One of the best ways to give your Self-Directed IRA an opportunity for maximum growth is to use it to purchase rental property. A Self-Directed IRA gives you so many more choices than a Traditional IRA, and one of those is the capability to invest in alternative investments such as real estate.
The term “real estate” captures a vast realm of opportunities—commercial properties, different types of land, etc. But it is the apartment buildings, condos, single-family houses, and multi-unit homes that are typically the most popular for Self-Directed IRAs. And these require a high occupancy rate to make the most of the investment.
There are lots of renters out there
Many people have decided to live in rent for various reasons. Some areas are experiencing housing shortages, which is resulting in escalating prices. Many older couples are selling the four- and five-bedroom homes that they no longer need or want to maintain and are choosing to live in rent. And some of the younger generation–millennials, in particular–are unsure of where they will be working next and are refusing to commit to buying a house.
The fact is that there are plenty of potential renters, but are you doing everything possible to entice them toward your property?
Renters love their pets as much as anyone
You probably know more than a few of them. They are the pet-lovers who consider their dogs or cats (or whatever!) to be part of the family. They are not moving anywhere without that family member, and you are alienating them with a “No Pets Allowed” clause in your listing. If you do not believe it is happening, take a look at the results of a study from Harris Research:
- 87% percent of recent home buyers considered the needs of their pets before making a final decision.
- 90% buyers under age 35 reported owning pets.
- 63% of buyers age 55 or older are also pet owners.
While the study targeted home buyers and their pets, it is unlikely that these results would have been different for renters. The study provides overwhelming evidence that people are looking for pet-friendly properties, and those investors with rental property could increase the pool of potential renters significantly by catering to pets. You could be setting yourself apart from the competition and giving your retirement savings a boost by changing your policy by putting out a welcome mat for renters and their furry family members.
What about the mess and damage?
There is no denying that dogs and cats are smelly, and they can create a mess. They may even do considerable damage to kitchen cabinets, carpeting, curtains, and molding. Add to that the lingering effects that can turn off future renters and you could end up with plenty of persuasive reasons to disallow pets.
But remember that your Self-Directed IRA for Real Estate is set up to deal with issues like this. Your IRA owns the property, and all income from the property goes back into the account. The same goes for expenses; any repairs or special cleaning are paid by the Self-Directed IRA and do not come out of your pocket.
A higher occupancy rate is always your goal with a rental. And welcoming pets should help you achieve that, even with the extra expense that might come with them. It is worth giving it serious consideration if attracting more tenants helps you build up your retirement savings.