The Ultimate Due Diligence Checklist for Self-Directed IRA Investors
“Due diligence.” Two words with big implications for retirement investors. If you’re considering investing in a Self-Directed IRA, then it’s good news because you get all sorts of new freedoms, particularly if you’re investing with the flexibility of a checkbook within the IRA. However, the risks are greater if you don’t do your “due diligence” on each investment. After all, you’re the one in charge of your investments now. So, how do you perform due diligence with the kinds of assets that belong in a Self-Directed IRA, and what does the process look like? Here’s what you need to know.
Start with the Basics of Checkbook IRA Investing
Before diving into an investment, you have to understand what you’re getting into. Do you know the lay of the land? The style of the investment you’re diving into? What kinds of investors typically explore these asset classes? The questions start to pile up.
That means doing some real homework. Look into the asset itself—whether it’s real estate, a private business, or something more unusual like tax liens. Research the track record of the investment type, the people managing it, and any legal or zoning issues that might come up (if you’re investing in real estate).
Don’t just take someone’s word for it when you’re buying, for example, a rental property in your portfolio. Get independent appraisals and valuations when needed. If it’s a private placement or fund, read every word of the offering documents. And check for red flags like promises of guaranteed returns. High rewards often come with high risks, and that’s especially true when you’re managing your own retirement funds.
Ask the Right Questions
Due diligence also means asking tough questions. Who’s managing the deal? How are they paid? What’s the exit strategy? And what happens if the investment goes sideways? You don’t want to be left holding the bag because you trusted someone without checking their background.
These questions can be tough to deal with, particularly because you don’t want to learn any ugly truths about an investment that might excite you. But that’s the key. Due diligence means trying to prove yourself wrong if you can. And that sometimes means asking the hard questions.
For real estate, that could mean verifying ownership records, inspecting the property, and evaluating rental income. For private companies, that might mean digging into financial statements and understanding how the business operates. Every asset class comes with its own set of questions, but the goal is always the same: protect your retirement.
Make It a Habit
The more you treat due diligence as a standard operating procedure, the more confident you’ll feel with your Self-Directed IRA. You’ll avoid mistakes and sleep better knowing you’ve covered your bases. And remember, you’re not alone. Work with advisors and legal professionals when you need clarity.
Freedom comes with responsibility—and due diligence is how you keep that freedom working for you. Ultimately, using a Checkbook IRA with a Self-Directed IRA means that you’re the one calling the shots. That can be a very good thing or a very bad thing, depending on your approach. If you’re a careful investor who enjoys doing his or her due diligence on properties and assets, then you’re in luck. This strategy will fit you like a glove. If not, you may have to adopt some more substantial due diligence habits to fully succeed.
Interested in making this work with a Checkbook IRA, or a Self-Directed IRA LLC? Reach out to us here at TurnKey IRA by dialing 844-8876-IRA (472) and explore a new future of retirement investing. Interested in learning more? Schedule a free consultation. Download our free guide or visit us online at www.turnkeyira.com.
