Self-Directed IRA: Getting Started in Hard Money Lending
If you are considering ways of generating a solid return that comes with substantial provisions for safety from your Self Directed IRA account, think about becoming a hard money lender. Hard money lending is a great avenue for diversifying your holdings into assets whose correlation to the broad bond market and stock market is not close.
Although self-directed IRAs are flexible and present an opportunity to diversify retirement assets, most people are not aware. A self-directed individual retirement account lets you decide how you will invest your money without limitations that are usually imposed on IRAs, like a 401(k) or company sponsored retirement accounts.
Invest IRA in Alternative Assets
Although investment companies set up plans, other retirement plans like 401(k), SIMPLE plans and SEPs and sell pre-packaged IRAs, have a stake in pushing stock as well as bond mutual funds. However, self-directed IRAs let you take personal control of assets within your retirement account, so you can steer them into anything you want. You can invest IRA in alternative assets that include the following:
- Tax liens and certificates
- Private lending
- Hard money lending
- Commercial real estate
- Rental housing
- Fix and flip real estate
- Farms and ranches
- Privately owned businesses
- Apartment buildings
- Oil and gas investments
- Gold, silver and other precious metals
- Pipelines
The list is endless. Therefore, you have the liberty of choosing an investment or a combination of investments that meet your criteria for investment. Even then, there are a number of investments that are prohibited. They include:
- Owning gemstones or jewelry
- Owning life insurance within a self-directed IRA
- Taking personal possession of precious metals (You can only be a custodian)
- Investing IRA money in collectibles or artwork
- Investing IRA money in alcoholic beverages
- Precious metals must be in the form of a bullion or approved coin
Self-Directed IRA Strategies
Despite the numerous restrictions, it is still possible to pursue different strategies within a self-directed IRA. Some of the common strategies you may consider are:
- Inflation hedges
- Leveraged strategies
- Defensive strategies
- Market-neutral strategies
- Dividend growth strategies
- Long-short investing
- Venture capital
- Income investing
- Private equity
- Real estate
- Hedge funds
Consider Hard Money Lending with your Self Directed IRA
In order to get started with hard money lending, you need to open a self-directed IRA account. You will then fund the account before finding one or more borrowers. You can then tell your self-directed administrator to send the money where you are lending.
About the author: Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He regularly writes for blogs at MoneyForLunch, Biggerpocket, SocialMediaToday, NuWireInvestor & his own blog for Self Directed Retirement Plans. If you need help and guidance with traditional or alternative investments, email him at rick@sdretirementplans.com or visit www.sdretirementplans.com.
