Take advantage of today's market with your IRA or 401(k)
You have probably heard about investors with cash, taking advantage of the current low prices in today real estate market to either buy a home for cash, fix it up and either sell lit or rent it with a decent cash flow.
You may have wished you could do the same thing. Well some people with large amounts in IRAs or 401(k)s are able to do just that while taking advantage of the tax benefits of building wealth inside an IRA or 401(k).
You may not have known that you can own rental or speculative property in your IRA or 401(k). By choosing to “Self Direct” your IRA or 401(k) you can purchase rental or speculative property and accumulate wealth with the same tax benefits that are afforded a traditional IRA or 401(k
How is this done? The property is held by an IRA/401(k) custodian. The rents and profits are paid to the custodian to stay within the IRA/401(k). IRS publication 560 and IRS Publication 590 explain the regulations surrounding this opportunity.
As the market firms up and returns on some investments in current IRAs or 401(k)s may taper off, some are looking to put their IRA and 401(k) funds to work in real estate and take advantage of this lower prices brought about by the market today.
You still have to invest wisely. Weigh the risks and returns accordingly. You might decide to buy a property to fix up and sell keeping the profits in your IRA/401(k) or buy one to rent out and keep the rents & potential profits when you sell later in your IRA/401(k). Some suggest that you monthly or quarterly move the accumulated rents into an outside IRA brokerage account for a better return. You may also choose to use a property manager to manage the property making the investment a little more hands off.
There are IRA/401(k) custodians across the country for self directed IRAs and 401(k)s. It is a good idea to compare their fees to find the one that makes the right match for you.
MarketWatch™ has put together a 3 part series on this subject. Part 1 is about how to own real estate in an IRA. Part 2 talks about reasons to buy real estate with your IRA. And Part 3 talks about how to leverage your IRA.
You might be in a position to take advantage of this market. Take a look at your IRA or 401(k) balance and decide for yourself.