When you think about retirement security, what do you imagine? You probably imagine having a big portfolio somewhere, generating enough interest to ensure that you’re perfectly comfortable. Or you might imagine having a stockpile of a certain investment type, ready to be sold off whenever you need some spare money or some income. But when it comes to a solid retirement income—something you know that you can rely on—the details can be a little fuzzy. That’s where the Real Estate IRA comes in.
With a Real Estate IRA, you can utilize the power of retirement accounts to maximize your real estate investments and generate a real retirement income—even if the stock market isn’t performing the way it should. Because real estate is an investment that will always be around—at least, as long as there’s land and property—you’ll be able to feel that you have a solid, reliable source of money even in retirement that isn’t dependent on the daily turning of the market.
But one question remains: how do you build that retirement income through a Real Estate IRA? Let’s look through some of the most common—and successful—strategies:
Using Leverage Within a Real Estate IRA
One of the most common questions or objections that many people who are new to real estate investing have is: “how do I even afford real estate?” You look at the big prices and you’re instantly scared away.
But real estate doesn’t work like that. Anyone who’s ever purchased a home or a condominium knows that real estate is affordable because of leverage: the concept of taking out a loan and paying it off every month.
The beauty of the Real Estate IRA is that it still allows you to utilize leverage in order to acquire real estate. The loan in this kind of IRA must be non-recourse, which means that if you default on the loan, the lender can only claim the property for which it lent out money—they can’t come after your other assets.
This helps protect your financial security while you’re investing in real estate, thus ensuring that you can feel safe and secure about your overall net worth even while you use this kind of investment account. And with leverage applied, you’ll be able to stretch your dollar and acquire a piece of real estate that has the potential for generating you an income that is both quick and lasting.
Earning Real Estate Income
Money is earned on real estate through rent payments: you rent out the property to someone else. Depending on how much rent you collect, the real estate can then become a “net profit” in that you earn more money from the real estate than the investment costs. This provides you with an income that’s separate from having a job, separate from relying on the stock market, and separate from many of the usual financial tools that people look at. It’s a way of diversifying your assets for more security.
And when the loan is paid off, you own the real estate. Once you fully own the real estate in question, your expenses crater and you’re left with profit if you have consistent tenants.
Obviously, real estate isn’t always so simple. While it’s a valuable tool for building income in retirement, we advise you to learn more about Real Estate IRAs and what they can do for you. Read our Real Estate investment section or call us at 828-257-4949 to learn more about what Self-Directed IRAs are all about.