One of the great things about the Self-Directed IRA concept is its flexibility. Take real estate investing: As an asset class, real estate is a proven wealth builder over the long-term, and one of the best generators of income out there, especially on an ROI basis, thanks to the willingness of bankers and other financiers to lend on property.
Of course, when it comes to real estate, investors have a whole continuum of options open to them – all of which are doable within a Self-Directed IRA. You can select a purely financial, minimum-hassle approach by buying shares in a real estate investment trust (REIT), for example. In this case, you get the benefit of a stream of income from the REIT without any of the worries of landlording. You are totally insulated from the day-to-day challenges of worrying about anything from tenant selection to repair and maintenance to improvements and tax planning, except at your personal level.
On the other end of the continuum is direct ownership (via your IRA) of a rental or fix-and-flip property, and direct management, where you are directly responsible for every clogged toilet and leaky faucet and it’s your personal phone that rings at 3AM when the pipes burst in the winter.
What if there were a happy medium between the two extremes of real estate ownership? Well, there is: Introducing the “turnkey” concept of real estate ownership. That’s where you get the benefits of a concentrated position in the best, most promising or best-yielding individual properties you can find (dilution is your enemy, here, assuming you’re otherwise sufficiently diversified in other asset classes elsewhere in your overall portfolio). The turnkey approach also insulates you from most or all of the day-to-day responsibilities of landlording.
In or out of a Self-Directed IRA, the turnkey approach to investing allows you the benefit of a hard, concrete asset that – unlike paper securities – can never fall to zero. Turnkey investment also allows you to benefit from positive cash flow from rent payments, the potential for capital appreciation (tax deferred, whether in or out of a Self-Directed IRA), and a personalized portfolio of properties that best fits your individual needs and capital available.
Furthermore, direct ownership of real estate typically has a very low correlation to the overall stock market (though that’s less true now than it used to be.)
The turnkey approach also enables you to invest in the best markets, even if you don’t live anywhere near them. So if you’re living in a very pricy market – like San Jose, San Francisco, New York or Honolulu, and you can’t afford to invest locally, it’s a simple matter to buy into other more moderately priced markets with more upside potential in cities across the country, and still have the benefit of some experienced local ‘eyes on the ground.’
Meanwhile, according to the U.S. Census Bureau, single-family rentals have racked up a track record of delivering average annual returns of 7.8 percent.
Turnkey real estate investment companies generally have their own people on the ground in the markets they serve, who can provide valuable insight and expertise for their clients. Each company offers a little different product mix, however. Some provide transaction support and will handle everything for you, soup to nuts. Others prefer to let the client handle some or all of the purchase transaction, or will stay clear of any rehabbing you do, leaving it primarily up to you, while still providing comprehensive property management services once the rehab is complete and it’s time to bring tenants in.
American IRA, LLC is one of the most experienced providers of third-party administrative services for real estate IRAs and other Self-Directed IRAs. If you are using your IRA to purchase turnkey real estate properties, it’s important to structure the transaction and your rental payments properly, in order to preserve the tax-advantaged nature of your Self-Directed IRA or other retirement account.
For more information, or to schedule a no-obligation consultation, call American IRA, LLC today at 866-877-IRA(472). Or visit us online at www.americanira.com.
We look forward to working with you.