An increasingly popular form of Roth IRA is that of the self-directed variety. Particularly among those obsessed with doing everything themselves. However, if you want to start one of these, there are some things you need to know. For instance, pitfalls that the average do-it-yourselfer often falls into when they try to pursue this very complicated financial undertaking. So, if you are interested in what self-directed Roth IRA companies like Mountain West IRA do, and you want a piece of the action, here are the best ways to avoid the most common pitfalls.
#1. Avoid taking rental income
The lure to get rental income from tenants you have to line your own pockets should be avoided. Instead, funnel the monthly rent into your IRA account. It may seem harmless to put the rent into your own account and then deposit the money to an IRA from your bank account, but this could raise a number of red flags.
#2. Keep a cash cushion
Any and all expenses even tangentially linked to a self-directed IRA property must be funded via cash already held within the IRA itself. As such, keep a preservation capitol in case of an emergency, such as if an apartment complex that’s part of a self-directed IRA has suffered damage that would cost $5,000 to fix, but your IRA only has $1,000. Keeping a cash cushion linked to your IRA (thus making it fair game to use in emergencies) will give you a safety net in these sorts of situation.
These two strategies will help you avoid what many others fail to notice when chasing a self-directed Roth IRA. Further information can be found by asking a self-directed IRA company such as Mountain West IRA for further advice on the subject. These two strategies basically boil down to “play by the rules, and you’ll be fine”.
