Deciding what kind of investments to make using your IRA funds can be a daunting process. While the traditional options of stocks, bonds and mutual funds still remain available, re: there are also alternative investments as well, like precious metals or real estate. Choosing to invest in real estate is a common way to build your self-directed IRA portfolio. Foreclosed property can often be purchased at a discounted price or tax lien certificates could be purchased. Profits can be made in your retirement account with little to no involvement in managing or maintaining the real estate. This option doesn’t require a great deal of money to be in your self-directed IRA. Many self-directed IRA holders select a non-recourse loan in conjunction with their purchase of investment real estate. The rental income generated from the property repays the non-recourse loan and any additional cash-flow is credited back to the self-directed IRA custodian.

One of the most important things to determine before opening a self directed IRA is how to abide by the guidelines regarding IRS prohibited transactions. The security that is provided by managing your own self-directed IRA can prove to be a lucrative one, however maintaining this requires adherence to the limitations of the accounts use. Prohibited transactions, as defined by the Internal Revenue Service (IRS), could mean your IRA becomes disqualified and your tax deferred status for that account revoked, causing tax liability to the beneficiary of the account. Some examples transactions include involvement of: a spouse, a parent, a grandparent, children and/or their spouses, grandchildren and their spouses. Staying updated about IRS guidelines for self directed IRA’s is the first step to preparing for a self-directed account.

Tags: alternative investments, non-recourse loan, self-directed IRA, self-directed IRA's