Time to Include Real Estate in Your Self-Directed IRA

Published on May 22, 2018

An article last month on Reuters explored how rising interest rates are helping real estate-related stocks perform very well amid the broader U.S. equity market; the article stated that investors are putting money into real estate investment trusts (REITs), betting that these publicly traded assets will provide a better return as the Federal Reserve continues to tighten monetary policy. Real estate sector stocks have declined at half the rate of the overall market since February. All this may signal a good time to include real estate in a self-directed IRA.

Interest Rates Expected to Rise

The Fed is expected to raise rates at least twice more this year (there was an increase in March), and rising rates generally indicate a strong economy. This in turn usually results in an increased demand for all types of commercial property—the type of property that self-directed investors can invest in through their retirement plans. The article went on to say that the Standard & Poor 500 real estate sector had been in decline since the start of the year, but was trending higher this quarter, which suggests more positive investor sentiment. And, according to research by the National Association of Real Estate Investment Trusts, if inflation remains moderate amid economic growth, REITs may outperform the broad stock market. Again, this may signal that for savvy investors who already know and understand real estate assets, the timing could be great for adding investment real estate in a self-directed IRA.

Rising Demand in Real Estate

The rising demand in real estate will also drive up rental rates, boost net operating income from investment property and increase real estate valuations along the way, providing relatively strong returns for the self-directed IRAs that have invested in those assets. Self-directed investors may include a broad array of non-publicly traded assets in their retirement plans, including essentially any kind of real estate: multi-family housing, warehouses and industrial properties, retail or office properties, and even vacation rental property. If you have your eye on a commercial or residential investment property to include in a self-directed IRA, our helpful Real Estate Investment Kit has all the forms you need to make it happen after opening a self-directed retirement plan at Next Generation Trust Company. Our Starter Kits will walk you through all the steps to open your self-directed retirement plan and get it funded, and our team is available to answer any questions you have. Contact us at Info@NextGenerationTrust.com or 1-888-857-8058 if you need assistance.