THE BIG PICTURE
INVESTING STRATEGIES
ARE YOU TAKING ADVANTAGE OF THE BENEFITS OF INVESTING IN REAL ESTATE THROUGH YOUR SELF-DIRECTED IRA?
More Choice, More Control
by Tyler Carter
A
are, bonds and other interest-bearing investments are offering paltry returns. These Boomers feel as though they’re trapped between a rock and a hard place. Should they assume more risk than they’re comfortable with in equities for some chance of a decent return? Or should they flock to the safe haven of interest-bearing investments and watch their principal erode due to inflation? The good news is that there’s a third option. I meet with thousands of real estate investors every year, and it always
amazes them when they learn that they can leverage their knowledge base in real estate to invest in something that excites them. In short, self-directed retirement accounts offer more choices and more control. Self-directed IRAs and 401(k)s allow for almost any type of investment, provided it’s passive and at arm’s length. Whether it’s for real estate—residential, commercial or agricultural—for cash flow or for capital appreciation, this
s April 15 approaches each year, most real estate investors spend
some quality time with their accountants or financial advisers. It can be a bitter- sweet time as they look over their real estate earnings and realize how much of it goes to the Internal Revenue Service. It has always struck me as odd that so many otherwise-savvy real estate in- vestors aren’t taking advantage of every opportunity to invest in real estate on a tax-deferred or tax-free basis. Most of them have an IRA, 401(k) or some other type of retirement plan that’s invested in mutual funds or another stock mar- ket-based investment. While it’s a little-known fact, you have a much broader scope of invest- ment options inside a self-directed IRA or an individual 401(k). If you’re not ex- cited yet, consider the fact that by virtue of being self-employed as an individual real estate investor, you may qualify for a retirement plan that allows you to sock away up to $53,000 on a partially tax-deferred, partially tax-free basis. That sure beats the $5,500 contribution limit for traditional and Roth IRAs. The self-directed retirement industry is growing rapidly. As an increasing number of Baby Boomers approach and enter retirement, they’re not enthused about living on a fixed income and watching their principal balance fluctu- ate with the volatility of the stock mar- ket. Historically, they would move into more conservative fixed-income invest- ments, but with interest rates where they
> Continued to :: PG 16
14 | think realty magazine | mar :: apr 2016
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