Many investors have been looking for answers when it comes to the right investments to make when it comes to diversifying their portfolios in order to increase net worth. Investing in real estate has always provided investors with a great way to grow their portfolio in a relatively safe fashion, which makes it a great choice for those who have a self directed retirement account. Here are a few reasons why you should think about investing some of your retirement funds in real estate.
Passive Cash flow.
Real estate is one investment that can actually generate a tangible income, that is if the properties are used as rental properties. The cash flow generated by rental properties can actually provide you with a monthly income stream that can have a huge impact on your retirement savings. This money can be used to invest in more real estate or pad your retirement account balance.
The income generated from real estate investing is also more predictable than other forms of investments. This is because tenants pay rent no matter what the financial markets are doing. This means that you can expect to continue to make regular deposits into your retirement account and grow your savings no matter what Wall Street is doing.
Tax benefits.
Investing in real estate offers you additional tax breaks when you use your IRA funds to purchase them. How is that? The IRS recognizes real property owners and offers them tax breaks on their tax filings. Think about this for a minute. Real estate rental payments are not considered self employment income, which means that you fit into a lower tax bracket. In addition, You can claim depreciation and other breaks that also lower your tax burden when the time comes to pay it.
The loan pay down
Retirement accounts offer you a special low interest rate when you use the funds to purchase a home. What’s really cool is that when you use the funds in your IRA account to purchase real estate, that super low interest rate you pay when you repay the loan is actually deposited back into your account. This means that you are actually the bank. And, in case that wasn’t enough, your tenants are actually making the loan payments, so you don’t even have to worry about disrupting your own monthly budget.
Appreciation.
Real estate, in most cases, enjoys a nice, steady rate of appreciation. This means that the value of the homes you purchase and rent out will actually go up, increasing the worth of your retirement account. Of course, things do happen and the values of the homes you purchase can decreases, this is not the norm, making real estate investing a great option.
Of course, these are a few of benefits of investing in real estate. If you are looking for a better way to diversify your retirement account investment portfolio, consider investing in real estate. Real estate offers you many different ways to add value to your IRA while protecting you from loss when financial markets are weak.