Determining whether or not you should invest your self-directed IRA assets into real estate can be challenging. It clearly depends on how much of your net worth is tied up in real property. I have read articles saying that everyone should have 20% to 30% of their investments in real estate. Now I’m not going to prescribe a specific percentage. Each person has their own comfort zone. But certainly everyone should have some form of real property investment, even if it is a real estate investment trust (“REIT”).
Not only is real estate a great investment, but it is less volatile than stocks and is also negatively correlated to stock market returns. But because it is generally actively managed, many folks may not have the stomach for it. So determining whether you should hold real estate in your IRA depends, in part, on your overall portfolio mix and your temperament.
When investing in real estate, the tax deferred nature of IRAs should not be ignored. An IRA may be a great vehicle for your investments if you have a strategy that would otherwise result in short-term capital gains.
But before you invest your IRA directly into real property, you must determine your risk tolerance. Certainly, real property in your investment mix can give you greater diversification and can give you great financial rewards. But you must make sure that you are educated on the process and understand the task at hand.
Answering questions about retirement investments is never easy. Please make sure you do your own research and clearly understand any changes to your retirement assets. But for people who desire the ultimate control and flexibility that a self-directed IRA offers, it can be a wise choice. Putting hard assets in an IRA may be an even better one.
But before you go ahead and open up an account, make sure that you talk to your CPA or other tax professional. Self directed IRAs can be complex, so make sure that you don’t get yourself into any tax trouble.
Additional Information:
If you are in the market for a real estate IRA or if you are looking for FREE information on how you can set up a self directed IRA, please visit our site at Self Directed IRA.
This article is for informational purposes only and is not meant to be tax or legal advice. Each situation is different and you must discuss your cancelation of debt issue with a qualified tax or legal professional. This article is not written to be used for the purpose of avoiding penalties under the Internal Revenue Code.
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