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What types of private debt investments can I invest in with my STRATA account?

Permitted private debt investments 

Your STRATA self-directed retirement account may invest in many types of private debt, provided the investment complies with IRS rules. Unsecured corporate debt/convertible notes require a pre-custody review, while secured debt instruments do not. Examples of eligible private debt investments include:

  • Mortgage notes
  • Promissory notes
  • Timber deeds
  • Private corporate debentures

For documentation requirements, refer to STRATA’s Private Debt Investment Checklist. 

Private debt types not permitted

Certain private debt investments or structures cannot be processed or held, including:

  • Transactions that would be considered prohibited under IRC §4975 (e.g., self-dealing)
  • Unsecured loans to individuals
  • Loans secured by vehicle titles
  • Foreign real estate and/or personal property

Important reminders

Private debt investments must be structured and executed in a way that complies with IRS rules. Transactions involving disqualified persons or improper benefit to the IRA owner can result in penalties or loss of tax-advantaged status.

For example, you own 50% of a company and direct your IRA to issue a loan to that business. Because you (a disqualified person) are on both sides of the transaction, this is considered self-dealing and is a prohibited transaction under IRS rules.

STRATA’s policy for private debt is that if the accountholder or another disqualified person is an officer or director of the borrowing entity (or an officer or director of a corporate general partner, managing member, etc.), and you will collectively own 10% or more of the entity, then you will need to obtain a legal opinion from an ERISA or tax attorney. Ownership of 50% or more would be considered a prohibited transaction, and STRATA will not be able to custody the investment. 

Before investing, review STRATA’s Rules and Regulations page and ensure you understand the definition of a disqualified person. STRATA does not provide tax or legal advice. Consult a qualified professional regarding your specific situation.