Self Directed IRA | EquityRoots

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Why Self-Directed IRA

A self-directed IRA is a tool for investors who would like to use their retirement savings to participate in private investments. Most traditional custodians only allow approved stocks, bonds, mutual funds and other publicly traded items as available investment options. In contrast, a self-directed IRA custodian allows for alternative investments - real estate, promissory notes, private placements, and more.

Self-Directed accounts allow for true diversification in a retirement portfolio. Pre-tax or post-tax (Roth) accounts can be self-directed for investors who are looking for exposure to other asset classes like hotels. Most commonly, self-directed IRAs are funded by transferring some or all of an existing IRA, or by rolling over from an inactive, qualified account like a 401k or 403b from a previous employer.

A self-directed IRA custodian is needed to hold and report on the alternatives held in your retirement account. The custodian ensures your investments are made properly on behalf of your IRA and provides the required reporting to the IRS. Investments made in an IRA are tax-deferred, meaning income earned on those assets are not subject to capital gains tax. Funds held in a retirement account are taxed as regular income only when cash or assets are distributed from the account.

The Process Defined

Open your account by visiting

Fund your account by making a transfer from another IRA, a rollover from an old qualified plan, or by a personal contribution (5-10 Days).

Midland IRA works with investment sponsors to provide a turn-key package for you to approve electronically.

Your approval allows Midland IRA to release funds from your IRA for the investment. (24-48 hours).

Equityroots receives funds from your IRA and signed subscription documents to complete your IRA's investment.

Equityroots then accepts your IRA investment and returns any income generated by the private offerings.

Self-Directed IRA vs. Direct Investing


Tax-Sheltered Income

All returns gained from the private offering are paid directly to your self-directed IRA, which provides tax-sheltered income for your retirement.


Independent Titling

The IRA, which has its own titling and tax-ID, takes direct title to the investment.


Custodian on File

Self-directed IRA investors have the convenience of the custodian handling all the administration - required paperwork, transactions execution and tax reporting.


Easy K1 Filing

An annual K1 filing is titled to the IRA using the IRA EIN. The custodian holds this for recordkeeping purposes.

Real Estate Invesment Gains using Tax Deferred Retirement Accounts

*Assumes $5,500/year, 25% tax bracket, 8% annual rate of return, reinvested dividends and capital gains.

Frequently Asked Questions

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What is a Self-Directed IRA?

Ans: A self-directed IRA is a unique investment account that allows alternative investments to be held as assets that can potentially build tax-free or tax-deferred wealth at a faster pace than traditional methods may.

How Can I fund my Self-Directed IRA Account?

Ans: Funding an IRA account can be accomplished in three different ways:

  1. IRA to IRA transfer
  2. Rollover from a 401(k) or other employee-sponsored plan (403(b), 457, TSP, etc.)
  3. Annual contribution

What is the difference between a Transfer and a Rollover?

Ans: A rollover is a movement of funds from one custodian to another initiated by the client, usually to move an old 401(k) plan to an IRA. A trustee-to-trustee transfer is sent by Midland IRA to the other IRA custodian and is done for any IRA to IRA movement of funds.

How long do transfers from my current custodian take?

Ans: Transfers typically take approximately two weeks to be completed. Depending on the custodian and how the transfer is submitted and funds are requested, they may take more or less time to complete.

I have an old 401K or 403B. Can I invest into Real Estate?

Ans: As long as you can move those funds into an IRA, you can use them to invest in real estate. To make sure that 401(k) funds (or any other employer-sponsored plan) can be rolled over into an IRA it is best to contact the administrator of your plan.

What are Alternative Investments?

Ans: More conventional IRA and retirement plan investments include stocks, bonds or mutual funds. These are common types of investments available through most brokerage firms and banks. Alternative investments are those not sold by or available from more conventional IRA administrators. For example, real estate, mortgage notes, private placements, and foreign currencies are considered non-traditional assets (i.e., alternative investments) that can be held within a self-directed IRA.

What types of Alternative Investments can I make using my Self-Directed IRA?

Ans: By using Midland IRA as your self-directed retirement account administrator, you provide yourself great flexibility in the investment choices you have. Every administrator decides which types of permissible investments they will allow your plan to hold, and Midland IRA allows a wide parameter of opportunities compared to a traditional brokerage house.

Some types of permissible investments include:

  1. Precious Metals
  2. LPs & LLCs
  3. Real Estate – rental property, raw land, mortgage notes, tax lien certificates
  4. Commercial Paper – commodity and option exchanges, futures
  5. Private Placements – certificates of deposit, tangible asset deeds, foreign stock, accounts receivable
**This list does not cover every single investment opportunity, and Midland IRA does not promote investment products. It is important that you consult an accountant or other professional to determine your own permissible investment opportunities.

Can I invest a Self-Directed IRA in Real Estate/Real Estate Syndications?

Ans: Yes! Since the inception of IRAs in 1974, real estate has been a viable option and a popular investment choice. A self-directed IRA or real estate IRA gives you the freedom to invest in real estate related vehicles such as raw land, rental properties (single-family and multi-unit), commercial property, mortgage notes, tax liens, and more. Many investors find investing in real estate attractive because it is fairly easy to navigate and the investment is secured by a tangible piece of property.

What are the limitations?

Ans: While the IRA is the owner of the property, the IRA holder and/or their disqualified parties may not use or otherwise occupy the property. The IRA-owned real estate must be treated as an investment while it remains inside the IRA.

What exactly are UBIT and UDFI?

Ans: Unrelated Business Income Tax (UBIT) applies to operating income received from companies owned by IRAs. Unrelated Debt-Financed Income (UDFI) tax applies to the portion of the property that has been debt-financed within an IRA. Qualified plans, like the Individual 401(k) plan, do not pay UBIT or UDFI.

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