Using a Self Directed IRA to Invest in Real Estate

Something that is rarely talked about at the financial advisor or the brokerage level is the ability to invest in actual real estate with your retirement account. Most brokerage services such as e-trade, or fidelity, or vanguard will not allow you to do it. However, there are "custodian" brokerage services that grant you this ability. 

The custodian is essentially the watcher of your IRA account & they will grant you the permission to invest in an alternative investment other than your typical stock, bond, or mutual fund. It is achievable through the process of rolling over some or all of your IRA into one of their programs. 

Don't worry, if you have a ROTH IRA it will still remain in that category as well as a normal IRA. 

Now, the biggest stipulation with a SDIRA is that it needs to be completely passive or hands-off for your the owner. This means that you can't go buy a vacation house with the money & have it as an AirBNB. You need to invest your money in some sort of real estate asset that is either part of a syndication or that is managed by a property manager & they take care of everything. If the rules are not followed the IRS could target your entire IRA & tax you on the total amount. 

Of course that is the worst-case scenario. But, the reason behind people investing in real estate with their IRA is the following reasons: 

1) Real Estate is a Physical Asset that will NEVER go down to $0 in value

2) In most cases the "right" real estate will outperform the returns of the stock market. 

3) Real Estate appreciates in value over time

4) Rental real estate provides monthly cash flow

If you are wondering how you can diversify your portfolio reach out to us & we can set up a video or phone call. 920-215-4201