There’s an asset class that affluent investors REALLY love… extraordinary cash flow is the norm and the tax benefits are the best around. But there’s a HUGE LANDMINE just waiting for affluent investors who try this in their self-directed retirement account. I’m Bryan Ellis. Today, you affluent investors learn how to sidestep certain disaster in Episode #324 of Self-Directed Investor Talk.

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Hello, Self-Directed Investors, all across the fruited plane. Welcome to the show of record for savvy self-directed investors like you, where in each episode, I help you to find, understand and profit from exceptional alternative investment opportunities.

For you folks with a bit higher net worth, you need to pay close attention today.

So for those of you who may not yet quite be in the high net worth world, something you should know about your wealthier brethren is that one of the most popular asset classes among them is one I’ve mentioned here before, but only very briefly… and that is oil well drilling.

It makes perfect sense because the cash flow beats the heck out of basically everything else, and the tax benefits makes real estate and other supposedly tax efficient investments look like child’s play. Yes, the risk is theoretically higher, and that’s why this is the domain primarily of accredited investors.

But to set up this dilemma, and the brilliant solution for it, let’s consider a scenario, with real numbers. So here’s the deal.

This investor… we’ll call her Tara… has decided to invest in an oil drilling deal. It looks like a pretty good one, I’m actually quite familiar with it… she’s got to invest $150,000 to buy into the deal, and based on the preliminary geological research, the expectation is that she’s going to bring in something on the order of $12 to $13,000 per month or so, based on current oil prices.

Now if you’re doing the math, you know that $12,000 per month equals $144,000 per year, which is shockingly close to being a 100% cash-on-cash return. Well, that’s one of the reason high net worth investors love this stuff… the cash-on-cash numbers are just breathtaking, enough so that the additional risk is quite regularly totally worth taking.

So that’s great, right? Tara makes this investment, and assuming it works like expected, then she yields a MASSIVE cash-on-cash return for 5-7 years until the oil well runs out… and then she’ll likely do it again, if she’s like most high net worth investors I’ve worked with.

And to make it better, she’s doing this in her Roth IRA… so all of that juicy ROI is totally tax free! Right? Right? Isn’t it tax-free?

Well… no.

Here, my friends, we consider a...

an IRA/401(k) LANDMINE for Affluent Investors