What is a Real Estate IRA?

Many people are under the impression that there are only a couple of options available when it comes to saving for their retirement. Unfortunately, they couldn’t be more wrong. The truth is that there are many different options that make it possible to invest in a variety of different assets in order to grow your retirement account and secure your income after you retire.

One such account is a real estate IRA. A real estate IRA is a type of self directed IRA that allows you to use the money in your retirement account to purchase investment properties. These properties can be rented out and the proceeds then deposited back into your IRA which can then be used to purchase additional investment properties.

There are a couple of benefits to using this type of retirement account to secure your financial future. The first benefit is that the rent you collect on a monthly basis represents a return on your investment. In a typical retirement account, the return on your investment in stocks, bonds and mutual funds is usually between 4% and 5%. In a real estate IRA, the return on your investment will be considerably higher. This is because you are in control of the amount of rent you charge as well as for the terms of the lease.

The second benefit comes in the form of appreciation. Real estate, up until most recently, has been considered one of the best investments you can make. This is because under normal circumstances, the value of real property actually increases in value rather than decreasing like most other tangible assets. So, not only are you able to increase the value of your retirement account through the rents you collect on your investment properties but through the appreciation of your properties as well.

And, last but not least, there are ways that you can purchase investment property that allows you to purchase the property from your IRA and turn it into a personally owned property. This is a great way to purchase the home you’ve always wanted using the money from your retirement account rather than from your own bank. There are certain rules around how this process is completed in order to ensure that you aren’t breaking IRS rules surrounding indirect benefit. If you have questions about this particular benefit, it is always best to consult a financial planner or your real estate IRA custodian.

If you are someone who is looking for an out of the box idea for saving for your retirement, a real estate IRA may be the solution you’ve been looking for. Starting a real estate IRA is easy. What’s more is that you can use the money you have already saved in another retirement account to fund your real estate IRA by simply completing a rollover. The rollover allows you to move the money without having to pay taxes or early withdrawal penalties. Take some time to research real estate IRAs and contact a real estate custodian for more information.