You may be wondering what all the confusing language surrounding IRA Real Estate Investing really means. Perhaps you have heard the term "self-directed" applied to IRAs used to invest in real estate, but the question is, "What does self-directed really mean, and why is it the best IRA for real estate investing?"

You most likely have at least a little bit of knowledge about real estate and income property, but you may have little or no understanding of IRAs. I'm going to assume you have a job where you earn a paycheck and contribute regularly to a 401K retirement account. Maybe your employer even matches a portion of those contributions, which are kept in a tax deferred account until you reach retirement age and begin withdrawals.

An IRA is also known as an individual retirement account, individual because instead of being related to your workplace, you can open an IRA for yourself, and deposit directly to it on your own. If you like, you can open an IRA in addition to your existing 401K, and you can contribute up to a yearly maximum (also mandated by the IRS).

You can also move the funds from an existing employer sponsored 401K into an IRA. This is called an IRA roll-over, and there are very specific rules for how these must be handled. I'm just giving you the basics in this article... good so far.

The big trouble here is, the account custodian - usually a financial institution or a bank - completely controls the investments the account purchases. You have no say whatsoever, other than the ability to designate certain percentages of your investment into certain types of funds. therefore, these accounts as they commonly exist can't be used to invest in residential income property.

It doesn't seem like a good idea that some nameless fund manager in who-knows-what city should be telling you where your money should be invested, does it? Of course not, and that's why the Self-Directed IRA is such a powerful tool. You get to designate, or direct, your funds into exactly the investments you like - and preferably know something about. This means you can control all those wonderful tax-deferred dollars residing in your own retirement account.

The easy as 1-2-3 way to get a self-directed IRA of your own is to open one with a custodian who handles this specific type of IRA. Of course, there are rules governing this procedure, but the custodian will guide you every step of the way, allowing your investments to grow tax-deferred!

Believe it or not, there's even a Socially Responsible Real Estate Investing company that will help you with all of the forms, paperwork, and hassles involved in setting up your self-directed IRA. They'll take care of the property transactions too, including buying, selling, and even property management.