How to Responsibly Diversify Your Portfolio Through Real Estate

DiversifyMany workers today report that they are struggling to properly fund their retirement accounts. According to a report released by RCS, only 69 percent of workers or their spouses have saved enough money for retirement. Whether it’s a 401(k) or an IRA, it’s simply getting harder and harder for people to contribute to their retirement plans.

But there’s a better way to increase your retirement nest egg, and that’s through real estate investing.

How Real Estate Investing Benefits Your Portfolio

Unlike traditional investment vehicles such as stocks, real estate is not tied to the stock market or the market fluctuations in major financial centers. Since real estate is a tangible investment asset, it is more dependent on the local market. Therefore, in many areas, when the value of stocks and other traditional assets decline, the value of real estate investments may actually rise.


Real Estate and a SDIRA

When it comes to accomplishing your retirement goals, there is a clear course of action – add real estate to a self-directed IRA.

A self-directed IRA, or Investment Retirement Account, is a type of IRA that gives you, the investor, greater flexibility and autonomy to build an investment portfolio that most closely mirrors your needs and goals.

You can adjust for risk as you move through your years in the workforce, add or sell additional investment vehicles as the market dictates and seek a balance between mainstream and alternative investment assets. Best of all, you can participate in real estate investments.

Here are some perks you gain when using your self-directed IRA to invest in real estate:

  • Types of real estate investments. With a SDIRA investment into real estate, your holdings can include all kinds of different types of real estate, from co-ops to traditional single family homes, condo complexes to commercial spaces, multi-unit townhouse communities or apartment buildings and land lots.
  • Invest in both direct and indirect real estate within the same IRA. You can use your self-directed IRA funds to invest in both direct and indirect real estate assets as you prefer. With a direct real estate investment, you are the owner of the property you are investing in. This holds true whether you are buying land alone or land plus residential (homes, apartments, condos, etc.) or commercial (office space, retailers, etc.) construction; in contrast, indirect real estate is when you purchase shares of a pool of properties, mortgage paper, or real estate investments trusts (REITs).
  • You reap the growth of your real estate assets on a tax-deferred basis. Of course it goes without saying that one of the primary perks of most IRAs is the ability to reap the gains on a tax-deferred basis. This also holds true in the case of real estate investments.
  • You can transfer funds from a traditional IRA into your SDIRA to invest in real estate. If you are just starting up your self-directed IRA, you can transfer funds from another IRA into your SDIRA for the purposes of real estate investing.

As you can see, there are a lot of gains to adding real estate assets into your SDIRA. Additionally, by investing in real estate assets, you will create a more balanced and diversified investment portfolio.

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