Traditional retirement investing dictates mostly investing in stocks, bonds and mutual funds. But, Self Directed IRA investing opens up a whole new world of options. Alternative asset investing can provide terrific growth potential…that is, if you’ve done your homework. Don’t hold back. Find something that interests you and become an expert.
The list of possibilities is very long. In no particular order, here are a few of the more popular options for Self Directed IRA investing. (Some of the information supplied by Investopedia and Wikipedia.)
Secured & Unsecured Notes
A note is simply a legal document that extends credit from one individual or entity to another individual or entity in exchange for agreed upon terms. You may offer notes that are backed by collateral (secured) such mortgages or deeds of trust, or unsecured notes to a relative or friend (non-disqualified).
Tax Liens & Deeds
Simply put, if the owner of a property is unable to pay the taxes on a property, the taxing authority allows investors to pay the taxes and typically offers high interest rates in return (varies from State to State). The purchaser either makes money on interest that accumulates and/or may end up with title to the property.
Judgments & Structured Settlements
Every day, individuals are awarded judgements and structured settlements by courts and insurance companies resulting from a myriad of claims. Sometimes the settlements do not adequately provide the recipient the immediate amount of cash needed or he/she simply wants to be “cashed out”. A savvy Self Directed IRA investor can step in to purchase these judgements and settlements at a discount and lock in a rate of return for the term of the judgement or settlement.
Accounts Receivable Factoring
Factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) at a discount. It involves three parties: the seller of the receivables, the debtor and the factor. The receivable is essentially a financial asset associated with the debtor’s liability to pay money owed to the seller (usually for work performed or goods sold). The seller then sells one or more of its invoices (the receivables) at a discount to the third party, the specialized financial organization (aka the factor), to obtain cash.
An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. The debt is usually issued at a discount, reflecting prevailing market interest rates. A major benefit of commercial paper is that it does not need to be registered with the Securities and Exchange Commission (SEC) as long as it matures before nine months (270 days), making it a very cost-effective means of financing.
Many businesses need equipment but can’t afford to purchase it outright. In an equipment leasing arrangement, the lender buys and owns the equipment and leases it back to the business for a flat monthly rate for a specified number of months. At the end of the lease, the business may buy the equipment at fair market value, keep leasing, lease new equipment or return the equipment. Investors can invest individually, through a limited partnership, or direct participation program.
Private Company Stock
Unlike public stock, the lack of information about most private companies tends to dissuade investors, who are usually very reluctant to buy into a company that they know nothing about. However, if an investor is familiar with the founders or shareholders of a privately held company and is afforded an opportunity to examine the books prior to making an investment, then it may be a very desirable non-traditional investment. The popular misconception is that privately-held companies are small and of little interest. In fact, there are many big-name companies that are also privately held.
Limited Only By Your Imagination!
The list above is very limited. You can actually invest in almost anything as long as you do not violate the “prohibited transaction” rules. We know of one investor who has moved a portion of his funds into a partnership that owns a race horse. Another investor started a new company with her retirement funds that manufacturers and installs solar panels.
Only your imagination can limit the investments you’re able to make. Get started today with a Self Directed IRA or 401k plan from Safeguard Advisors. Contact us at 877-229-9763 to explore all the possibilities.