Interested in a retirement-friendly, tax-deferred way to invest in, say, reality TV? How about a beach house in Malibu or a burger franchise in Eastern Europe? Well, self-directed IRAs can help.Unlike traditional IRAs that limit investors to stocks, mutual funds and bonds, this alternative account allows for a broader, more creative range of assets, including real estate, private equity, foreign companies and even racehorses. David Cole, a developer in Fort Worth, Texas, recently rolled over part of his retirement fund into a self-directed IRA. Now, he's investing in two real estate development projects and a reality TV series. "My purpose was twofold," says Cole, 44. "I wanted to take advantage of opportunities in real estate and defer the taxes,
"There isn't a market where you just look up
various opportunities," says Tom Anderson, CEO of Pensco Trust, a custodial firm for self-directed IRAs. "There's nobody bringing ideas to the IRA owner and saying, 'Choose A or B.' There's no one driving the bus for you." Cole, fortunately, has insight as an experienced property developer, and the two projects he's invested in are managed by fellow developers he trusts. The reality TV program seemed sound because it was already in production and just needed additional bridge financing. The next step for investors is to hook up with custodial firms, such as Pensco or Sunwest Trust Co., which facilitate the investment and keep the books for a fee. Irahelp.com , "You can buy a house, but you can't live in it or rent it to your mother." Otherwise, you've engaged in "self-dealing," one of the worst violations in the tax code. Self-dealing exposes the entire account to taxes and penalties. The same goes for a business: Investors can't get involved in the operations of a business if it's included in their self-directed IRA. money in one piece of property ," he says, "not any more than I would in one stock."