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Self Directed IRA Investments: It’s OK To Think Outside The Box

I’ve had a few requests to post more blog entries with ideas for self-directed IRA investments.

Again, the only things the IRS does not allow you to invest in are collectibles and life insurance.  You also cannot do any investments with disqualified parties.

If you have questions about disqualified parties, please refer to the blog post “3 Pitfalls to Investing in Self-Directed IRAs”.  Keeping the self directed IRA rules in mind, feel free to be creative.

Take what you know and use that knowledge to make investments that interest you.  If you have no idea about Real Estate, buying and selling foreclosed houses is probably not for you.  Just because you’ve seen a few episodes of “Flipping Out” on the Bravo Network does not qualify you to flip a house.

What exactly do I mean by “Use what you know” when investing?  Here’s a good example of exactly what I’m talking about… a few years back I got a call from a rancher in the Midwest.  He told me about his idea to fund an LLC through his IRA, which is okay as long as he still follows the IRA rules within the LLC and does not commingle any personal funds with the LLC money.  Out of curiosity, I asked him what he planned on investing in through the LLC.  Without missing a beat, the man responded back, “Cows.”  I was a little surprised by this answer and decided to inquire further.  The man went on to tell me that for years he had been going to auctions and purchasing cattle to sell to other ranchers at a profit.  When he found out about self-directed IRAs, he thought to himself, “Would it be possible to use this same idea to create wealth in my retirement account?”

The man would hire a friend of his, who was not a disqualified party to his IRA, to go to the auction and purchase the cattle on behalf of his LLC, which was owned by his IRA.  They would then sell the cattle at a profit to other ranchers and the proceeds would go back into his IRA LLC.  To me, this sounded like a perfect idea.  The man was taking an idea that he already knew worked and applying the same principles to his self-directed IRA.  There was no need to do a lot of research or risk putting his retirement money in something that he knew very little about.  He had years of experience in this field and he knew exactly what he was doing.  The investment wasn’t as much of a gamble, being in advance he knew better than most the risks, the rewards based on experience. In the end, the fate of this investor’s self directed IRA was in his own hands, and that is just the way he wanted it.

So, what are your “retirement cows”?  Use what you know thoroughly and invest in something that interests you, but always remember that Sunwest Trust does not offer any investment advice or sell any investment products.  We are simply the custodian of your self directed IRA.  We encourage all of our clients to do their own research and engage the services of a competent CPA or tax attorney before making any investment decisions.

I would love to hear from some of our clients to find out what you guys are investing in and if you’ve had success.  By creating a community of informed “self-directors” we can help each other make the most of our retirement accounts.

Terry White

About Terry White

I started my business career after getting my degree in Accounting from the University of New Mexico in 1983. My first job was as a controller for a local title company, and in 1987 I started First Financial Escrow, Inc. Over the years I played a part in several startup companies including First Financial Equities, Inc., First Financial Trust, Inc., First Financial Marketing, Inc. and Asset Ventures, Inc. In 1997 First Financial Escrow, Inc. was able to purchase the escrow accounts from Sunwest Bank and changed its name to Sunwest Escrow. As the market changes, Sunwest has grown and changed along with it. Besides my wife, Sheila, we have three boys, two daughters-in-law, one grandson, another grandson on the way and a future daughter-in-law. Sunwest is my passion, and I enjoy coming to work every day to see what will happen next. I enjoy fly fishing, spending time in Colorado, biking and watching my boys play soccer.