Buying a home for the first time? Then you are, on average, about 38 years old—an all-time high. That’s according to a recent report from the National Association of Realtors, highlighting just how high the cost of housing has gotten in the U.S. And while there are no band-aid solutions for a national economic challenge, there are some things that individual investors can do to maximize the returns they get from real estate investments. Case in point: the Self-Directed IRA. In this article, we’ll dive into how the benefits of retirement investing can help investors offset the higher costs of real estate in the current economy.

Let’s start with the basics. A Self-Directed IRA allows investors to step outside the traditional stocks and bonds model, making it possible to invest in alternative assets such as real estate, precious metals, and private businesses. In the face of high real estate costs, the tax advantages offered by a Self-Directed IRA can make a huge difference in building wealth over time.

Tax Advantages of Real Estate Investing with a Self-Directed IRA

One of the main reasons investors turn to a Self-Directed IRA for real estate? Tax benefits. With a traditional or Roth Self-Directed IRA, your real estate investments can grow tax-deferred or even tax-free, depending on the type of account. By keeping your real estate assets within a retirement account, you can squeeze every ounce of juice possible. By reducing or eliminating capital gains taxes, a Self-Directed IRA can boost your overall return on real estate investments.

Direct Control Over Real Estate Assets

Self-directed IRAs are just that—self-directed. This control means you can select properties you believe will offer strong returns. Investors can buy residential, commercial, or even raw land properties within their Self-Directed IRA, which means you can diversify your portfolio as you see fit.

The key to making all of this work? Performing due diligence. While a Self-Directed IRA offers more control, there will be the responsibility of managing and researching investments. However, this hands-on approach can be rewarding! Think about it as a way to exercise more of your investing prowess, particularly if you’re looking to flex your real estate investing muscles through a Self-Directed IRA.

Generating Rental Income and Building Equity

Another advantage of investing in real estate with a Self-Directed IRA? Your ability to generate rental income. Properties held in a Self-Directed IRA can produce steady income that goes directly back into the account, growing the overall retirement fund in a mostly passive way. This passive income, when paired with the appreciation of property values over time, can help investors build equity within the Self-Directed IRA. And it’s especially helpful if the economy is uncertain—you can always rely on rental income to help see your retirement account through. Although the income can’t be used for personal benefit before retirement, reinvesting it back into the IRA can strengthen your retirement fund.

The Potential of a Self-Directed IRA in a High-Cost Market

With today’s record-high real estate prices, a Self-Directed IRA presents a practical option for investors looking to offset high costs and diversify their portfolios. It not only enables tax-advantaged growth but also offers greater control over investment decisions. By selecting properties, generating rental income, and allowing assets to appreciate over time, a Self-Directed IRA can be an effective tool for those willing to handle a few extra regulations and responsibilities.

And, of course, a Self-Directed IRA administration firm in your corner will help make things easier.  Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.