Many investors are familiar with using Individual Retirement Accounts, or IRAs for short, to grow their wealth in the stock market tax deferred. Did you know that you can take advantage of those same tax benefits when investing in real estate? It’s true, ever since 1974, IRA and 401(k) account holders have control over how they invest their retirement money. This means you don't have to invest your IRA or 401(k) into the traditional stocks and bonds. You can invest into tax liens, or even real estate.
There are many advantages to real estate investing. It can be a great investment for your IRA because real estate can be much safer and more familiar than the stock market. Real estate is a tangible asset and investment. Real estate investors can see what they are investing in; they can visit their investment; they know if it is being maintained well. That is why astute investors are starting to turn to real estate investment as a means to support their retirement accounts.
And still, most investors don’t understand the power and advantage of buying and selling properties through an IRA. Since your IRA is the title holder of the subject property, all earnings from that property are tax free, including earnings from rent, interest, and appreciation of value. Furthermore, your IRA can buy real estate of any property type, such as residential, commercial, agricultural, or unimproved land.
Investing your IRA into real estate can seem daunting because of the large sum of money that is involved in an initial transaction, but there are alternative methods to raising the capital needed for real estate investment. Non-recourse loans, loans that do not require a personal guarantee, and land contracts can finance the remaining balance not covered by your IRA. Try hedging your risk by bringing in partners! Instead of paying 100% of the purchase cost of a property, consider having a partner or multiple partners invest in the property with your IRA. Partners can be a person, another IRA, or a company.
The team at Neighbors Development often brings partners together to invest in various income producing investment properties. Contact us by email or phone with any questions you might have about investing your retirement accounts in real estate.
Business Development Manager | Neighbors Development