Ah, the bread and butter of self-directed investments; however, do not be folly into thinking that real estate is the only asset your IRA or 401(k) can invest in….quite the contrary. However, utilizing a self-directed retirement plan may be an ideal avenue in which to purchase real estate. The reasons may be countless.
Real Estate — The asset that most investors are interested investing into. Note that there are there different strategies (e.g., buy and hold, flip, rental income) involved with real estate investing, there are also several types of real estate investments that one might consider.
Benefits — One of the primary benefits of using self-directed retirement funds for real estate investing is that most real estate holdings are executed with the long term goals in mind. For example, if an individual was 50 years old, they may not want to utilize $100,000 of non-qualified funds (e.g., savings) and tie it up into a real estate investment possibly spanning 10 to 20 years. Retirement plan funds may be used as, generally speaking, the individual may not be accessing those funds until a much later date as well.
Lack of Non-Qualified Funds for the Investment — Let’s be blunt, there are many individuals who do not have the non-qualified sources available for such an investment; however, they may have this source of funding in their eligible retirement plan (e.g., IRA, 401(k)). Having the freedom and flexibility within their self-directed retirement plan, the individual may now elect to use these types of funds for this long-term investment.
Investing with Others — In addition, self-directed retirement funds may be possibly combined with other individuals (non-disqualified individuals) for further flexibility. The individual may wish to leverage their retirement plans, they may not wish to use all of their funds within their plan in one real estate investment. This freedom provides great flexibility and the ability to diversify as well.
Types of Real Estate Investing
And, besides the diversification of investing into real estate, one has further diversification within real estate. For example, a self-directed IRA or 401(k) could invest into:
3) Raw Land
4) Foreclosure Property
5) Foreign Property
This flexibility and choice of real estate investment options should be of interest to any self-directed investor!