IRA real estate investments are becoming more and more popular and for good reason. Until recently, only a few people knew how to keep real estate in IRAs and protect their earnings from excessive taxes. Now, there are experienced trustees and investors who are willing to help the average man.
One of the first things any investment advisor will tell you is that you need to diversify your portfolio if you want continued growth over the long term. Market volatility means that relying on one type of investment to finance your retirement is not a good bet. It’s like “putting all your eggs in one basket.” This is where IRA real estate investments come in.
The stock market is flat or falling. The success of mutual funds is based on the stock market. Certificates of deposit have low yields and often do not even match the rate of inflation. But, real estate is always considered a good investment if you buy it for the right price. Putting real estate into IRA portfolios is one of the best ways to diversify.
To make successful investments in a real estate IRA, there are several things you will need to do. You must be able to self-direct the funds in your account or convert your traditional IRA to a self-directed IRA. If you have a Roth-IRA, you should be able to withdraw money for real estate transactions and then return the proceeds to the account, but you may not be able to have a deed to the account, as you would if you were investing in rentals.
You will also need a custodian who offers his clients the ability to invest in real estate. Not many do. And you want a custodian who understands the tax laws and regulations related to real estate in IRAs. Once you take care of these things, you should have no problem funding your deals. But wait, unless you have the time and knowledge, you could be under a lot of stress.
The saying that real estate is always a good investment is true, but you can lose money if you buy the wrong property at the wrong price. When you participate in self-directed real estate IRA arrangements, your custodian or trustee cannot make the arrangements for you, nor can they advise you on which arrangements to make. You need a third party for investment advice.
When you have real estate in IRAs for rental income, you become a property manager, unless you hire one and then have the added headache of dealing with an employee. That might not be what you want to do. For quick returns, you’ll probably want something a little different.
Not long ago, an IRA owner turned $28,000 into more than $90,000 by buying a dilapidated house, remodeling it, and reselling it a couple of years later. He had done those kinds of deals before, using other assets. In this case, he decided to use the IRA account for the tax advantages.
You probably don’t have the time it takes to find a top fixer and you probably don’t have the knowledge to do the job, but you can still take advantage of IRA real estate investments. You just need a little help from the right people. Fortunately, there are some experienced real estate investors who are willing to hold your hand and help you avoid the stress and headaches that do-it-yourselfers come across. It’s a new investment idea worth investigating.