Private Investing with Your IRA: A How To
Jordan Speaker l September 18, 2017
Do you know that you can invest your retirement account savings into private investments? You can through a program called "Self Directed IRA". The program allows you to participate in investments such as private stocks, tax liens, private real estate, and or make loans. Famous private investment opportunity examples include companies such as Uber or SpaceX. Many real estate purchases are also done through private investment vehicles.
This is a great opportunity for individuals looking to achieve higher returns when compared to typical public investments. Based on research, and personal experience, private debt (loans, tax liens) can generate nearly double the returns on a risk adjusted basis of public comparisons, and private real estate can generate 3X public real estate returns when held over a 5 year period.
What is it? How does it work?
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To invest IRA into private deals you need to set up a “Self-Directed IRA account”
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Created by rolling over existing IRA/401k OR can also establish a new IRA with a SDIRA custodian and has same contribution limits as typical IRA
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An SDIRA is an IRA (Traditional or Roth) established with a custodian* (special broker) that facilitates investments into any qualified* investments
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YOU choose the investments, the broker facilitates the investment and paperwork!
Why invest through a SDIRA?
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More alternatives than your normal IRA account
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Successful private investments typically yield higher returns based off research and studies (see note at bottom)
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Access to high yield, mezzanine debt vehicle with better risk adjusted performance
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Grants you more flexibility with your investments to maximize retirement account returns
What can a SDIRA invest in?
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Real estate
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Promissory notes (loans)
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Precious metals
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Private company stock
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And many more asset classes (land, venture capital, hard money lending...)
How do you create a SDIRA?
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Set up an account with a SDIRA custodian (takes less than 15 minutes)
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Fund the account with new funds or rollover from IRA / previous employer 401k
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Send custodian the investment opportunity and documents
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Custodian reviews documentation to check for prohibited transaction, upon approval funds deal
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As investment earns money, funds are sent to your retirement account
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Custodians
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There are many custodians that can provide SDIRA services, here are four firms with slightly different customer service models:
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Summary
Self Directed IRA is a great way for individual investors to participate in private investment opportunities. If you are interested in learning more please e-mail me @ jordanspeaker@vcgmf.com.