Mat Sorensen (0:06):
Welcome everyone to the Directed IRA Podcast. This is Mat Sorensen, joined by the incredible Mark J. Kohler. And we are here talking about the critical question you might be asking yourself: What is a self-directed IRA, and how do I use this thing?
Mark J. Kohler (0:21):
Yeah, common question. I just want to paint the picture—we bump into you at a bar and you ask what we do for a living. As soon as we say this, you’re about to run away. You’re thinking, “I do not want to talk to this guy—he’s going to bore me to death.” I get that a lot as an accountant.
But no—you’ve got to hear this. I think you’re going to love it. I really do.
Mat Sorensen (0:44):
Yeah, the true story is we’re actually very popular at parties. We had the kids’ flag football team over at the house, and all the parents were asking what everyone does. “Oh, you sell cars,” “You’re a contractor”—then I say, “I’m a tax lawyer and I run a self-directed IRA company.”
I’m not kidding—it turned into nonstop questions. One parent asked if she could buy real estate with her Roth IRA. She had never even heard of that before. She was like, “That’s so cool—I can do that?”
What a Self-Directed IRA Really Is
Mark J. Kohler (1:28):
Alright, let’s get into it. And I’ll be the guy you can understand, because the GOAT here is Mat Sorensen—he literally wrote the best-selling book on this topic.
But let’s start simple.
Most of you have had a 401(k), IRA, or Roth IRA at some point. You associate those accounts with Wall Street—stocks, bonds, mutual funds. That’s what you’ve been told.
But that’s probably the extent of what you know.
Mat, would you agree?
Mat Sorensen (2:57):
Yeah. We all know these are great tax-advantaged accounts. With a traditional IRA, you get a deduction. With a Roth, it grows tax-free.
But we’ve been told the only investment options are ETFs, mutual funds, and stocks.
And a lot of people ask:
- “Why can’t I invest in something I actually believe in?”
- “Why can’t I use my IRA to buy real estate?”
- “Why not crypto? A business? A startup?”
The answer is—you can.
That’s what a self-directed IRA is. It allows your IRA to invest in alternative assets instead of just what Wall Street sells.
Mark J. Kohler (4:12):
And we’re going to do a lot of demystifying today, because there’s so much misunderstanding.
One of the biggest questions we get is:
“How do I buy real estate if I can only contribute $7,000 a year?”
That’s confusing contributions with returns.
Think of Monopoly—you pass “Go” each year and can contribute more. But your returns? Those are unlimited.
That’s the beauty of a self-directed IRA.
Contribution Limits vs. Unlimited Returns
Mat Sorensen (5:40):
Exactly. Most people already have money in retirement accounts—maybe $400,000 sitting at Fidelity in a mutual fund they don’t even understand.
Now they want to buy a duplex and generate rental income inside their IRA.
All they need to do is transfer that money to a self-directed IRA provider. It’s still an IRA—same tax status—but now you can invest in real estate.
We’ve seen clients grow accounts dramatically this way. Your earning potential is not capped.
Mark J. Kohler (7:17):
That’s the whole point—we’re opening up a new world of investing.
Wall Street makes money by keeping your funds in their system. In a self-directed IRA, you’re in control.
You can even have multiple IRAs:
- One at Fidelity in stocks
- One self-directed in real estate or crypto
Same tax benefits—just different investments.
What You Can Invest In
Mat Sorensen (9:09):
You use a self-directed IRA because you want access to better opportunities.
That could include:
- Real estate
- Crypto (Bitcoin, XRP, Solana, etc.)
- Private companies
- Startups
- Private funds
We’ve had clients invest in everything from real estate syndications to professional sports teams—even cattle.
If you understand the asset, your IRA can likely invest in it.
How to Open, Fund, and Invest
Mark J. Kohler (11:05):
If this feels overwhelming, don’t worry—we’ve got hundreds of episodes that go deeper.
But here’s the simple process:
- Open a self-directed account
- Move funds from an existing IRA or 401(k)
- Invest in what you want
No taxes. No penalties. It’s your money.
Mat Sorensen (13:40):
We call it “open, fund, invest.”
- Open the account
- Fund it (transfer or rollover)
- Invest
And our team helps you through every step.
The Rules That Can Trip You
Mat Sorensen (16:46):
Now—there are rules.
First: what can’t your IRA invest in?
Only three things:
- Life insurance
- S-corp stock
- Collectibles
Everything else is fair game.
Mark J. Kohler (17:44):
Second rule: you cannot personally benefit from the investment.
No:
- Living in a property your IRA owns
- Doing the labor yourself
- Paying yourself
You can manage—but not personally benefit.
Mat Sorensen (18:27):
This is called a “prohibited transaction.”
Your IRA also cannot transact with:
- You
- Your spouse
- Your parents
- Your kids
For example:
Your IRA can’t buy a property you already own
It can’t buy from your parents
These rules prevent abuse of the tax advantages.
Final Thoughts
Mark J. Kohler (21:30):
Don’t let the rules scare you. They’re manageable—you just need to understand them.
Mat Sorensen (22:33):
If you want to learn more, go to DirectedIRA.com. We’ve got webinars, podcasts, and a full educational resource center.
You can also book a call with our team to get started.
Mark J. Kohler (23:24):
Take action. Learn more. This could completely change how you invest for retirement.
Mat Sorensen (24:23):
And remember—this is not investment or tax advice. Always consult your professionals before making decisions.
We’ll see you next time.
