A self-directed IRA is technically the same as any other IRA or 401k account. Individual Retirement Accounts were created by the government in 1974 to give investors a way to maximize growth by leveraging the power of compound interest in a tax-deferred or tax-free environment.
Self-directed IRAs are distinctive because they allow investments in royalty properties, which are considered real property. While the majority of IRA custodians only allow investments in mutual funds, stocks, CDs, and bonds, a truly self-directed IRA custodian will allow additional types of investments not approved by traditional IRA custodians.
Royalty investing with a self-directed IRA is similar to investing outside of an IRA, with a few minor differences. Here is a basic overview of the steps involved in purchasing royalties with an IRA:
If you decide to sell your investment, complete the necessary form(s) to direct your IRA custodian to sell on behalf of your IRA based on the sales terms you have negotiated. Proceeds from the sale will then be returned tax-free or tax-deferred back in to your self-directed IRA.
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