By J.P. Dahdah, Founder & CEO of Vantage
Investing your Self-Directed IRA in private companies is primarily centered on looking for profitable opportunities. Even when financial statements and the business plan do reveal positive prospects for future growth, you still have to face the reality that some of the company’s plans may not materialize. These are things that even the best diligence or most comprehensive business documents will not show you.
If you’re having second thoughts on whether to invest your Self-Directed IRA in a particular company, here are red flags to look for:
1. Name change. How many times did the company change its name? For what reason? A company’s name is an intangible asset, especially for companies that have made their name in the industry. If the company has undergone several name changes for no valid reason, it is potentially avoiding or hiding something.
2. Officer resignations. Beware of resignations by people who are holding key positions in the company. While it’s essential to meet with management, it’s likewise critical to interview people who are no longer connected with the business.
3. Entrepreneurs without substantial investment. Company owners are making their case for you to invest because they believe in their business. But one way to honestly know that information is to determine whether they are substantially invested in their idea. You can only be confident with people or management who eat their own cooking, so to speak.
These are just some of the basic red flags you should be wary of when investing in your Self-Directed IRA. But with extensive due diligence and the vigilance of a prudent investor, you can easily spot problem areas that will warn you of a bad investment.
For more information on how you can discover your IRA investing alternatives, contact our team at (866) 459-4590 or Info@VantageIRAs.com.