If you own a traditional IRA, you probably think that your investment options are fairly limited. It might surprise you learn that in fact the opposite is truethere are almost no restrictions on the types of investments you can make with an IRA. However, unless you convert your traditional IRA into a self-directed IRA or a Roth IRA, you wont be able to take advantage of the many benefits of these types of retirement accounts.



Self-directed IRAs Increase your Investment Opportunities

You can buy and sell almost any type of investment using a self-directed IRAincluding real estate and real estate notes, of course. Investing with your IRA is particularly beneficial for a variety of reasons, mostly relating to the way taxes are charged on profits made by the account.

-Profits made by IRA investments are not subject to Capital Gains Tax

-IRA profits are tax-deferred until you reach distributions age (59 1/2)

-IRA profits are not taxed until withdrawn from the account, even after you reach the age of distributions

With a little extra effort, an IRA trust can be created that can be named as an IRA beneficiary. This is an effective way of leaving money to a spouse or children without losing money due to taxes, particularly if a minor child is a beneficiary of the trust. These are also an effective way of setting aside money for estate taxes.

Roth IRAs

Roth IRAs are in essence very similar, but have some extra advantages. While the range of investments you can make is the same as with a self-directed IRA, Roth IRAs are subject to slightly different tax types. The profits generated by a Roth IRA are tax-deferred, however contributions are not tax-deductible. However, all withdrawals from the account are tax-free once you reach 59 1/2. Additionally, there is no minimum distribution, so you are free to withdraw as much or as little money as you like once you reach distribution age.

Generate Passive Income with Real Estate Notes

A real estate note is the contract made between a money lending institution and the purchaser of the property. The note details the terms and conditions of the contract and financial institutions often buy and sell these notes on the secondary mortgage market. Private investors can also create or buy real estate notes to create streams of passive income, so called because once the investment is made very little further effort is required to keep it ticking over. This is why an IRA is an ideal vehicle for investing in real estate notesonce the note is bought, profits continue trickling into the account, untaxed and earning interest. For this type of investment account, steady streams of revenue are an excellent way to create wealth in the long term. An additional advantage of notes is that unlike property itself, notes are not subject to the fluctuations of the real estate market. The face value of a note doesnt change even if the property market cools off.

Can anyone buy Real Estate Notes?

Anyone can buy real estate notes, including private investors. There is excellent profit potential, with the possibility of buying notes for as little as 70% of face value. Private investors can also create notes by lending money to would-be property buyers who prefer not to borrow from financial institutions. Because the risk of such a loan is greater to an individual, the interest rate on them is higher than for a bank mortgage, meaning the profit potential is even greater.