Many American investors wary of the U.S. housing industry are turning their eyes towards distant shores. Overseas real estate is hot. Countries like China, Mexico and Costa Rica are selling off prime properties to Americans discouraged by their recent struggles within the domestic market. Some countries, such as Argentina, France, Italy, Spain, Panama and Malaysia, have few or no restrictions on foreigners buying real estate, and some countries are even encouraging it. While properties in some pockets of the world are certainly exorbitantly priced (think: French Riviera), others, like Malaysia and Uruguay, boast highly affordable real estate in charming and picturesque towns.

One way that a growing number of investors are submitting to the lure of distant lands is through the use of self-directed IRAs. These specially structured retirement accounts allow account holders to personally direct their IRA investments outside the stock market into more non-traditional investments like real estate, tax liens, personal loans, etc.

“Many investors are avoiding the stock market for investment opportunities that allow for more individual control,” says David Nilssen, president and CEO of Guidant Financial Group , a leading retirement account facilitator. “One of those areas is real estate, and, increasingly, foreign real estate. A growing number of our clients report that they’re securing excellent overseas land and rental properties with their self-directed IRAs.”

To set one up, you should work with an “account facilitator” who specializes in self-directed IRAs. Account facilitators offer structures that give the IRA holder checkbook control of IRA funds, which means you can literally write a check on the spot to make a purchase or investment. By contrast, traditional “IRA custodians” allow foreign investments but charge a percent fee for each transaction and then must coordinate the transaction. 

“Our clients find checkbook control to be extremely advantageous,” says Nilssen.

With a self-directed IRA comes the responsibility that every purchase/investment must be made with the IRA in mind. You as the account holder are the “fiduciary” for that IRA (almost as if you were the trustee for, say, your goddaughter’s trust), so you are required by law to avoid any transactions that create a conflict of interest. This means that real estate, whether purchased domestically or abroad, must be for investment purposes – not something that you or a close relative will live in. Feel free to rent it out, however, and funnel that rent money back into the IRA. It’s a great way to make your IRA grow while holding onto real estate you could even choose to occupy after you’ve taken your age 59-and-a-half distribution.

Whether you buy foreign real estate as a potentially lucrative investment or whether you buy it as a means to secure a future retirement home, self-directed IRAs can be your ticket to foreign lands!