By Jeffrey Dixon, MBA, CISP, SDIP

By Jeffrey Dixon, MBA, CISP, SDIP

The most popular investment class for Self-Directed investors is private equity.  An IRA or Solo 401k funds can invest in a Private Placement Memorandum (PPMs), Syndications or LLC’s. Many terms for the same type of asset.  You may think of Real Estate Syndications primarily, but Syndications can offer a variety of asset investments. It may be a mortgage fund, a crypto-currency fund or many others. There are several reasons they are popular.

  • Syndications usually do not require as much money as buying real estate directly.
  • Private equity offerings are easy investments to make and can be done in a short time frame, assuming you are an accredited investor.
  • Asset sponsors are the ones finding the assets being acquired.  Your IRA/401(k) can invest in a debt or equity position.

Do we offer these investments or suggest companies to invest in?

No.  With a Self-Directed IRA or Solo 401k, you would locate the investments you want to consider. We do not provide these investments ourselves or suggest companies to invest with.

What You (The Investor) Does

  • Does all the homework on the investment risk
  • Chooses the investment
  • Conducts all due diligence
  • Negotiates the price of the asset
  • Makes sure investments are not prohibited by IRS
  • Makes all investments in the name of the IRA account
  • Makes sure transactions don’t include disqualified persons
  • Monitors their account
  • Completes documents or has them completed

Services uDirect IRA Services Provides

  • Administers the sales and purchases of assets, and processes invoices
  • Administers account contributions and distributions
  • Provides accurate and timely IRS reporting
  • Provides IRA account record-keeping
  • Provides an online statement available 24/7

What uDirect IRA Services Does Not Do

  • Endorse any particular product or company
  • Offer products or recommend investments
  • Provide tax or investment advice
  • Provide legal or financial advice
  • Supply investment templates
  • Complete or alter account-holder’s forms or legal documents

Are Syndications risky?

Any investment has the potential of risk. You always need to do the proper due diligence of the people and the track history of the company involved when considering any investment.

Can my Self-Directed IRA incur taxes?

When a Self-Directed IRA borrows funds or invests in a Syndication or LLC that uses financing it can lead to a tax called Unrelated Debt Financed Income Tax (UDFI).  You can read more about this tax at Pub 598.

You cannot provide a personal guarantee for the loan.

The Solo 401k is exempt to this tax.

There is another tax called Unrelated Business Income Tax (UBIT). When an IRA or Solo k is running a business, this tax is applicable. Flips. Air BnB’s and a bed and breakfast property can also trigger the UBIT tax.

Here is a link to related information on our website. Click HERE

 Final Thoughts:

Consulting a tax professional when deciding between retirement plans (or any decision regarding a retirement account) is a very good idea.  Feel free to contact us if you have questions about this or any IRA-related topic. We can send you information on how the retirement plan makes these investments. We can be reached at (866) 706-2798 or