Self Directed IRAs for Real Estate Investors
If you invest in real estate, why aren’t you protecting those investments? Sure, you might own an LLC to protect yourself—but if you want to take it to the next level, a self-directed IRA is a “must” for any real estate investor. A self-directed IRA means that you’ll have access to tax protections and unique ways to save money even while you exercise much of the same freedom you’ll have as a personal investor.
Here are the top five reasons every reason estate investor needs a self-directed IRA:
Expertise. An experienced real estate investor has expertise in one area. So why should they force themselves to invest in multiple areas? Using a self-directed IRA for real estate investing means an investor can use their skills and experience for creating a diversified portfolio of real estate holdings. They don’t have to emphasize stocks and bonds if they don’t want to. They’re able to build a retirement portfolio that’s on their terms—and plays to their strengths.
Tax Efficiency. Every dollar saved goes towards building a better retirement portfolio. Consider that if you sell a property in your personal name or LLC, you will typically have a considerable tax burden to go along with it. Tax efficiency is the name of the game for any real estate investor who wants to maximize their chances of retiring with a considerable nest egg in their name.
Cash Flow. Why don’t more retirement investors talk about the importance of cash flow? If you achieve enough of it, you have financial independence. If you don’t, well… you’re still looking. A high yield mutual fund or an individual stock may be in the realm of a 3% to 5% dividend yield—and that’s assuming good returns and that the company doesn’t stash its dividend. In real estate, it’s very common to see 10% cash flow when purchasing good rent-generating properties.
Diversification. Do we really benefit from stock market diversification? What is diversification, anyway, if the stock market goes down and your well-diversified stocks no longer perform? Over the last few months, we’ve seen how COVID-19 can change everything about the stock market overnight. True diversification means having multiple asset classes generating cash flow to help boost the quality and quantity of a retirement account. And without cash flow, stocks don’t perform as well when there are unforeseen risks. You know, like an unexpected pandemic!
Wealth-Building. “Buy land” is some of the oldest financial advice on earth. You know why? Because it often works. Many investors create multi-million dollar portfolios with real estate when compared with the stock market, so much so that it’s often said that real estate results in more millionaires than with any other asset class.
There are lots of reasons to use a self-directed IRA for any investor who focuses on real estate. But it’s not only about tax protection. It’s about leveraging one’s experience and skills in a unique asset class to maximize your chances of retiring with a solid, cash flow-generating nest egg.
In order to get the best overall understanding of the value of a land agreement, real estate investments, and why they might be the best fit for you, don’t hesitate to contact the experts here at Patriot Funding. We provide top-rate service combined with the most competitive pricing around, giving you a worthwhile experience all around!
Patriot Funding, LLC: Land Contract Homes & Buying a House on Land
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Article: American IRA
Jim Hitt, Author
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