Self-Directed IRA: The Definitive Guide to Alternative Asset Investing for Retirement [2017 Edition]

Self-Directed IRASelf-Directed IRA's are a lot like dynamite:  Powerful, flexible and very dangerous.

You can't the appeal of using your retirement savings to invest in assets you actually understand like real estate, precious metals or private companies… It's almost intoxicating…

And yet, there's real danger for your retirement portfolio, and the IRS loves to exploit that.

So here's how to enjoy the explosive power of Self-Directed IRA's without blowing up your nest egg…

Chapter 6:
Real Estate in your Self-Directed IRAReal Estate in Your Self-Directed IRA

Self-Directed IRA's are BOOMING in popularity.  As the trend towards diversification AWAY from Wall Street and INTO alternative assets (like real estate, precious metals and private companies) continues, Self-Directed IRA's are going to do nothing but get bigger and bigger and bigger.

But let's be very clear:  Self-Directed IRA's are not right for everybody.  Not even close.

Sure, the benefits are substantial:

  • Astounding flexibility
  • Ability to invest your retirement funds in real estate, precious metals, pre-IPO stocks, cryptocurrencies... just about anything
  • Strong legal protection
  • Much greater tax planning capabilities than normal IRA's
  • Impressive estate planning potential

That's just a short list...

...But that flexibility makes it easy to "hang yourself" in a million different ways.  And when you screw up with a self-directed IRA (called a "prohibited transaction" by the IRS), odds are extremely high you'll lose at least half of your entire account... maybe even all of it.

So yes, there's real risk.  But here's the actual truth of the matter:

Conventional financial "experts" are woefully ignorant... and maybe even directly deceptive.  (I hope it's the former.)

These people have a vested interest in dissuading you from diversifying away from stocks, because their livelihoods are based on selling Wall Street's retail assets.  It's a conflict of interest the size of Mount Rushmore, which, by the way, is stunningly gorgeous and was carved using dynamite.

But many of the Self-Directed IRA companies aren't much different.

Most of them default to recommending self-directed retirement accounts for everyone, even though converting to self-directed IRA's is a counterproductive strategy for many people.  Even worse, many of those accounts sit with dormant capital, all because the investor is merely excited by the prospect of investing in alternative assets, but soon finds him or herself unable to identify or vet such investments on their own.

(Unlike conventional financial people who trash self-directed retirement accounts without regard to the facts of the law, I've got some sympathy for self-directed IRA companies, who have some difficult legal limitations... more on that later.)

So there... I've told you that the conventional financial "experts" are being deceptive about self-directed IRA's, and that self-directed IRA companies are between a rock and a hard place when it comes to really helping their clients as much possible.

That, of course, leaves me.  I'm not a provider of IRA's or financial accounts of any type, so I don't have that conflict of interest.  Yet I have vast and lengthy experience in the arena of self-directed retirement accounts, including the honor of providing legal continuing education instruction to California attorneys (in association with highly reputable institutions like UCLA).

Bottom line:  I'm going to tell you the truth about this stuff, without any conflict of interest.  And I know what I'm talking about.  The truth is frequently different than popular assumptions.  So let's begin:

Self-Directed IRA BasicsSelf-Directed IRA Basics

Self-Directed IRA's are just like regular IRA's in most ways.  There are great tax benefits, strong legal protection and many different types of accounts for varying types of people, such as employees, self-employed workers, non-working spouses, etc.  But the one big difference is that Self-Directed IRA's don't force you to buy investments only from your IRA provider.  In fact, there are nearly no limits...

The self-directed IRA is a financial tool that’s so powerful, I wonder if Congress knew what they were doing when they created it.

With a self-directed IRA, you can:

  • Save money for retirement… and get tax deductions for it
  • Invest your savings in nearly ANYTHING you want (not just stocks and mutual funds)
  • Never pay taxes on the growth of your account

You’re probably familiar with the “conventional” IRA.  Those are usually set up through companies like stock brokerages, insurance companies, banks and other conventional financial companies.

The tax benefits of these conventional IRA’s are the same as for self-directed IRA’s.  But there’s one big difference:

With conventional IRA’s, you’re limited to investing your retirement savings into the investment products sold by your IRA company.  That’s why I usually use the word “captive” rather than “conventional” to describe these IRA’s… because your money is captive to the limitations of the IRA company.

That’s how self-directed IRA’s are different.  With a self-directed IRA, you can invest your retirement savings in practically anything the law allows…

…and the law places very few limits on your IRA in the law.  That’s why these accounts are so very, very powerful.

Self-Directed IRA RulesSelf-Directed IRA Rules:  Top 10 Most Important

It's true:  There are some rules you have to follow to use a Self-Directed IRA successfully... and some of them are very tricky.

That's why I've distilled it all down into the 10 most important rules for self-directed IRA owners.  Follow these, and you'll be well on your way to a totally hassle-free experience with your self-directed I.R.A.

The law that created IRA's - 26 U.S. Code § 408 - stipulates only 2 asset classes you must avoid:  Life Insurance and Collectibles.

If your self-directed IRA acquires ownership of any life insurance or collectibles, the IRS will view the transaction as a withdrawal of IRA funds by you, rather than as a purchase of the assets themselves.

This is called a "partial distribution" and quite probably will bring with it income taxes, penalties and interest for the IRA owner.

There are other problematic asset types - including S-Corporations and Collective Investment Trusts - that do not result in a distribution of the IRA, but should be avoided for other reasons.

Self-Directed IRA CustodianSelf-Directed IRA Custodians & Administrators

The only difference between a self-directed IRA and a "normal" (I call them "Captive") IRA is the custodian that holds the account.  Some IRA companies give you freedom, and some don't.  It's that simple.

So below, you'll find not just a comprehensive list of self-directed IRA custodians and administrators, but you'll also learn how to choose the one that's right for you... because this is a very important choice! 

Accuplan Benefits Services406 S Jordan Pkwy #640South JordanUT84095(801) 266-9900
Advanta IRA3525 Piedmont Rd NE
Building 8, #101
AtlantaGA30305(678) 513-8913
American Estate & Trust6900 Westcliff Dr
# 603
Las VegasNV89145(702) 489-6403
American IRA137 Broad StreetAshevilleNC28801(828) 257-4949
Bank of Utah2605 Washington BlvdOgdenUT84401(801) 409-5000
CAMA Plan122 East Butler Ave
Suite 100
AmblerPA19002(215) 283-2868
Central Bank of Utah75 North University AvenueProvoUT84601(801) 655-2126
Community National Bank225 Main StSenecaKS66538(785) 336-6111
Entrust Group555 12th Street
Suite 1250
OaklandCA94607(510) 587-0950
Equity Trust Company1 Equity WayWestlakeOH44145(440) 323-5491
First Midwest Bank1 East Erie StreetChicagoIL60611(312) 440-3022
Goldstar Trust Company1401 4th AveCanyonTX79015(806) 354-3540
Horizon TrustP.O. Box 30007AlbuquerqueNM87190(888) 205-6036
IRA Express74 N Main StCedar CityUT84720(435) 867-8008
IRA Financial Group1688 Meridian Ave #504Miami BeachFL33139(305) 538-9292
IRA Financial Trust Company221 S. Phillips Ave.
Suite 206
Sioux FallsSD57104(800) 472-1043
IRA Innovations100 Concourse Pkwy
BirminghamAL35244(205) 985-0860
IRA Resources825 La Jolla BlvdLa JollaCA92037(858) 459-1212
IRA Services Trust1160 Industrial Rd
San CarlosCA94070(800) 248-8447
Kingdom Trust Company1105 KY-121 bMurrayKY42071(270) 226-1000
Liberty Trust Company101 S. Reid Street
Suite 307
Sioux FallsSD57103(800) 473-1977
Madison Trust Company401 E 8th St
Sioux FallsSD57103(800) 721-4900
Mainstar Trust Company214 W 9th StOnagaKS66521(785) 889-4213
MidAtlantic IRA125 South Carroll Street
Suite 250
FrederickMD21701(240) 575-3880
Midland IRA1520 Royal Palm Sq. Blvd
Fort MyersFL33919(239) 333-1032
Millennium Trust Company2001 Spring Rd
Oak BrookIL60523(630) 368-5600
Mountain West IRA10096 W Fairview Ave
# 160
BoiseID83704(208) 377-3311
Nevada Trust Company9130 W Russell Rd
Suite 310
Las VegasNV89148(702) 696-0000
New Direction IRA1070 W Century Dr
LouisvilleCO80027(303) 546-7930
Next Generation Trust Services75 Livingston Avenue
Suite 304
RoselandNJ07068(973) 533-1880
NuView IRA280 S Ronald Reagan Blvd
LongwoodFL32750(407) 367-3472
1560 Broadway
Suite 400
DenverCO80202(866) 818-4472
Polycomp Administrative Services3000 Lava Ridge Court
Suite 130
RosevilleCA95661(800) 952-8800
Preferred Trust Company2471 W Horizon Ridge Pkwy
HendersonNV89052(702) 990-7892
Premier Trust4465 S. Jones BlvdLas VegasNV89103(702) 507-0750
Provident Trust Group8880 W Sunset Rd
Las VegasNV89148(888) 855-9856
Quest IRA17171 Park Row Dr
HoustonTX77084(281) 492-3434
Real Trust IRA Alternatives312 East Trow Avenue
Suite 201
ChelanWA98816(509) 888-8100
Self-Directed IRA Services LogoPO Box 23149WacoTX76702(512) 637-5739
Sovereign International Pension1314 Alt 19Palm HarborFL34683(727) 286-6237
Specialized IRA Services6100 Indian School Rd NE
AlbuquerqueNM87110(505) 514-0539
STC Inc. (Security Trust Company)223 N Prospect StHagerstownMD21740(301) 665-2830
Summit Trust (In Receivership)8861 West Sahara Ave
Suite 215
Las VegasNV89117(877) 268-9115
Sunwest Trust10600 Menaul Blvd NEAlbuquerqueNM87112(505) 237-2225
uDirect IRA8 Corporate Park
IrvineCA92606(714) 831-1866
Vantage IRA20860 N Tatum Blvd
PhoenixAZ85050(480) 306-8404

Checkbook IRA LLCCheckbook IRA LLC

Want to have instant access to your IRA capital?  Would you like to have literal checkbook control of your retirement savings... and even save a ton of custodial fees in the process?  Then the Checbkook IRA (aka the IRA LLC) is for you.  But be forewarned:  This is the most perilous way to handle your Self-Directed IRA.  Legal expertise is necessary, and the cost of errors can be devastating.  But if ultimate control and instant access is what you want, the Checkbook IRA LLC will definitely provide it to you:

The “Checkbook IRA LLC” is a very important strategy used by some investors who need to have instant access to their capital (like anyone who buys real estate or other assets at cash-only auctions).

Under normal circumstances, you have to take some extra steps for your IRA to purchase assets through a self-directed IRA custodian.  Those extra steps can take time, and for many investors, time is money.

There are some important things you should understand about the Checkbook IRA LLC, so read on...

Specialty Self-Directed IRA's

You've probably heard of a thing called a "Real Estate IRA"... or maybe a "Gold IRA"... or maybe even a "Cryptocurrency IRA".

Do you think that the U.S. Congress actually created something called a "Cryptocurrency IRA"?  Ummm.... no.

So here's what those terms actually mean...

The term “real estate IRA” is a marketing term that doesn’t appear anywhere in U.S. law.

It’s just a term created by some self-directed IRA custodians to suggest that their particular IRA is better for investing in real estate than IRA’s offered by other custodians.

In reality, all IRA’s have precisely the same investment capabilities under the law.

Some custodians are certainly more experienced with real estate investments than others, and that is a worthy consideration.

But at the core, all Self-Directed IRA’s – and all IRA’s in general – have precisely the same investment capabilities.

Real Estate in your Self-Directed IRAReal Estate In Your Self-Directed IRA

Without a doubt, the single most popular asset class for self-directed IRA owners is real estate.  Every truly self-directed IRA company I've ever asked has told me that real estate is their largest single asset class.

So... YES, real estate in your IRA is possible and legal.  But exactly how do you invest in real estate in your IRA?  You do it by understanding these things:

We don't give out legal advice here at, so talk with a lawyer if that's what you're after.  But as an expert-level layman on the topic, I'll tell you this:  More dollars in self-directed IRA's are allocated to real estate than any other asset class.

To be clear, I don't actually know that last item to be a fact.  But I'm led to that conclusion by a substantive anecdote:  Literally every single self-directed IRA company that I've asked about this - and there have been many - has confirmed that real estate is the top asset class for their self-directed IRA clients.

So, yes, you can buy real estate in your IRA.  Recall that only collectibles, life insurance and s-corporations are fundamentally problematic as a self-directed IRA investment, and real estate certainly isn't any of those things.

But always remember the rules about disqualified parties:  Even though real estate is compatible with your IRA, you still have to be sure that you don't buy it from or sell it to any disqualified parties... and don't let any disqualified parties benefit from it in any way.

What are your questions about Self-Directed IRA's?

Enter them here and we'll be glad to assist you:

      Self-Directed IRA Rules

Bryan Ellis

Bryan Ellis is host of Self Directed Investor Talk, America's #1 podcast and for affluent self-directed investors. He's also an expert in self-directed IRA's, solo 401k's and 1031 exchanges. You can find Bryan's writing in very highly respected publications including Forbes, Entrepreneur and TheStreet. Bryan lives in metro Atlanta, Georgia with Carole Ellis - his wife, business partner and best friend - and his 4 children ranging in age from 2 to 19.