Investing In Real Estate With Your Retirement Accounts
TL;DR - A 401k or IRA through a self-directed custodian is one of the best ways to invest in real estate.
You have old retirement accounts, but they haven’t been making you money. It’s gotten to the point where you don’t even want to open your monthly statements. This can be such a frustrating situation - but there is hope. Not only can you begin generating money into a retirement account again, but you can make a killing doing it. How? By investing in real estate with an SDIRA (self-directed IRA). Let’s talk about it.
Investing with your retirement accounts
Why Your Retirement Account Isn’t Making You Money
When we invest in a retirement account, whether that be a Roth IRA, traditional IRA, or 401k, we believe that we’re contributing to our future.
Yet, that may not always be the case. Why? Because your financial advisor might not have your best interests in mind. Let me explain.
You might be thinking, “My advisor only makes money when I do.” While this is true for the most part, it’s leaving something out.
You see, financial advisors only make returns off of certain types of investments. Things like mutual funds, stocks, bonds, and exchange-traded funds (ETFs).
They do not make money when you use your IRA to buy real estate.
In fact, most financial advisors or account custodians won’t let you buy real estate even if you have a self-directed account.
It just doesn’t make sense for them. After all, their main goal is to make money for themselves.
This can lead to them prioritizing their own interests and neglecting the large number of gains you could be making in certain markets. Like - you guessed it - real estate.
So, you might want to consider transferring your investments into a self-directed account.
This will allow you to focus on investments and markets that truly benefit you, your family, and your future.
How Do I Invest In Real Estate Using My Retirement Funds?
This is an awesome question to ask yourself, for a variety of reasons.
It means that you’re thinking about your future. That you’re prioritizing your own interests, wants, and needs. That you’re being proactive in finding ways to maximize your cash flow and passive income, without relying on a financial advisor.
With that said, investing in real estate with a retirement account isn’t as difficult as it might seem.
Here’s one super simple checklist to help you begin your real estate investment journey, using a retirement account:
Step 1: Open a 401k or IRA account with a self-directed custodian.
One of the best IRA accounts you can open, for real estate investing, is a self-directed IRA (SDIRA).
You can roll over funds from prior 401ks or IRAs into your new account. They just have to be OLD, not active. So, if your 401k is through an employer you’re actively working for, you can’t roll over those funds.
This SDIRA (or 401k) account will allow you to choose your investments, without the advice or guidance of a financial advisor.
You still need to create the account with a custodian - someone who’ll handle the back-end work of your investment deals.
This is required by the Securities and Exchange Commission (SEC).
Essentially, the custodian will hold your funds until you’re ready to make an investment.
Step 2: Decide what real estate asset class(es) you’re going to invest in.
Whether you’ve invested in real estate before or not, one of the first things you’ll need to choose is the real estate asset class(es) you want to pursue.
These can be residential properties - single-family homes, townhouses, condos, co-ops, and more.
Or commercial properties - retail spaces, hotels, self-storage facilities, office properties, and the like.
Perhaps you just want to buy land.
Whatever real estate asset class(es) you want to focus on, make sure you decide before you invest willy-nilly.
Step 3: Fund your new self-directed retirement account.
This will be one of the last steps before you can begin to buy real estate through your retirement account.
As mentioned before, you can choose to transfer, or roll over, funds from previous retirement funds. This can be from a 401k, IRA, you name it.
Be sure that it’s an old retirement account though. You can’t roll over funds from an active 401k or IRA.
An active retirement account is when you’re currently working for the employer to which the account is funded and/or contributed.
You could also just invest fresh funds into your new account.
Step 4: Buy/invest in real estate property.
The fun part!
Of course, there is much more that goes into it than simply buying the property.
But, this is when you get to start investing in real estate property that’ll give you a good, great, or better rate of return.
You’ll be extremely satisfied with how you’ve diversified your investment portfolio. Your retirement account will start to increase in value as well.
Consider opening a self-directed retirement account. It’ll be a great introduction to investing in real estate.
You won’t regret it.
The Best Part (You Can Partner With Others!)
You heard that right.
It might seem daunting to you to begin investing in real estate. Don’t you need heaps of cash for that?
The answer is a resounding no!
Not only can you use a retirement account to invest in real estate, but you can also use retirement funds to invest in other people’s deals.
What does this mean for you?
You can start investing in real estate with a low initial buy-in, while also getting some of the best rates of return in the real estate industry.
You’ll be able to partner with experienced real estate investors, who know all the best deals to buy into and maximize your investment gains.
This lifts the barrier of entry to real estate investing tremendously.
So, if you’re interested in real estate investing at all, take this as a sign to get started.
How We Can Help
If investing in real estate with your retirement account sounds interesting, and you’d like to learn more, we’d love to be of value!
At Undoor, we pride ourselves on teaching new and experienced investors how to maximize their gains with minimal stress. Our goal is to help you fall in love with real estate and real estate investing. What we’re most passionate about is maximizing investment gains for people like you.
Do you want to get key insights and advice that’ll help you get ahead of the game? Don’t hesitate to contact us for any and all real estate wants or needs. Alternatively, you can join our investor group by clicking the button below. You will get priority access to our upcoming investment opportunities.