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Investing in Real Estate and Other Alternatives in Your IRA

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Did you know that you can buy the house next door as a rental with money in your IRA?  Well, you can’t—but your IRA can. Your IRA is basically it’s own entity, and has nearly limitless ability to invest in all kinds of odd-ball—or hair-brained—investment ideas. There is a small list of “prohibited transactions”. Beyond  lending or renting to yourself or family and investing in antiques and collectibles with IRA dollars, the world is pretty much your IRA’s oyster. Officially, your IRA can’t sell naked calls or use leverage, but done inside an LP or LLC it can. In short, you don’t have to open a brokerage or bank account and buy only stocks, bonds, mutual funds, ETFs, CDs, and annuities inside your IRA; the banks and brokerages just don’t want you to know it.  

In 2013, we began suggesting to clients looking for “alternative investments” inside their IRA to review IRA Services Trust Company. As with all of our investment-related suggestions, IRA Services Trust is not paying us to write this, and we receive no referral fees to recommend them. Prior to discovering their IRA services (no pun intended), we had always shied away from alternatives in IRA accounts because of two huge inefficiencies. One, most IRA custodians of alternative investments charge at least $300/year and have other horrendous ancillary fees. Two, as your advisor, it was extremely difficult to communicate with other trust companies. Fortunately, IRA Services Trust seems to have solved both issues. For a ‘one-holding’ IRA, their annual fees are reasonable at around $115.  

Obviously, TD Ameritrade does not typically have an annual fee; but if you want to hold a “non-standard asset” in your TDA account, they charge $250/year!  

So for those of you interested in real estate investing and have all of your money tied up in your 401(k) or IRA, IRA Services Trust just may be your answer. Or, if you’ve heard about the Naked Alpha Fund and want to invest some of your retirement funds in that strategy, IRA Services Trust will act as your trustee/custodian. Recently, clients have been lending on private notes secured by real estate, earning over 10% per year with the help of IRA Services Trust.  

If you’re interested in something other than traditional stock/bond investments in your IRA, we are here to advise and facilitate.