Invest in Real Estate Tax-Free Using a Self-Directed ROTH IRA

What is a Self-Directed IRA?

  • A self-directed individual retirement account (SDIRA) is a type of individual retirement account (IRA) that can hold various alternative investments normally prohibited from regular IRAs. Although a custodian or trustee administers the account, it’s directly managed by the account holder, which is why it’s called self-directed.
  • Available as a traditional IRA (to which you make tax-deductible contributions) or a Roth IRA (from which you take tax-free distributions), self-directed IRAs are best suited for savvy investors who already understand alternative investments and want to diversify in a tax-advantaged account.
  • SDIRAs allow the owner to invest in a much broader array of assets. With an SDIRA, you can hold precious metals commodities, private placements, limited partnerships, tax lien certificates, real estate, and other alternative investments.

How to Open a Self-Directed IRA Account:

  1. Find a qualified IRA custodian that specializes in SDIRAs.
  2. Determine whether they offer the range of investments you want.
  3. Set up the account and pay any fees.
  4. Begin contributing to your account.

Remember that SDIRAs are self-directed, so custodians aren’t allowed to give financial advice. As such, traditional brokerages, banks, and investment companies usually don’t offer them to their clients. This means that you need to do your homework. If you need help picking or managing your investments, you should plan on working with a financial advisor.