Self-Directed IRA Investments Guide – New Year, New Investment

Self-Directed IRA Investments Guide – New Year, New Investment

Each new year brings hope of starting fresh. As a result, we put some self-directed IRA investment information together that may help bring you financial success as we ring in the new year. If you are not self-directing at least a portion of your retirement funds into alternative assets, you could be missing out on a huge opportunity!

Advantages of Self-Directed IRA Investments

Self-directed retirement plans have many advantages for building retirement wealth. Below, we discuss four main benefits of self-direction rather than traditional investments with your retirement account.

Tax Advantages

Self-directed IRA investments have the same tax advantages as traditional investments through banks and brokerage firms such as Charles Schwab or Fidelity. Any retirement account can be self-directed.

Investment Options

With banks and brokerage firms, your investment options are limited to the products those entities sell. At Midland, you choose your investments. You can invest in hard assets, private stock, real estate, and much more! The only two limitations set by the IRS on self-directed retirement plans are collectibles and life insurance.

Administrative Fees

Many financial institutions that manage retirement accounts charge built-in, hidden fees to investors without the investor realizing it or being made aware. At Midland, there are no hidden fees. You select the fee schedule that works best for your account. Midland offers both an asset-based and value-based fee schedule for plans that hold multiple assets or high-value assets.

True Diversification

With banks and brokerage firms, you may feel that your investment portfolio is diversified. However, your investments are limited to assets such as stocks, bonds, mutual funds, and money markets, specifically the assets that the investment firm sells. With a self-directed retirement plan, your investments are your choice. Our clients enjoy the freedom to choose their investment to diversify their retirement account investments.

Investment Choices

As stated previously, Midland is not a fiduciary. Midland’s role as the custodian and/or administrator of self-directed retirement accounts is non-discretionary and/or administrative in nature. Here, we hope to provide you with some insight into some of the advantages and rules with more popular assets that our clients invest in with their retirement accounts.

Real Estate

All types of real estate qualify as a viable investment with a self-directed retirement plan. You can invest in properties such as single-family homes, multi-unit homes, apartment and condo buildings, commercial properties, improved or unimproved land, Trust Deeds, and Tenant in Common (TIC) Interests.

The IRA is the buyer of the property. Your IRA may not take ownership of a property that you already own.

Real estate owned by a retirement account must be for investment purposes only. You and disqualified parties may not use or benefit from the property personally. You nor disqualified parties can have sweat equity in the property, including maintenance. Learn more about prohibited parties in our Prohibited Transactions Guide.

All rental income and expenses related to the property flow through the IRA, allowing the IRA to maintain its tax-advantaged status.

Ways that you can purchase real estate include cash, partnership, checkbook control LLC, and borrowing money via a non-recourse loan. Learn more about how money flows in and out of real estate investment in your self-directed IRA.

There is a 7-day right of rescission from the date you open your account at Midland. We can prepare documentation in that timeframe but cannot send any funds out within the recission period.

Learn more about real estate IRAs.

Promissory Notes

Your retirement account can lend money via a promissory note as an investment. IRAs can invest in both secured and unsecured notes. Secured notes are a safer option for your IRA because collateral secures the note if your borrower defaults.

One advantage that investors enjoy with promissory note investments is that they select or negotiate the note’s terms, including the length, interest rate, and payment structure.

Typically, secured notes are secured by first or second-position mortgages. Ideally, you aren’t using a secured loan as a sweetheart deal. The lender sets interest rates. However, it is suggested that at a minimum, it is at a prime interest rate plus an additional percentage or so. At a maximum, please ensure you comply with the state usury laws.

Learn more about investing in promissory notes with an IRA.

Single-Member LLCs/Checkbook IRA

In this asset class, an IRA is the 100% sole owner of the LLC. The advantages of single-member LLCs include more control over retirement funds. This structure gives the investor the ability to do quick turnarounds for investments. If you are a real estate investor that attends auctions for tax-deeds or properties, a single-member LLC is for you!

If you have multiple assets within your retirement account, it may be administratively easier to utilize a single-member LLC. Depending on your situation, it may also cost less in fees.

With single-member LLCs, the client, or a third-party of their choice, is the manager of the LLC. A bank account must be established in the name of the LLC. This structure means the IRA holder has additional responsibilities, so please ensure this is the right direction for you.

As the LLC manager, you can sell and liquidate the property at your discretion. The sale proceeds will flow back to the LLC. If it is a multi-member model, the funds will be split accordingly. For a single-member LLC, the total amount will flow back to the IRA.

Learn more about single-member LLCs/checkbook IRAs.

Set up your single-member LLC through Midland Forms.

Private Placements and Private Stock

This asset class covers a wide range of self-directed IRA investments. Investments in LLCs, C-Corporations, Limited Partnerships, and other entities are included within this asset class. With these assets, the IRA is investing in private equity. The company offers shares or is raising capital, and the IRA can be a subscriber or limited partner in the deal. The IRA is listed on those documents and returns flow back to the IRA.

Some private placements are exempt from Securities and Exchange Commission (SEC) registration and reporting requirements. For this reason, in most cases, the IRA holder must be an accredited investor. Because private placements are not offered on the open market, they are not offered through traditional custodians and brokerages.

Private placements can include stock in your local community bank, hedge funds, venture capital in a start-up tech or medical firm, or even a group of private investors pooling capital in an LLC to make a larger real estate purchase. With a self-directed IRA, the options are limitless!

Learn more about private placements and private stock investments in an IRA.

Precious Metals

Through Midland, you can hold precious metals in your retirement account. Applicable metals include gold, platinum, and silver that meet specific fineness requirements.

There are different ways in which you can invest in precious metals. You can invest via a commodity exchange, providing liquidity for investors, as well as through precious metal dealers. You can also directly hold physical gold in your retirement account, stored in a third-party depository.

Learn more about investing in precious metals with an IRA.

Foreign Currency Exchange and Futures Trading

There are a few ways you can trade futures and forex in an IRA. You can use a self-directed trading model in which you trade futures or currencies independently with your self-directed IRA. You can also have a broker-assisted trading account where you work with a professional broker assisting in your decisions. A money manager account may do the trading for you. Or, you can utilize automated trading robots that provide buy/sell signals.

The IRS requires a third-party, such as Midland, to handle the IRA administration and cash flow of the account.

Contributions and deposits must be sent directly to Midland, and we will redirect those funds to your FCM/broker.

Learn more about futures and about foreign currency exchange (forex) trading in an IRA.

And More!

You are not limited to the self-directed IRA investments listed in this article. Other permissible assets in an IRA include Bitcoin (cryptocurrency), oil and gas rights, tax certificates, structured settlements, commercial paper, convertible notes, commodities, livestock, timberland, rights or warrants, accounts receivable factoring, equipment leasing, and much much more!

How to Get Started

If you do not already have a self-directed IRA account, opening one is easy!

STEP 1: Open a Self-Directed IRA

First, fill out a Midland account application online at

STEP 2: Fund Your Self-Directed IRA

Next, fund your account. To do this, you may transfer funds from an existing IRA account or rollover funds from a former employer plan. If eligible, you may also contribute annually to your IRA.

STEP 3: Choose Your Investment

Lastly, choose your investment! Once you identify an investment, Midland will determine if the investment is administratively feasible and will work with you to properly custody the asset.

Alternatively, if you already hold a self-directed IRA account at another financial institution, you can transfer those funds to a Midland account. Learn how Midland sets itself apart.

There are many advantages and investment options with self-directed IRAs. We understand that it is a lot of information to absorb, and you may have a unique situation that was not covered in this article. Don’t worry! We’re here to help!

Midland’s Senior Business Development Associate, Matt Calhoun, recently hosted a Midland University webinar that covered this article’s content in more depth. During the webinar, Matt answered questions that live guests had. If you need more information or have specific questions, please watch the recording below, or contact Matt Calhoun directly at (239) 333-4461 or



MIDLAND TRUST COMPANY, NOR ITS AFFILIATES OR SUBSIDIARIES (COLLECTIVELY REFERRED TO AS “MIDLAND”), IS NOT A FIDUCIARY: Midland’s role as the Custodian and/or Administrator of self-directed retirement accounts is non-discretionary and/or administrative in nature. The account holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account, and is responsible for conducting his/her own due diligence. Midland has no responsibility or involvement in selecting or evaluating any investment and does not conduct due diligence on any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee, endorsement, or certification of any investments.

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