With a Self-Directed IRA you are prohibited from investing in real estate that you live in or collectibles, but there are many ways to invest that can be quite profitable. My brother took an old 401k when he left his job and put it into a Self-Directed IRA and has been investing in ocean front property. Since one of the mega-trends in real estate is the growth in the value of ocean front, he has made a small fortune, all accumulating in a Roth IRA which he will not have to pay taxes on.
Another method of making money in this type of IRA is to become a bank. Everyone who has paid interest in a credit card or other loan and then looked at the measly interest rate in their savings account knows that banks can make a lot of money. Many real estate investors are looking for funds and are willing to pay a higher interest rate than normal - 10%, 12% or more.
I am in the process of looking for this type of lender. My program is to pay 10% interest with the loan secured by a Deed, Promissory Note, Title Insurance and Hazard Insurance. Loans will never exceed 75% of the after-repaired value of the house, so even should a lender have to foreclose, he or she should be able to recover their equity. Choosing an established investor should reduce that risk. This creates a relatively safe investment compared to stocks.
There are many companies that will convert your existing IRA or an old 401K into a self-directed IRA:
I've put my IRA into Equity Trust. I can't lend money to myself, but I can purchase real estate using the IRA. One property I plan to buy for $10K should sell for $20K within a month. Last year my IRA had a return of 1% in my stock portfolio.
Should you decide to do this, investigate it carefully and do your due diligence. A good place to find real estate investors is a local REI club which usually has meetings advertised in the real estate section of the paper every month.