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Seven Ways Your IRA Or 401K Can Invest In Real Estate.

August 19, 2021

Today, we’re going to cover 7 ways your IRA or 401K can invest in real estate and reap the multitude of benefits you can receive by doing so.

Way # 1: Invest in real estate by directly owning real estate

The number one way your IRA or 401k can invest in real estate is by directly owning rental properties. That’s an investment that is available to you within a self-directed IRA. To do this, you must have a self-directed IRA at a company like NuView Trust.
But, what’s the benefit of owning real estate inside of an IRA?
Most investors would say that it’s the tax advantages you get.
But, remember that real estate’s a tangible investment. It’s not going anywhere. And there are multiple income streams you can tap into.
So, clients love holding fee-simple real estate inside their retirement account.

Way # 2: Owning land

The number two way to invest in real estate inside of an IRA is by owning land.
Mark Twain said it best. He said the best investment on Earth is land, because they’re not making any more of it.
So, can you own land inside of an IRA? Yes, it is no different than owning land outside of an IRA.
The only difference is you don’t pay capital gains tax in an IRA. So, having land inside of an IRA can be a great investment.

Way # 3: Own commercial property

Way number three is… you could own commercial property inside of your IRA.
Again, commercial property could be a great investment. It has multiple income streams.
It’s a tangible investment that hopefully appreciates over time.
But, it’s different to the stock market in the sense that the asset doesn’t have to appreciate in value to earn the benefits.
If you own commercial property and you’ve got tenants, your IRA gets the cash-flow tax-free or tax-deferred depending on the type of IRA you use.
So commercial properties, the number three way you can own real estate inside of an IRA.

Way # 4: Own multi-family or apartment buildings

Way number four is… owning multi-family or apartment buildings. What a great investment.
We have a lot of clients that use their IRA to buy multifamily or apartment buildings. Or, they partner with other people’s IRAs to do the same.
This is very important for people who are syndicating as well.
Did you know, you can raise capital to buy your own apartment buildings or multifamily by using other people’s IRAs?
And if you’re a real estate investor looking to raise private capital, you should realize that the largest source of Americans’ wealth is retirement accounts.
There is roughly $35 trillion in American retirement accounts, and 10 trillion in IRAs.
This is a great source of private capital to buy larger projects like multifamily properties.

Way # 5: Own real estate indirectly

The number five way is…. to own real estate indirectly.
What I mean by this is that many clients like to own notes secured by real estate. Think about it. Banks, own notes secured by real estate. They are in the business of holding notes.
What does that do for banks? It allows them to gain interest payments from borrowers secured by tangible asset, like real estate. You can mirror that same strategy inside of an IRA. And there are a lot of clients that like to do that.
So, if you don’t want to deal with the toilets, the tenants and the headaches that come with real estate, think about owning a note secured by real estate.
That way, you just receive the mailbox money or interest payments, by lending money from your IRA to a real estate investor, who’s actually providing the sweat equity.

Way # 6: Own real estate options

The number six way is a little advanced, but real estate options is a great investment strategy for those who understand it.
What is a real estate option?
It’s basically a one-way contract that gives your IRA the right to buy a property, and you don’t have to own it.
Consult with an investment professional, but real estate options are a great alternative.
They give you the right to buy real estate, and six different exit strategies.
But again, owning a real estate option is possible in an IRA, and it gives you a lot of different exit strategies that hopefully make you a big return.

Way # 7: Investing in entities that hold a variety of real estate investments

The seventh way to own real estate inside of an IRA is by investing in an entity that might hold a variety of real estate investments in it.

And what do I mean by that? I’m talking about investing your IRA into an LLC or a trust that might hold one property or hundred properties.

Most people are familiar with investing in a REIT (a real estate investment trust). And these are great. Some are publicly traded. Some are private. But, you can do it on a smaller level with smaller LLCs that might just own single properties.

In this case, your IRA could own shares of an LLC that might own property, or they’re the beneficial interest owner of a trust that might hold property.

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