If you’re looking to diversify your retirement savings in a big way, a real estate IRA could be all you need to make this dream a reality. Holding physical real estate in a self-directed IRA opens up a world of potential benefits that you simply can’t get from traditional retirement accounts invested in stocks, bonds, and mutual funds. 

So what exactly is real estate IRA investing, and what are the main advantages? Here’s a comprehensive guide to everything you need to know.

What’s a Real Estate IRA? 

Let’s first get that question out of the way. As the name implies, a real estate IRA (individual retirement account) is one that allows you to hold alternative investments like rental properties, land, and real estate contracts. This differs from a traditional IRA, which typically only allows stocks, bonds, mutual funds, and sometimes options. 

Top 5 Benefits of Real Estate IRA Investing

  1. Growth Potential – Real estate has long been a powerful wealth-building tool, with rental income, appreciation, leverage, and tax advantages driving growth. IRA investing turbocharges the benefits by allowing tax-deferred growth over decades.
  2. Portfolio Diversification – Housing generally moves differently than stocks and bonds, making real estate IRA investing an excellent way to diversify. Reducing the correlation between assets in a portfolio can lower risk and enhance returns. 
  3. Inflation Hedging – Real estate and rent prices tend to rise with inflation, potentially protecting against inflation, eating away at idle cash in traditional bank and money market IRA options.
  4. Tax Savings – Money invested and growth in a real estate IRA accumulates tax-deferred, amplifying long-term compounding. Capital gains taxes are avoided as well if properties are held until retirement distributions.
  5. Passive Income – Owning a rental property in a real estate IRA can generate steady cash flow without added tax liability. This passive income can supplement retirement cash flow from other sources.
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As you can see, the benefits of a real estate IRA are quite substantial. The ability to grow a diversified portfolio tax-deferred for decades makes this option very compelling for retirement savers looking to maximize their nest egg.

 

How to Get Started with Real Estate IRAs

If you’re sold on the benefits and want to start your own real estate IRA, you can get up and running by first opening an account with a specialized self-directed IRA custodian. Fund the account through retirement account rollovers or contributions with no tax penalties

Now the exciting part – select your real estate investments like rental properties or REITs after thorough vetting. Instruct your custodian to execute the transactions to acquire your chosen assets, as they handle the paperwork while you make the decisions. 

Finally, work with your custodian to manage ongoing administration, like required distributions and appraisals. With an expert custodian guiding you through setting up and maintaining your account, investing in a real estate IRA puts your dream portfolio within reach.

Enjoy the Powerful Benefits of Real Estate IRA Investing

The possibilities are vast when you open a real estate IRA, from flipping houses to acquiring apartment buildings to investing in a real estate crowdfunding platform. And the tax benefits are just the icing on the cake. So, if you want to supercharge your retirement investing, now’s the time to explore the world of real estate IRAs.

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