When In Doubt About Market Stability, Invest in Real Estate in a Self-Directed IRA
Published on September 6, 2016
That’s the advice proffered in an article on TheStreet.com in response to the concerns about Brexit and how it will affect markets. While the world won’t fall apart when the UK exits the European Union, the Brexit vote did bring on market volatility felt around the globe. And, the author tells us, it provided investors with a strong reminder to include real estate and other hard assets in their portfolios.
This is because real estate:
- Tends to hold its value.
- Generates more stable returns.
- Is less vulnerable in volatile economies, unlike paper assets like stocks and bonds.
- Is less dependent on the country’s currency (which can be devalued, which occurred to the British pound following the Brexit vote).
For investors with real estate or precious metals (hard assets) in their self-directed retirement plans the situation is different. Real estate has intrinsic value because it provides shelter, something everyone needs. It can also be leased or traded for other items of value. And it’s not something that is continually created, so that limited supply means there will always be demand. Hard assets are also a hedge against inflation.
Investors who have self-directed retirement plans are including real estate, precious metals, many types of commodities and other alternative assets in these plans rather than the soft assets that are highly subject to market volatility. When it comes to real estate, these investments could be rental property, vacation property (domestic or foreign), warehouses, raw land or farm land—real estate that will produce income for the retirement plan and grow the portfolio’s value with the same tax advantages of typical retirement plans. As with all types of self-directed investments, all income and expenses related to the asset flow through the IRA. If the account holder has a Roth or Traditional IRA, the same IRS guidelines apply as they do for plans that are not self-directed.
Real estate professionals are also seeing the value of investing in what they know and understand, and are including real estate in their self-directed retirement portfolios. Since self-directed investors make all their own investment decisions and conduct their own (thorough!) research about their desired investments, including real estate in a self-directed IRA can make good sense for those who already work in that field—or for people who are already investing in real estate outside of their existing IRA.
Want to know more about including real estate in a self-directed retirement plan? Read more on our website and watch our informative video about completing a Next Generation Trust Services real estate purchase kit. Or contact our helpful team at Info@NextGenerationTrust.com or 888.857.8058 for answers to your questions or help getting started on your real estate IRA.