When many people think about building wealth, they picture one thing: investments in the stock market. Mutual funds, individual stocks, index funds—the list goes on and on, but ultimately, they fall under one asset class. What more future retirees need to remember is that there are other ways of building wealth that can be just as effective—if not more effective—than the stock market. One such way is through a Real Estate IRA.

Real estate is an entirely different asset class from stocks. But the difference goes even deeper. Real estate is an entirely different type of retirement investment as well. That’s why it’s important for anyone considering building up wealth for retirement to at least consider the benefits of using a Real Estate IRA. And along the way, you should learn the tools within a Real Estate IRA that help you build this wealth consistently and safely over time.

Real Estate IRA Tax Protections

Perhaps the most obvious tool for building wealth with a Real Estate IRA is the fact that it’s still an IRA. With IRAs come certain rules—but also certain protections. The most powerful protections here are usually focused on taxes. With IRAs, you can often grow wealth either tax-free or tax-deferred so that your money is as optimized as possible when providing you with the returns you seek.

For example, consider the following potential protections:

• Owning real estate within a Roth IRA allows the collection of real estate income, tax-free. This is because with a Roth IRA, you’re investing taxable money while the value of the investment is allowed to grow tax-free.
• You can sell within your Real Estate IRA and not have to worry about capital gains taxes. If you’re a frequent property flipper who often makes sales at a profit, you might want to consider the Real Estate IRA as a tool for building long-term retirement wealth.
• You can use the tax-deferred exchange within your Real Estate IRA to defer the UDIT tax, which helps you save some money.

It’s important to know these protections in order to get the most out of every real estate investment.

Utilizing the Power of Loans and Leverage in a Real Estate IRA

Perhaps the most powerful thing about investing in real estate is that you don’t have to pay it all in cash. Buying real estate with debt is not only easy in some cases, but often necessary. Using a Real Estate IRA means there are some limitations on the kinds of loans you can take out—they have to be non-recourse loans—but these non-recourse loans also come packaged with certain protections, such as the fact that the lender can only come after the value of the loan itself.

This protection, used in symmetry with your leverage, allows you to make big real estate transactions while still remaining comfortable in your financial position.

You can also use the power of partnering up in real estate—and the same is true within a Self-Directed IRA. You can buy part of a piece of real estate and hold it within your IRA, just as you would own a portion of a mutual fund.

Understanding these tools is the first step toward finding the right solution for your individual retirement plans. Whether or not those plans involve real estate may still remain to be seen—but you should at least know the tools at your disposal. For more information, view our real estate resources or simply call us at 866-7500-IRA. When it comes to retirement wealth, the most important tool is always knowledge.