has a different process. So make sure to check in with your representative ASAP when you identify an investment opportunity.

1. 1. Identify the asset to invest in.
   2. Confirm the minimum investment and make sure you have enough funds in your self-directed account to invest.
   3. Send the private placement memorandum forms to your custodian to review and/or complete. This process can take a couple of weeks.
   4. Return your forms to the operator or co-sponsor you are working with.
   5. Follow up with your custodian and operator to make sure the investment is successful until completion.

Remember to complete your own due diligence on your investments. Your custodian is there to help facilitate in
your self-directed plan and your investment choices. They are not financial, legal or tax advisors. Every
investment has risks, and it is up to you to take control of your future!

Now go out there and be great!

PS – Below are a few extra resources to help you understand how you can take control of your retirement funds:

https://youtu.be/ypqW9ojs4nY

https://www.advantaira.com/self-directed-ira/what-is-a-self-directed-ira/

https://youtu.be/u22_wfMVj1I

You can also access our latest webinar with Corey Daharsh, from Advanta IRA, where he shows us how to get started using a self-directed retirement account to diversify our portfolio with alternative assets.

Part 1: https://clipchamp.com/watch/K23wfi3t5SB

Part 2: https://clipchamp.com/watch/1VNIZsxGSjm