Using Self-Directed IRAs in Self-Storage Investing

This week’s podcast is another one from our #PlatformForChange Series. Our guest is Donnell Stidhum, an engineer, leader, and educator, who’s been investing in real estate for more than twenty years. With the goal of helping both new and old investors achieve financial freedom, Donnell has been working as a consultant and a speaker. 

Donnell Stidhum is also a private pension plan consultant with the company Self Directed Retirement Plans, and works directly with his partner Rick Pendykoski. He chose to focus on self-directed IRAs because they provide more freedom for smart investors. He traveled across the United States to speak in front of tens of thousands of people, and we’re likewise honored to hear his advice.

Can You Buy Land With a Self-Directed IRA?
You can hold real estate in your retirement accounts, but they need to be self-directed. As the name suggests, a self-directed IRA allows you to take control of your investment portfolio and put your money where you wish, even with alternative investments, such as real estate, private mortgages, private companies, precious metals, digital assets, etc.

A self-directed IRA can be easily opened in many financial institutions, but you need to have a qualified trustee or custodian to hold the assets on your behalf. It’s just a legal requirement by the IRS so you can claim the same tax benefits as you would in a traditional or Roth IRA. IRA custodians can restrict types of assets you can hold to suit Internal Revenue Code (IRC) restrictions and limit prohibited transactions. So, it’s best you talk to your chosen self-directed IRA custodian and clear the air right from the start.

Can I Manage My Own Self-Directed IRA?

Money And Time

A self-directed IRA isn’t a retirement plan that you may manage totally by yourself. You’d still need a custodian to administer the account, but you have the freedom to find and choose an asset you want to invest in.

Hence, active investors see a self-directed IRA as an opportunity to control their investments. They have a clear vision in mind and want to browse different investment options while avoiding penalties for pulling money from their accounts (like in regular IRAs). These investors are happy to embrace self-directed accounts and manage them with more freedom.

Other people don’t want to be much involved in their retirement planning or sometimes even lack the knowledge to do so. A good piece of investment advice can do wonders for these individuals, so it’s wise to get consulting services from experienced professionals. Getting educated will allow you to wait it out and catch amazing opportunities.

Reconsidering Investments During the Pandemic

Since self-directed accounts provide freedom, you have the option to change your investment strategy and go for different asset classes. In uncertain times, you must diversify your portfolio and increase your chances of success. You’d also need to look at the state of each potential industry to find properties and companies that are worth investing in.

Nowadays, the situation varies from industry to industry. Just compare hotels and medical facilities – which one is a better investment option? Lockdowns decimated even the retail industry since businesses moved online and offices became redundant. Although this is only temporary, it makes sense to move your investments to other assets. In that case, it’s wise to check out commercial real estate properties that are still thriving during these difficult times such as self-storage.

Struggles When Investing

Money Investment

Some people have a tougher time getting into the world of real estate investments, especially when it comes to alternative investing. People of color are fighting systemic racism, among other things, so being always on guard has allowed Donnell Stidhum to be in control of his investment journey.

As more people get access to the same opportunities, people of color get much more representation and can help each other succeed. That’s the core of Donell’s education goals. He wants to provide access to knowledge for more people and bring many investment opportunities for new generations.

Are Self-Storage IRAs a Good Idea?

Portfolios of smart investors are built on serious research. There are a lot of reasons to open a self-storage IRA, the first being a guard against recession and the pandemic. Self-storage is a steady, recession-proof industry, and it’s growing even during the pandemic. Naturally, this makes it very attractive to investors. 

Storage facilities can hold more than five hundred units, each bringing separate cash flow. The demand is high, so vacancy isn’t a problem, either. Investors and owners of storage facilities can rent out units without being in contact with tenants since everything is automatized. Overall, self-storage is a safe and efficient option for IRA investments.

How Much Money Can You Put In a Self-Directed IRA?

Self-directed IRAs aren’t different from traditional or Roth individual retirement accounts in the sense that you have the same contribution limit set by the IRS on all accounts: $6,000 (plus an additional thousand if you’re age fifty or older). However, the difference lies in, as we said, the types of assets you can acquire and hold.

Traditional and Roth IRAs allow you to invest in only stocks, bonds, or mutual funds. On the other hand, with a self-directed IRA, you can invest in other, more profitable assets, like real estate. For example, you can open home storage IRAs and separate your retirement from the stock market fluctuations. 

Donell also says that investors need to adhere to proper structures. Whether that means educating yourself or choosing different accounts, structure will provide you with stability and opportunities to succeed. You need to set clear goals and create a plan that will get you there.

Self-storage IRAs will put you on the path toward financial freedom. All you need to do is start!

For more advice on how to ensure your self-storage business is a success, check out our FREE Blueprint that will provide you with all the information you need.