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Time to Include Real Estate in Your Self-Directed IRA

Time to Include Real Estate in Your Self-Directed IRA

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 or 1-888-857-8058 if you need assistance.

Beware of Investment Fraud in Your Self-Directed IRA

Beware of Investment Fraud in Your Self-Directed IRA – and Being Defrauded of your Retirement Savings

Ponzi schemes, identity fraud and other related problems can ruin investors

A story broke in early April about two Texas men who targeted elderly retirees in a $2.4 million Ponzi scheme and a related $1.4 million scam involving an oil and gas company they controlled. Unfortunately, it’s the type of fraud that can also happen to owners of self-directed IRAs if they’re not careful.

According to the SEC, the owner of a retirement planning firm cheated at least 30 investors, who were lured to invest their retirement savings into his Texas planning firm; he then used a portion of the funds to support a lavish lifestyle. Ponzi payments kept his scheme afloat after he’d squandered the money; investors believed their promissory notes were legit and they were enticed to increase their investments (in some cases, nearly all of their pensions and savings). The other man joined him in 2015 during the alleged fraud, which ran from 2010 to 2017. The SEC is on the case.

As the director of the SEC’s Fort Worth regional office stated, “Fraudulent conduct targeting the most vulnerable among us is reprehensible. As the US population ages, financial exploitation of seniors is an increasing and serious problem.” In December 2017, another alleged scheme out of Florida bilked investors—many of them seniors—out of $1.2 billion through a group of unregistered funds, the regulator says.

Since individuals who self-direct their retirement plans make all their own investment decisions, and must conduct their own due diligence regarding any investment they include in their plans, these fraudulent schemes (and many others) are a cautionary tale.

Self-directed IRAs and fraudulent investments

We cannot stress enough how important it is for investors to conduct thorough research before making a self-directed (or any) investment. A prior post about the importance of researching your investments is here.

Investors are wise to go with what they already know and understand in terms of any alternative assets (or investment funds for that matter) that they plan to include in a self-directed IRA.

Fraud shows up in many ways, including:

The SEC cites several red flags about potential fraud: look out for promises of high returns with little or no risk, unlicensed and unregistered sellers and overly consistent returns.