REIG Carole | Investing Using Retirement Funds


Many people have their eyes on investing in real estate but believe they don’t have the means to do so. However, little do they know that they actually have thousands or more in their retirement funds. Joining Monick Halm to talk about using retirement funds for investing and growing our wealth is Carole Ellis, the COO of Self Directed Investor (SDI) Society. She also serves as Editor-in-Chief of Self Directed Investor News, the top news publication in America for self-directed investors, and the co-host of Self Directed Investor Talk. Learn more from Carole as she proves to us how investing using our retirement funds and understanding self-directed IRA can help secure our future.

Listen to the podcast here:

How To Invest Using Retirement Funds – Interview With Carole Ellis

I am excited for this episode because we have a special guest. Her name is Carole Ellis. Carole, how are you?

I’m doing well. How are you? I’m pleased to be here.

I’m happy to have you. We invited Carole to speak with us because we want to talk about how to invest using retirement funds. Many people want to invest and they think they don’t have any money. They don’t realize that they’re sitting on thousands, sometimes hundreds of thousands of dollars that they could access to their retirement accounts. This is something that I found out about and was completely revolutionary for me. It allowed my husband and me to invest in a lot more real estate than we thought possible because we were able to tap into our retirement accounts. Carole is the Cofounder of the Self-Directed Investor Society or SDI, and a news editor for SDI News, which is the top news publication in America for self-directed investors. Self-directed retirement accounts are how you can do this. She’s also the cohost of Self-Directed Investor Talk on KDOW 1220 in San Francisco and Dallas.

That’s right and we are also on KEXB.

There’s more. She’s also the host of the Real Estate Investor Podcast, and editor of the Bryan Ellis Investing Letter, a newsletter for real estate investors with over 700,000 subscribers. She’s a regular contributor to various financial real estate industry publications such as Think Realty and The Huffington Post. She’s also a wife and a mama. She has four kids and a fur baby, Yorkie. She works with her husband, her business partner, Bryan. Welcome.

Thank you.

You’re busy. It’s impressive. There was more too and these are only the highlights. I’m happy you found the time to speak with us.

This stuff is interesting, especially in terms of real estate. The word you use, revolutionary, is perfect. Knowing how to use a self-directed account effectively is absolutely revolutionary. Not knowing how to use a self-directed account, effectively is catastrophic. Neither one of those is overstatements. I’m excited to be here.

Before we get into how to use it correctly and what do you avoid, what is a self-directed retirement account?

The wonderful thing about a self-directed account is that you can use it any way you want as long as you don't make any major mistakes. Share on X

A self-directed retirement account, a lot of times you’ll hear people refer to them as SDIRA, Self-Directed IRA. It’s any retirement account in which you have the ability to direct your investments the way that you believe are best for those investments. Normally, if you have a retirement account with your corporation, or if you have it with one of the big names, Schwab or something like that, usually they’ll say, “Perhaps we will let you pick between these couple of stocks.” If you say, “I want to flip a house.” They’re going to say, “No.” Some custodians will tell you it’s illegal, which is not true. It’s any retirement account, in which you have the wherewithal to direct your investment, which means you have a custodian who will let you do it.

I know there are different companies that do it. We took our retirement accounts out of a Schwab account, and then we put it into different specific self-directed IRA custodian. We have a self-directed 401(k) as well.

Those are nice. Those have wonderful benefits also.

Do you want to share some of the differences between the self-directed IRA and the self-directed 401(k)?

I don’t want to get this wrong. I’m not an accountant, nowhere near any of that stuff. When you’re dealing with the two accounts, a lot of the issues revolve around how much money you can put in. Do you own your own business? There are a lot of little bits of fine prints within that that determine how much money you can put in every year, when you have to take money out, at what age do you have to at all, and how you can pass it down. That’s all general. I’m not going to go super specific because I don’t want to say it wrong, but with a 401(k), you have a lot more flexibility in terms of how much money you can put into it. With an IRA, you are governed a lot more by how much money you have made in a given year, whether you’re self-employed, who else is in your account, and all sorts of other little bits like that. The biggest difference is flexibility and how that flexibility affects the funds that you’re working with, in my opinion. I am sure that there are a lot of people who would have different opinions about what the biggest difference is but that’s probably the easiest difference is to say, “It’s an issue of flexibility.”

I recommend people talk to their CPA and figure out what’s the best option for them. That’s what we did when we were originally going for a self-directed IRA. Our CPA recommended for us in our particular situation that a 401(k) was a better bet. It’s all very individual, so talk to your CPA about it. How can investors use a self-directed retirement account to invest in real estate?

The wonderful thing about a self-directed account is that you can use it any way you want, as long as you don’t make any major mistakes. By major mistakes, I mean prohibited transactions. There is a fairly straightforward list of things that the IRS says, “You can’t do this.” They’re simple things like, “You can’t pay yourself a salary out of your IRA,” things like that. As long as you don’t do stuff like that, you can use it any way you want. The whole point is that you’re in charge of it. If you want to make private loans, create notes, flip a house, we certainly have plenty of investors who have purchased turnkey rental portfolios. In their entirety, they’ll purchase them 2 or 3 at a time in some markets. You can do any of that stuff as long as you don’t turn around and say, “I manage these properties myself so I’m going to pay myself,” for example.

As long as it’s not prohibited then you can do anything, including buying real estate.

Honestly, real estate is your best bet. Everyone’s situation is different, but real estate is simple. It’s a safe investment when properly collateralized. It’s strong. You can make predictions about what your investment is going to do. You could invest in venture capital, but I don’t know if I’d sleep any better at night invested in venture capital than I would in the stock market.

REIG Carole | Investing Using Retirement Funds

Investing Using Retirement Funds: Self-directed IRAs are retirement accounts within which you can direct your investments the way you believe are best for those investments.


I have a preference for real estate. I’m bullish on real estate investing. It’s a great investment. I love that you can use your retirement account. There were probably a lot of people who were ready to retire in 2009 that had their retirement accounts in the stock market and they lost everything or so much of their value. If they had been able to put their money in different things, they might have been a lot better off. I like having that flexibility. You were saying that it can be incredible if you’re using it right or can be catastrophic if you’re doing it wrong. Let’s start with the right way. What are the right ways to use these retirement accounts?

Let’s stick with real estate because we are in agreement that in our personal experience, that’s the way to go. If you are going to invest using your IRA or your 401(k) in real estate, the right thing to do is identify the strategy that’s going to work best for you. I am a huge fan of cashflowing turnkey rentals, especially in mid-level markets. They may never be anything astounding like you experienced in your market, but they chug along. Maybe the area has a great responsible housing authority that provides some support to populations who need help with housing. That’s a good place to go. I like identifying someplace like that and buying cashflowing turnkey rentals in someplace with a good manager so that you can collect your rent check. I let that snowball into a larger portfolio.

We have members who are dead set. They want to flip and they flip houses. You can use collateral and debt in these accounts. It’s a little bit complicated but if they have a couple hundred thousand dollars, they’ll buy a house and hire somebody to flip it for them. Some people will borrow money to fund that transaction. It depends on how quickly you’re trying to accomplish something, how patient you are, and how quickly you are hoping to start taking money out. Whether you’re looking for cashflow or whether you’re content to say, “I’m going to hold on to it for six months while they fix it up and make it beautiful and then I’m going to sell it.” You can do anything. With commercial real estate, you can go in with other people.

In our syndications, we have investors that invest with their IRAs, or self-directed IRAs and 401(k)s. There’s a lot you can do with it, which is awesome. When you’re talking about cashflow, are people allowed to take cash out of there? If you’re in cashflowing properties, does the money go back into the retirement account or is there a possibility to take it out?

No, you can’t pull it out. You could do some distribution, but you’d have to talk to your financial professional. When I say cashflowing, it’s cashflowing back into the account. Say you have a property in Birmingham. You bought it for about $45,000. It’s renting it $950 a month, all that money is going back in. That $40,000 property, even if you had to fix it up, did not set you back so far. That it’s not going to start cashflowing pretty quickly. This is why we say, “Don’t forget about cashflowing when you’re investing for retirement. It’s relevant.” What people will do is roll that back in and say, “I’m not good enough, I’m going to buy another one.”

What you were saying about the syndication is a nice way to do it because it lets you get into much bigger things than if you were trying to invest in a rental property. If you’re involved in syndication with a lot of other people who know exactly what they’re doing and can handle it, it gives you that distance that you need from the investment. It still lets you get into something potentially much bigger. My IRA doesn’t have $10 million into it. I wouldn’t do a commercial deal by myself. It lets people get in without getting too close, which is wonderful.

Those are some of the wonderful ways that we can use it. What are some of the catastrophic things that happen with self-directed IRA or 401(k)s?

Here’s the big difference with an IRA and the 401(k). This is what our legal counsel would say. If you make a bad decision with your IRA. If you make a mistake and you violate a regulation that the IRS has placed on you, it explodes if you ever get caught. Eventually, the IRS is going to want your money if you’re going to get caught. Even if you didn’t know you did it. If you do it with a 401(k), it’s not good but it’s not the end of the world. That’s a better difference.

Can you give some examples?

There are numerous things you can be creative with when using your IRA for investments. Share on X

This is an easy example. You have a rental property and you have a property manager. You have been very careful. You’re not touching that rental property. If you are touching your IRAs investment, you need to back away quickly because that’s a prohibited transaction. You’re not allowed to directly affect your IRAs investments. Let’s say you’ve got a property, and it’s a great little rental property. It’s doing its own thing. One day you’re in the city and you drive by it, you see that the mailbox flag is broken. You say, “That looks crummy. I don’t want them to think I’m a bad landlord.” You go to Home Depot, you get a new little mailbox flag, go back to the little house, you scribble the mailbox flag on and the mailbox looks good. You have committed a prohibited transaction. From that point, your IRA is no longer tax-protected.

Nobody knows it. It’s not like the IRS has a traffic light and says, “Monick fixed a mailbox.” Ten years down the line though, when somebody tracks down your receipt because they’re auditing you, and the whole point of auditing you is to get your money. They track down that receipt and they say, “You improved that property directly. That’s illegal. Everything you’ve done since then not only do you owe us taxes to the greatest extent possible, but you’re also assigned fees and penalties.” There are horror stories where you hear about people who end up not only losing millions of dollars that they’ve generated after they committed this prohibited transaction, but also owing money. You could go into debt over a prohibited transaction.

How do you avoid that?

Don’t touch it, but it’s not bad as a list. You have to be very diligent. Use your educational resources like the SDI Society. We have a handy dandy book about all the horrible things you could do so that you can read it and then you don’t do them. Here’s our big five. Don’t borrow money or lend money to yourself. Don’t do business with disqualified people, which means you and most of your family. There is some fine print there, but I wouldn’t mess with it. If you’re going to fight with IRS, who’s going to win? Don’t purchase prohibited assets. Those are things like, you can’t invest in life insurance or collectibles. Don’t put your IRA up as collateral and the big one with the mailbox, which is also the most complicated for real estate investors because it’s tempting to get involved with your investment. Don’t mess with the investment. There are more than that and those all have a lot of details in them. If you’re diligent, if you hire a property manager and then forget about it, or if you get into syndication, any of those things where you’re not as likely to mess with something that can create a problem, you’re fine. It’s a wonderful opportunity. It’s an opportunity most people don’t have if they don’t use these funds.

What’s the website so people can get the book?

It is If you go there, you’ll see we do legislative updates. Up in the corner, there’s a little thing that says, “About,” and then you go down and it says, “Prohibited Transactions.” Read the whole thing.

You all know exactly where to go. What are some creative ways in which investors have used these accounts to invest?

We do have a guy who invests in dairy cattle. He bought a herd of dairy cattle. He’s abiding by his prohibited transaction rules. I assume somebody’s managing the cattle for him. It’s whatever your passion or your expertise is. We have one member who is an adrenaline fiend because he loves high-risk real estate. He doesn’t have a 60% return. When you’re talking like that, that’s not my cup of tea. When you’re talking like that, you have to get creative. There are all sorts of things like that that you can do. A lot of people buy precious metals, which isn’t super creative but is a solid, traditional thing that’s nice to have in there. You can do private loans. Anything you do in real estate that’s creative, you can do through your IRA creatively also. I say anything but I’m sure there’s an exception out there and somebody’s like, “Hey there.”

As long as you’re not touching it or benefiting from it.

REIG Carole | Investing Using Retirement Funds

Investing Using Retirement Funds: You are not allowed to directly affect your IRA’s investments.


To be clear, my list of prohibited transactions, that was not comprehensive. Even if you don’t read the book on the website, which you should because it’s the best, you still need to be sure that you understand. You don’t want to get a fight with the IRS. Even if you’re right, you’re not going to win.

They have a lot more resources, but from what I remember, the list of things that you can’t do is pretty small and then the rest of the entire universe is open. There’s a lot you can do with it. It’s something to check out. You have some retirement money and you’re worried about what the stock market is doing. It’s going high, but what comes up must come down.

You won’t see it coming necessarily.

It’s a great time to move into self-directed funds. Thank you, Carole. That was good.

Thank you.

We need to end with trinities. We always end with a brag, gratitude, and a desire. I’ll share one so you can see how it’s done. I have two brags because I brag that you’re on. That was good and such great information. I appreciate that you’re here and that we’ve met. I appreciate you being part of Real Estate Investor Goddesses and being on the show. I appreciate all of that. I brag you’re here. Also, I brag that I leave for Real Estate Guys’ Summit and I’ll be on a cruise.

You’re going to have so much fun.

I’m excited. I brag that and I’m grateful for the opportunity to be able to go. I’m grateful that the internet and phone service will be bad and that I get to unplug for nine days. I’m grateful for that. I desire to have an incredible time. I desire to deepen relationships, learn a lot and have a blast. That’s my trinity. What’s yours?

I love it. Our celebration or our brag is that SDI Society has been invited by the California Continuing Education of the Bar or CEB to teach continuing education to California attorneys who are studying to master the intricacies of self-directed IRAs, prohibited transactions, and all the stuff that goes along with that. That’s such an honor. My jaw hit the floor when I found that out. The thing I’m grateful for is that you have me on. This is a great opportunity. I’m excited to get to know you and learn more about you. I appreciate the opportunity to come to your show. It was nice of you.

It is my pleasure. It is a beautiful gratitude. What do you desire?

To have a wonderful life. I love Georgia, my family, and what I do. I desire to keep that focus, not even so much like, “I’ve got to look forward,” but to focus on the present and the day. Not to the exclusion of the future, but to maintain that and being in the moment.

Desires to be in the moment and sound like to have more of the good stuff that you have. So shall it be or so much better than you can imagine. This is great. Find out more about self-directed IRAs and how you can invest using retirement funds. There’s a wealth of information over there that they have available for you. We’ll catch you next episode. As always, keep it juicy and keep it pleasurable. I’ll see you next time. Thank you.

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