Institutional Services
Facts
Only one hundred years ago, the life expectancy of the average American was just 47 years. In the twenty-first century, the average life expectancy has climbed to 77 years. The fact is, people are living longer—and while that means more time to enjoy your retirement years, it also means that you’ll need more money if you want to live those years to the fullest. You’ll need to be assured of having around 75% of your working income to achieve the same lifestyle once you retire.
Couple these facts with two more—many people begin saving for retirement too late, and many may find that they need to make up for lost time due to recent downturns in the stock market. Unfortunately, that amounts to lost time that could have been spent creating wealth that will assure you of the retirement income you need to maintain your lifestyle.
How can you buy back your time and play the catch-up game to ensure you’ll have sufficient income when you retire?
How can you protect yourself against the ups and downs of the stock market and turn your nest egg into an investment account that will provide for your retirement?
Traditional May Not Cut It!
While many traditional financial advisers may tell you that investing IRA funds in real estate is not possible, the fact is that you can legally invest in real estate, and profit from it too. The problem isn’t that you can’t invest in real estate using IRA holdings—it’s simply that traditional investment advisors don’t want you to. They’d prefer you to invest in their own products, and that’s why many banks will only allow you to invest in Certificates of Deposit, and why brokers will only allow you to invest in stocks and bonds.
Truth About Real Estate Investing
Even if you already know that you can invest your IRA funds in real estate, you may believe that real estate investment is too risky, and again, that is very much a fallacy. Out of the approximately three trillion dollars invested in IRAs in America, only 2% of that money is invested in real estate, and these figures are a reflection not on the risk involved in real estate investment, but on the fact that traditional investment advisors and institutions just don’t tell you what all your investment options are.
The truth is that it’s much riskier to invest all your money in the stock market, which is notoriously volatile, and while you’ll get an average 10% per annum return in the long run, the short-term risks are very high. Large investment companies can afford that risk, but most individuals can’t. In fact, real estate prices are much less likely to experience dramatic down-turns, and real estate investments typically carry less risk than stock market investments.
You may feel that investing in real estate is simply too much trouble—and sometimes that’s true. Owning real estate can eat up a substantial amount of time, particularly if you own a rental property. Finding tenants and carrying out maintenance on the property, or even remodeling a property to make it livable—these are just some of the reasons why many people don’t want to invest in property.
Specializing in new construction and pre-construction projects
Pre-construction projects are particularly lucrative real estate investment division because of what’s known as “preconstruction pricing”. This means that you purchase a stake in the project for around 15-20% less than the market value of the finished property—so you already have equity n the property as soon as construction is complete. Additionally, you’ve got extra equity due to the appreciation of the real estate itself over the duration of the construction phase.
New construction projects are loaded with potential equity—so much so that simply buying undeveloped land is a potentially valuable investment, and making any kind of improvement on that land increases its value substantially. Better yet, investing in this kind of real estate means that there are no tenants to deal with, no leaky pipes to fix, and none of the problems that you might commonly associate with owning property. You end up with the advantages of investing in a growing market, with none of the associated disadvantages and responsibilities.
By adding these types of real estate investments to your portfolio, you can substantially increase the income-generating potential of your self-directed IRA. The key here is to diversify your holdings.
We’re not suggesting that you put all your investment money in new construction or any other type of investment, just like we’d never suggest that putting everything in the stock market is a good idea. One of the most important things you should know about investing is that creating a portfolio of several different investment types is the best way to protect yourself against a slump in any market.
Grow Tax-Deferred Retirement Income
Another advantage you may not have considered is that you can grow tax-deferred retirement income with a self-directed IRA. Any money that is earned by your self-directed IRA investments is not taxed until it is withdrawn—so the money that you invest in that account is always working for you, and the money that account earns stays in the account and can be invested too.
For all these reasons and more, a self-directed IRA with a diverse selection of holdings that includes real estate investments is truly the best way of creating retirement income that will not only ensure you’ll spend your retirement years comfortably, but maybe even allow your children and grandchildren to benefit from your financial decisions.