Imagine looking for the perfect real estate deal or perhaps a really great business to invest in. Let’s say that you found it, the returns look great, and the risk is minimal. You take a look at the investment amount and realize that it is 10 times the amount that you actually have in your IRA. Most investors would be let down and think to themselves “How am I ever supposed to make the kind of returns I want to, if I don’t have hundreds of thousands of dollars ready to invest now?” On the other hand, the Self-Directed investor would rest assured knowing that he or she could invest without any problems.
The secret that the self directed investor knows about is that you can actually partner with other self directed IRAs on certain types of investments in a completely legal and IRS approved fashion. The simplest way to explain how this works is with a real estate transaction. Let’s say that there is a piece of property for sale that cost $200,000 and that you wanted to purchase that property in order to use it as a rental home. The only problem is that you only have $50,000 in your IRA. If you had a self directed IRA then you could legally partner with other self directed IRA owners and all go in on that property. Now let’s say that you were part of an investment network and were able to find 3 other investors all with $50,000. Together you could purchase the property. Once the property was rented out then the rental income would be split proportionately amongst the investors, in this case, four 25% portions. That income would go right into your Self-Directed IRA.
This is just one of the many powerful ways a Self Directed IRA allows you to invest SMARTER. Using these types of investment methods will have you earning more money and eventually retiring the way that YOU want to.