We are always looking for better choices when it comes to investing. We want to be able to invest assets in a variety of securities that may not be as volatile as stocks or bonds but still offer the security of ownership and a predictable cash flow. Especially when we are looking to diversify our Self-Directed IRA accounts.
Among various options, real estate is considered to be one of the reliable investment vehicles to invest in. Not only that it is more stable, but it also helps in diversifying your investment portfolio. Many people know that investing in real estate provides the security of tangible equity, which is different than stocks and bonds. If done correctly, investing in real estate should be able to meet the retirement account’s goal of earning good returns in the long term, security of the retirement fund, and portfolio diversification to minimize the risk of losses.
SDIRA and Real Estate
Self-directed IRAs, like traditional IRAs, provide a great platform for investors to use their own money and plan for retirement, but they also allow investors to have more freedom in their portfolios than with traditional funds.
With SDIRA’s, you can pick your investments in a variety of ways: real estate, start-up companies, even gold. There are many options available to you that you may not have had with traditional IRAs.
If you are looking for long-term stability (based on historical performance), predictable cash flow, and diversification, real estate can be a good option to invest in. Why should you invest in real estate with your IRA? Here are three reasons:
1. Less Volatile
The stock market is notoriously volatile, but real estate is generally less so. Real estate tends to be relatively safe because it's a tangible part of the world that is always in demand—unlike stocks, which can change rapidly based on unpredictable factors.
2. Growth Potential Over Time
Due to inflation, real estate investments tend to grow over time—especially if you're investing in property that will appreciate in value over time. For example, if you purchase an apartment complex and raise the rent each year by about 3%, you'll see your investment increase every year until you sell the property.
3. Hedge Against Inflation
Inflation means that as time goes on, money won't be worth as much. The value of your cash will erode quickly unless you invest it. But if you invest in real estate, the value of your investment follows the current condition of the market. As they increase, the value of land and homes also increases, counterbalancing the effect of inflation. This results in capital appreciation and increased rental income.
Using Your Self-Directed IRA to Invest in Real Estate
If you are looking to invest in real estate using your self-directed retirement account, a good start could be through real estate crowdfunding. EquityDoor is an online marketplace for real estate investing that matches developers and investors to bring together capital for real estate deals. Investors can invest in these opportunities with as little as $1,000. This means more opportunities for investors to get involved in real estate without having to invest huge amounts of money upfront.
Developers (issuers) can create a profile with the information they want potential investors to see, including photos of their projects, financial details, and contact information. Investors can then search for the type of project that interests them, review developer profiles, and contact the developer to request more information about the project.
EquityDoor is a platform that makes it easier and cheaper for people to invest in properties. And by eliminating the typical costs, complexity, and reliance on traditional banks and real estate insiders, it makes investing is affordable and inclusive that allows almost anyone to invest including non-accredited investors.