Utilizing real estate as an investment opportunity is possible with any amount of money. It’s one of the most sustainable methods for building wealth over time. A significant number of the world’s wealthiest people have made their empires using real estate. Real estate is a relatively safe and understood vehicle that gives investors options.
Here are a few different techniques to invest in real estate with a self-directed IRA.
Real Estate Investment Trusts (REITs)
REITs are the kind of trust that provide investors with the benefits of a long-term real estate investment mixed with the benefits of a mutual fund. Shares in a REIT are liquid in nature, and the business that qualifies as a REIT will manage the properties for the group of investors that help fund them.
REITs trade on exchanges in much the same way mutual funds and stocks do. They are often sought out for attractive tax benefits and are popular with investors interested in low-risk but stable returns.
Real estate partnerships can be incredibly lucrative if the partnership is with the correct people. These partnerships typically are combined with people who find the investment property and those who bring the money and set up the deals.
These groups can often take small amounts of funds from several investors and apply the same dynamic to every investment through experience, ensuring a swift return when repeating the process from property to property.
There is a reason so many TV shows are popular that feature DIY-enthusiasts who take distressed or abandoned property and fix it up, so it’s worth enough to sell for a decent profit.
Real estate is accessible and familiar, which is why it’s sought-after by investors. Not to mention it is a hard asset. A hard asset refers to a tangible asset. If the real estate value goes to zero, you still have the actual property, which in and of itself is of value.
Where self-directed IRA investors differ from these popular TV shows is that IRA holders are not permitted by IRS regulation to complete work on the renovated property. All maintenance on IRA-owned real estate must be paid for directly from the IRA. For more extensive details on all SDIRA real estate rules, go here.
Real estate can be tricky for the inexperienced. Still, few areas of the market have a longer and more successful record of success for both IRA owners and the general investment community.