Both IRAs have been permitted by the IRS for years, yet is seems that very few people know that they even exist. Quite simply, a self-directed IRA is one that allows an investor to hold non-traditional assets (like real estate, limited partnerships, general partnerships, private stock and more). This opens up a world of investment possibilities beyond the common stocks, bonds and mutual funds within most retirement plans.
Real estate IRAs are a specific type of self-directed IRA that may only hold real estate. Some IRA custodians prefer to handle only real estate transactions and holdings and are an excellent option for those investors seeking to maintain some traditional holdings in their current retirement accounts and diversify in a separate account with real estate.
Here are 10 reasons, regardless of the economic climate, that you should consider establishing a self-directed or real estate IRA today:
- Most IRA custodians and employer-sponsored retirement plans limit your choices for investments. With a self-directed IRA, you can choose from a much wider array of investment possibilities from real estate to private stock and private notes.
- Diversification is an important part of any balanced portfolio. Establishing a self-directed or real estate IRA allows you to diversify your portfolio in more ways than you ever thought possible.
- For established or aspiring real estate investors, self-directed IRAs offer the opportunity to invest in an asset class they know and trust.
- For those using a self-directed IRA to purchase real estate, you can use leverage in your IRA through non-recourse loans to acquire property (not possible in with IRAs that are not truly self-directed).
- Self-directed IRAs can be established even when you already have an existing employer or IRA plan.
- You can rollover a portion or all of assets from your current IRA plan into a self-directed IRA.
- The ability to control your retirement in a way like never before through a self-directed IRA is very empowering to an investor. Finally, you have a choice of what you can invest in – seize the opportunity!
- Contribution limits on an annual basis are the same for a self-directed or real estate IRA as they are for any other IRA.
- You can establish a self-directed solo 401(k) plan, Roth IRA, Traditional IRA, Coverdell Savings account (Education IRA), corporate 401(k) or SEP IRA.
- For those looking to learn more, visit InvestorLoft’s Self-Directed IRA Learning Center
Erika D. Napoletano is the Director of Communications & Content for InvestorLoft.com. As a former holder of multiple FINRA/SEC licenses such as the Series 7, 66 and 31 as well as being a former Registered Mortgage Agent, she possesses a deep knowledge of both investments and real estate. InvestorLoft.com ([http://www.investorloft.com]) is dedicated to providing the most relevant search results for the real estate investor on the web and offers the most comprehensive tool set available today. From smart, investment-centric property searches (search InvestorLoft listings by cap rate, cash flow, cash on cash return, down payment ad more) to the most in-depth, real-time financial calculators available online, InvestorLoft is committed to meeting the needs of the real estate investment community as well as the real estate professional. Amber Sea