Since most banks don’t allow their IRA clients to purchase real estate through those accounts (because it doesn’t create any profits for the bank), those investors may opt for a self-directed IRA. Next, the investor must decide how to choose between a custodial or checkbook self-directed IRA.

Whichever type you choose, you’ll be able to invest in an asset you actually understand — not only in real estate but also just about anything else other than collectibles or life insurance.

Here are just some of the assets in which you can invest with your self-directed IRA:

• Real Estate
• Tax Liens
• Trust Deeds
• Mortgage Notes
• Stocks & Bonds
• Real Estate Investment Trusts (REITs)
• Precious Metals
• Foreign Currency
• Other Alternative Assets

How to Choose Between a Custodial or Checkbook Self-Directed IRA

With a custodian-controlled self-directed IRA, you are in charge only up to a point. Under this structure, only the IRA Custodian can write checks and pay bills from that account.

With this type account, you direct the Custodian as to what type assets to invest in. But choose carefully, as not every institution may include your chosen asset in its offerings. Many banks and other institutions don’t offer investing in real estate, for example. They may choose to specialize in a specific type of asset instead. It also can be a lengthy process to make your investment when you have a third party involved in the process.

Things move much faster with a checkbook-controlled self-directed IRA. And that is vital for a real estate investor who needs access to funds quickly when coming upon a great deal.

With a checkbook-controlled self-directed IRA, first you set up a limited liability company that is the owner of your self-directed IRA. Next you open a business account in the name of your LLC and the Custodian transfers your assets to that account. Now youare in control, and you can choose what to invest in – within the limits of the law, of course.

With a checkbook-controlled account, you decide what to invest in – and when. Simply write a check. There are no forms, fees or other frustration as with some other types of IRA.

For more information about how self-direction works, see our blog entitled “How Does a Self-Directed IRA Work?”