Equipment Leasing Self Directed IRAAs we continue to see volatile financial markets, changes in the economy, and conflicting news accounts on investments, investors are getting nervous. Many of our clients invest in the market as a part of their investment strategy along with acquiring non-traditional alternatives such as real estate.

Real Estate-related assets including loans, options and actual real estate acquisition make up the majority of the alternative investments our clients utilize. However, investors also use their self-directed IRAs in other creative ways. One recent transaction came across our desks and I thought I would share it to demonstrate the power of using a self-directed IRA for creative financing. In this case the collateral is a piece of equipment.

Equipment Financing In A Self-Directed IRA

Linda, a client of Andy’s from his hard money lending business, decided to start a business. She wished to purchase a portable ultrasound machine, travel to doctors’ offices and do ultrasounds for their patients. This would save doctors time as they would not need to wait for results from a hospital or radiology center. It would also save the patient and insurance companies the cost of having to use a specialized facility that bills at a higher rate than she would as an ultrasound technician with her own equipment.

The cost of the machine was $80,000. Linda came to Andy and asked if he wanted to invest in her business. He personally did not. However, after listening to Linda’s idea Andy’s ROTH IRA decided it could fund the cost of the equipment and create a note and a UCC1, the documentation needed to record the security on the equipment with the state and protect his collateral. Linda would make payments to Andy’s ROTH IRA at 10% interest over two years.

Her business was a hit with the local doctors, so much so that she is considering hiring an ultrasound technician and buying another machine. Andy is happy to have his ROTH IRA create another loan with the same terms or buy the machine itself and lease it back to Linda. Either way is fine for Linda. She would get another machine and make money and Andy’s ROTH IRA would receive10% interest tax-free. The worst that could happen would be that she does not pay and he ends up with an ultrasound machine worth almost $80,000

This example led me to thinking about equipment leasing, or a rent to own program for a self- directed IRA investor on a smaller scale. The lease payments would come back to an IRA tax-deferred, or in the case of a Roth IRA, tax-free. The return on equipment acquired and leased back on smaller items such as washers and dryers for rental homes could be infinite.

This is certainly a creative way to grow your IRA!

Though we at IRA Innovations do not recommend any investments or give investment advice, I am fascinated at what creative self-directed IRA investors do to accumulate wealth. For more stories like Andy’s visit our website at Got an interesting story on how you accumulate wealth in your self-directed IRA? Contact us on LinkedIn or Facebook and share yours.

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