About 63% of Americans own their own home, but less than 5% of Americans have investment property. While owning a own home is a good first step, having one property does not begin to yield wealth. On the other hand, you don’t need 1,000 properties or even 100 properties in order to build true wealth through real estate. In fact, you don’t even need to own any real estate to build wealth with it— you just need to know where to find real estate-based investments that provide consistently great returns.
In 2009 I converted my retirement account into a Self Directed IRA and have had great success with it building my retirement portfolio tax free using real estate as the primary asset class. I thought that I’d share some concepts so that you have a basic understanding of what you can do with your retirement funds, especially in the investment real estate arena.
Many investors are seeking alternative asset classes to diversify their wealth building tactics for retirement. The stock market is what it is—and always will be—full of inconsistent highs and lows and a possibility for a constant source of stress for those who heavily depend on its success. Even though the economy appears to be on the rebound, the stock market can be volatile and unappealing to those who have neither the risk tolerance nor the time to play that game.
Savvy investors have turned to Self Directed IRAs to gain control over their funds, which allow them to maximize their diversification into areas beyond what a mutual fund portfolio manager would do and without having to pay their commission!
Alternative Investments To Diversify Your IRA
Self-directed IRAs (SDIRA) allow you to invest in non-traditional assets such as LLCs, private placements, oil and gas opportunities, futures trading, foreign exchange options, private equity funds, gold and other precious metals. The list literally goes on and on and can include things you may never have considered. As long as the investments are permissible within IRS guidelines, using a SDIRA allows you to maximize your retirement portfolio diversity.
As many familiar with alternative investments know — real estate is the most popular asset held within self-directed IRAs. Why? Well in a nutshell, as a result of the “bubble” created in 2006-2008, real estate is “on sale”. Those who know how to find values to turn them around into a profitable venture can reap tremendous benefits. In addition, the communities in which these homes are located benefit as well from the improvements made, avoiding urban blight and recreating tax revenues to support their schools and public services.
How real estate IRAs offer diversification
Assets permissible in self-directed IRAs transcend simply investing in the property itself. Investments involving real estate include many asset classes:
• Raw land
• Rental properties (residential and commercial)
• Rehab-and-flip projects
• Private equity funds
• Tax liens and certificates
• Tax deeds
• Nonperforming or re-performing mortgage notes (this is something I just started doing with great success)
SDIRAs are also able to partner with qualified persons or entities to acquire investments and may also borrow funds in order to gain capital to invest. These techniques can be somewhat complex and must not be performed without the advice of a financial advisor or other professional familiar with how these processes work.
Many of us want to diversify and know that real estate is an excellent asset class, but we don’t have the knowledge or time to dedicate for hands-on real estate investing. With responsibilities for family, our careers and social interaction it’s sometimes just not practical and many turn to a more passive method to gain the returns from real estate investing — without the hassle. Some of our members in the Resolution Capital Management fund have invested their SDIRA money to provide them a passive income stream based on the underlying real estate assets that we manage. They don’t have to manage any projects, comply with licensing laws or have any specialized knowledge about the intricacies of real estate investing. They just let the years of experience and background we’ve developed provide them the high performance returns that are typical of our projects.
Beyond the obvious advantages to investing in real estate, there are a few things you should know if you decide to invest with your SDIRA. All income derived from property in your IRA flows directly into your IRA, just as any expenses are paid out of the IRA. You are not allowed to personally benefit from the investment, nor are you allowed to personally contribute to the performance of the asset. There are many IRS restrictions for personal use and dealing with disqualified individuals as well. If you choose to use your SDIRA for real estate, become familiar with IRC 4975 which outlines prohibited transactions and disqualified persons in detail.
Free Real Estate Investment Report
To learn more about investment opportunities from Resolution Capital Management and receive a copy of our free report, browse to http://rcm.company/contact/freereport/. Once registered, you will also have access to more information on our fund and receive our newsletter.
In this updated report, you will gain perspective of how real estate is an excellent alternative or addition to conventional investing methods, and why it will continue to deliver above average returns.
For more links and resources to learn about Self Directed IRAs, visit our Resources page at http://rcm.company/team/links/