INVESTMENT STRATEGY
Leverage Self-Directed IRAs for A ordable Housing Solutions USE SELF DIRECTED IRAS TO PARTNER WITH NONPROFITS AND DRIVE IMPACTFUL AFFORDABLE HOUSING INITIATIVES.
TARA BOGARD
T he affordable housing crisis is a pressing issue in many communities across the country. With rising property values, stagnating wages, and increasing costs of living, millions of individuals and families are struggling to find housing that meets their needs and fits within their budgets. The need for affordable housing is clear, with statistics showing that over 19 million households are cost- burdened: They spend more than 30% of their income on housing. The demand for affordable housing far exceeds the supply, and advocacy plays a crucial role in addressing this crisis. Self-Directed Individual Retirement Accounts (SDIRAs) are a unique avenue for addressing the affordable housing crisis. An SDIRA is a type of retirement account that allows investors to diversify beyond traditional assets such as stocks and bonds. With am SDIRA, you can invest in a wide range of assets, including myriad real estate options, precious metals, private equity, and more. Unlike traditional investors, SDIRA owners can partner with nonprofits and housing advocates to support affordable housing initiatives. Through these partnerships, investors can provide capital for projects that address the housing needs of low- income families while also securing a return on their investment.
SDIRA STRATEGIES TO ADDRESS AFFORDABLE HOUSING There are many strategies SDIRA owners can use to generate a return on their investment and simultaneously contribute to the social good by addressing the critical
help projects move forward that might otherwise stall due to lack of funds. INVESTMENTS IN SOCIAL IMPACT BONDS SIB . SDIRA owners can invest in bonds that fund affordable housing projects. These bonds typically offer returns based on the success of the housing project in achieving its social outcomes, such as reducing homelessness or providing affordable housing. REAL ESTATE INVESTMENT TRUSTS REIT WITH A SOCIAL MISSION. Some REITs focus on affordable housing or other socially responsible real estate investments. SDIRA owners can invest in these REITs, providing capital that supports affordable housing initiatives while potentially earning returns. MIXED INCOME DEVELOPMENTS. SDIRA owners can invest in mixed-income housing projects that include a portion of units designated as affordable housing. These developments often align with workforce housing initiatives, providing affordable options for essential workers. FUNDING LOW INCOME HOUSING TAX CREDIT LIHTC PROJECTS. SDIRA owners can provide funding for developers working on LIHTC projects that incentivize the construction or rehabilitation of affordable rental housing. These investments can be structured as loans or equity, depending on the project.
need for affordable housing. Let’s explore a few options:
PRIVATE LENDING. SDIRA owners can act as private lenders directly to nonprofits or housing advocates working on affordable housing projects. These loans can fund the construction or rehabilitation of affordable housing units. JOINT VENTURES. Individuals can form joint ventures with Community Land Trusts (CLT) to develop or acquire affordable housing. These partnerships help secure long-term affordability by keeping the land in trust while allowing for affordable homeownership or rental opportunities. EQUITY INVESTMENT. SDIRA owners can invest directly in affordable housing projects by purchasing shares in real estate ventures that focus on creating or maintaining affordable housing. BRIDGE LOANS OR GAP FINANCING. SDIRA owners can provide bridge loans or gap financing to nonprofit developers who may need temporary funding to complete affordable housing projects. This can
| :: NOVEMBER - DECEMBER 2024
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