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5 Ways Your Client Can Benefit from IRA Real Estate


As a real estate professional, you want to make sure you give your investor clients the best strategy options for maximizing return on investment. Investing in a rental property with a self-directed retirement plan can be an incredibly powerful way for your client to put their real estate expertise to work to grow their tax-sheltered retirement savings.

Real estate is one of the most popular investment assets for self-directed IRA and Solo 401(k) retirement plans.

IRA-owned real estate provides your clients with the opportunity to generate tax-free or tax-deferred income from rent, appreciation, fixing and flipping, and more.

Your client’s IRA can purchase any type of property, including residential and commercial real estate, raw land and agricultural property.

Even if their retirement plan doesn’t have enough cash to cover the full price of a rental property, there are several different purchasing structures for IRA real estate:

  1. Holding title to real estate: Your client’s IRA purchases 100% of the rental property, and holds title as the full owner.
  2. Tenants-in-common with a partner entity: If your client’s IRA doesn’t have the cash to cover the entire purchase of a rental property, their IRA can partner with another investor to purchase the property.
  3. Purchase using a mortgage: An IRA or Solo 401(k) can use mortgage financing to expand purchasing capabilities and bring the benefits of leverage to their IRA. Higher cash-on-cash return is possible with smart leverage.
  4. Private equity in an entity (like an LLC, LP, C-Corp., etc.) that invests in real estate: Private equity in your client’s IRA takes the form of shares of a private company. This type of structure is common with larger commercial deals involving several investors.
  5. Loan money to a borrower who uses real estate as collateral: Your client’s IRA can work like a mortgage lender. The retirement plan can lend money to other investors, and secure the note with real estate holdings and/or other assets. Your client and the borrower decide on the term, the collateral, and the rate.

Here’s what your client needs to know about investing in real estate with their retirement plan, and the benefits of tax-free or tax-deferred retirement growth with a self-directed IRA.

Real Estate is a Tangible Asset

Unlike stocks or bonds, real estate is a tangible asset that your client can see and touch.

The stock market can be unpredictable, which can put retirement investors at risk of significant downturns. Real estate values are typically less volatile than other market-based asset classes, providing an inherent stability over time.

Real estate typically produced income via both cash flow and potential appreciation. Most stock market gains are based on appreciation only.

Your client’s knowledge about the real estate market can give them confidence in their ability to make successful real estate investment choices with their retirement plan.

Putting Their Experience to Work

Chances are, your investor client is already knowledgeable and experienced in real estate investing.

They can put this knowledge of the real estate market to work to strategically grow their retirement savings through rental income, appreciation, fixing and flipping, or mortgage lending.

Real estate can also bring balance and diversity to a retirement portfolio that only holds paper assets.

Closer Control

Using a self-directed IRA to invest in real estate gives your client greater control over their retirement savings.

They decide which properties to buy and which cash strategies to use with their IRA rental property.

They can act as property manager for their IRA rental property, or contract it the position to an unrelated 3rd party.

And it’s your client’s choice whether they want to fix and flip, hold for rental income, or engage in a variety of other strategies.

Tax-Deferred or Tax-Free Growth

A big advantage of using a retirement plan funds to invest in real estate is the benefit of tax-free or tax-deferred growth.

Gains in a tax-deferred IRA or Solo 401(k) are not taxed as earned, allowing for accelerated compounding of growth.

When your client invests cash into a post-tax Roth Solo 401(k) or Roth IRA, the returns grow tax-free.

If your client uses their Solo 401(k) cash to cover the full purchase price of a property, your clients don’t have to worry about depreciation or investment expenses, since there aren’t any taxes on growth.

Plus, when the plan eventually sells the investment property, your clients don’t have to worry about capital gains or a 1031 exchange.

At Safeguard Advisors, we’re happy to provide real estate professionals with the education and resources they need to support their clients’ IRA real estate ventures. Contact us today to learn more about IRA real estate investing for your clients >

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