Blog & Journal


Learn about the benefits of Investing your IRA in Rental Properties

alinabeths March 18, 2021

A self-directed IRA is an individual account, a retirement account specifically that allows you to invest in things that are not traditional. For instance, you can invest your self-directed IRA in purchasing real estate properties, precious metals, cryptocurrencies, and many more. But remember, self-directed IRA investment is not a safe flow. There are many challenges and upheavals. Only a seasoned financial advisor can help you get the best from your self-directed IRA.

You may be wondering how a self-directed IRA investment might work. More or less, it functions like the traditional IRA. You need to pay an annual contribution of $6000 and $7000 if you are 50 and above. The pre-tax and post-tax rules are the same for both the traditional and self-directed IRA.

In a self-directed IRA investment, you must approach a custodian (a licensed financial advisory firm) to know the in and out of the self-directed IRA investment procedure. Not seeking expert advice might land you up in huge, insurmountable problems.

In regular IRAs, the bank has control over your investment options. In self-directed IRA investment, the custodian offers you a plethora of viable choices to choose from. For instance, he might tell you to invest in gold and silver, bitcoins, and many more, that although challenging, bring promising returns. But as mentioned above, you always need to be working under the guidance of an expert for the self-directed IRA investment.

What can be procured from a self-directed IRA?

  • Tax liens and deeds on foreclosed properties.
  • Startups via crowdfunding platforms
  • Although there are a variety of special rules that govern investing in real estate via a self-directed IRA, real estate properties.
  • Precious metals, including gold, silver
  • Foreign currency, via so-called forex IRAs.
  • Cryptocurrency, like Bitcoin or Ethereum.

As of now, you cannot invest your self-directed IRA in life insurance, artwork, antique pieces, etc. Purchasing these might make you liable to pay taxes before you are 59 1/2 years old.

A real estate IRA is a self-directed IRA that allows a person to make profitable retirement investments in real estate. A self-directed real estate IRA will help you to invest your retirement benefits in various real estate options and properties. Here goes a list of real estate options that you could invest in with your self-directed IRA:

  1. Residential investment: This is the most popular type of real estate investment sought by many. The benefit of investing in residential or commercial property is that you will keep getting a regular and safe income utilizing renting or leasing. Commercial investment generates a lot of income too. The commercial properties that could generate a viable income are malls, grocery stores, a building used for official purposes (educational institutes, companies, and other business outlets), and even properties such as baseball/football and fields for different sports.
  2. Offshore real estate investment: These real estate investments are for adventurous people. They are the ones who want to transcend geographies and come up with viable investment options.
  3. Foreclosed property investments: You can invest in real estate by means of purchasing properties meant for foreclosure. You can purchase foreclosure properties from the bank directly or during a sale auction. 

 A self-directed Roth IRA is an individual account that allows you to exercise control of your investment’s nature. The self-directed Roth IRAs are offered as brokerages. In this kind of self-directed IRA, you can choose a custodian.

The advantages of purchasing rental properties through self-directed IRA:   

You can easily invest in rental properties using your self-directed IRA.  Many people invest in real estate that gives them a wide range of investment opportunities and lucrative returns. Mentioned below are a few benefits that you can consider.

  1. You need not pay tax on your self-directed IRA rental property until the day you withdraw. However, you can buy real estate outside your IRA based on your terms and conditions. Your investment returns will grow in a self-directed IRA based on market appreciations.
  2. Investing your self-directed IRA in rental properties is good because it is an informed decision made by you.
  3. Rental properties offer a lot of portfolio diversification and reduce risks.
  4. Rental properties can be tracked easily, and there is no need to file tax returns annually.

Leave a Comment

Login to your account

Can't remember your Password ?

Register for this site!