A recent uptrend in the amount renters pay each month could prompt new lucrative possibilities for real estate investors. According to an article by Think Realty, the cost of renting increased in 79% of major U.S. metropolitan areas over the past year. Rent boosts are attributed to thriving local economies and population influxes, meaning new people and new money continue to flow into these markets and spark a need for additional housing. Investors can help meet this rising demand and earn tax-advantaged rental income with their self-directed retirement plans.
Experienced and prospective investors alike can benefit from remembering the following key principles when considering real estate for their IRAs, 401(k)s, or health savings accounts (HSAs):
You control the process
As the name suggests, self-directed investing affords a higher degree of personal interaction than other strategies that rely on brokers or fund managers. As such, the step-by-step process of incorporating rental property in an IRA will largely mirror that of a non-IRA investment. Even though your account will “own” the property in the eyes of the IRS, you will pull the strings. You may qualify your potential renters, determine appropriate rates and lease durations, and even collect payments as long as they’re subsequently forwarded to New Direction Trust Company for deposit into your account. Your retirement plan is the investment vehicle, but you’re behind the wheel.
You’re not limited to local properties
You may think you’re out of luck if yours isn’t among the 79% of communities that have experienced rent increases, but you needn’t maintain a ground-based presence to invest in a growing market. You can delegate responsibilities from afar by researching and hiring a new property manager or by on-boarding a member of your real estate team that you already trust. You can even utilize a turnkey service that handles almost every step of the investment process on behalf of your IRA.
You may also consider ways of tapping the booming rental markets without acquiring and managing an actual property. Online crowdfunding platforms allow investors to obtain equity positions in real estate projects or portions of loans that finance those projects. Property developers may look to capitalize on rising rental rates but may need investors to properly expand. Just as you could invest the money in your pocket, you could also invest your retirement dollars in a real estate opportunity anywhere in the world from the comfort of your home computer.
For more information about investing in real estate with a self-directed IRA or to open a self-directed IRA account, feel free to contact New Direction Trust Company toll free at 877-742-1270 or e-mail our team at firstname.lastname@example.org.