It’s not always what you do that counts. Sometimes, it’s all about what you don’t do. Strong retirement investors know that fact, as they watch their wealth grow over time thanks to consistent work and a reasonable portfolio. But if you want to truly understand another tool for building wealth—the Real Estate IRA—the best way to go about it might not be learning what to do. It might be learning what not to do. With that in mind, let’s look at simple mistakes you can avoid when using a Real Estate IRA to build wealth.
Mistake #1: Using a Real Estate IRA for Personal Use
Not only is this a mistake, but it’s against the rules.
A Real Estate IRA is essentially a different entity that will own the real estate investment. You’ll own the entity. Because of this separation—and the tax advantages of using an IRA this way—you’ll be prohibited from personal use of the real estate. That means you can’t live in it and shouldn’t even fix its problems yourself. Instead, you’ll use a real estate property manager to handle all of that for you. So if you’re thinking about real estate as an investment for “fun” and not wealth-building, you shouldn’t do it through an IRA.
If you’re doing it through an IRA, it’s all about making smart investments and collecting the passive income that comes when rent payments go through.
Mistake #2: Not Doing Your Homework
When you learn about the possibilities of real estate investing, it’s tempting to jump right in to the deep side of the pool and swimming away. But is that always the best way to go about it? It’s probably better to do your homework and understand what you’re getting into before you try out a Real Estate IRA. That applies for IRAs as well as real estate investing in general.
This doesn’t mean that you should suffer from paralysis by analysis, either. You don’t get any gains from the investments you don’t make. But as you consider your future, you’ll want to make sure you did your due diligence along the way. It will give you a better chance at yielding a return on that investment.
Mistake #3: Over-Relying on Real Estate
If you’re a real estate whiz who can build wealth through real estate and real estate alone, then you’re probably smart at handling downturns in the market. But for retirement investors, real estate is an entirely different prospect. It’s one way to expand one’s assets outside of the stock market in order to build a more diversified portfolio.
It’s not wise to put all of your retirement eggs into one basket. And though real estate can feel like a shortcut to building retirement wealth, you should still think about other assets you can keep and invest in throughout. There are lots of different assets that accomplish a lot of different things. Don’t over-rely on real estate if you don’t have to.
Mistake #4: Not Thinking Long-Term
Real estate is a long-term investment. Unless you’re a property flipper. But property flippers aren’t thinking about Real Estate IRAs—they’re thinking about the quick buck.
There’s nothing wrong with that. But that’s not what you’re after. You’re here to build retirement wealth, which means thinking long-term. That’s why the protections of an IRA can add up to a lot more net gains in the long run. Keep browsing our site here at www.AmericanIRA.com to learn more, or give us a call at 866-7500-IRA. We look forward to hearing from you.