Profit From the Down Real Estate Market Using a Self-Directed IRA

Estimated reading time: 3 minutes(Last Updated On: November 30, 2018)

It can be difficult to keep your retirement nest egg growing when the stock market is moving sideways or even downward. You can try to pick individual stocks that you believe will beat the overall market, but you’ll be up against professional and institutional investors who have much more trading support (and better information) at their disposal. In the long term, most individual investors simply can’t compete against those market participants.

Or you can invest your retirement funds in passively managed index funds, with a view towards matching the broad market performance, and avoid having to pay high management or transaction fees. But take a look at how the broad markets have performed over the last decade or so – they’re basically unchanged.

So making public equity investments with retirement funds is an unappealing prospect for many individuals. Fortunately, there’s a way to broaden your investment scope using your retirement funds. You can use a self-directed IRA to make investments in real estate, and build the value of your retirement portfolio even in down markets.

It’s certainly true that many local real estate markets have been hit hard over the past half-dozen years with falling real estate values, as well as an inventory of homes headed towards foreclosure that may continue to keep prices depressed for the foreseeable future. But that’s not the case in every real estate market; many have been recovering over the past few years, and some have even experienced strong gains.

Purchasing real estate with funds from a self-directed IRA can set you up for healthy gains when you can hold the property long enough for prices to recover, or increase even further.

In addition, for as long as you hold real estate within your self-directed IRA you have the opportunity to rent that property and generate immediate returns for your account. In some cases, this cash flow can end up being an even greater contributor of growth to your IRA than any eventual gains in the value of the property itself.

It’s worth noting that in some real estate markets, the wave of foreclosures and short sales has actually driven up the rental market in those same areas. Individuals and families still need a place to live in, and if they can no longer afford to buy a large home, many will look to rent a smaller home in the same city or neighborhood.

When you’re coming up with a plan for investing in real estate within your self-directed IRA, don’t forget that you’ll need enough cash in your account (either through your prior contributions, or through the cash flow that’s generated by the property itself) so that you can pay all applicable property taxes, insurance premiums, HOA fees and maintenance and management fees.

With a self-directed IRA you have more opportunities for investment than you would if you held your IRA with a traditional custodian, including being able to profit from the down real estate market.

If you want to realize the higher potential returns and tax advantages by investing in real estate with your self-directed IRA, Quest Trust Company, Inc is your professional support team. Our industry leading knowledge is based on hands on experience in real estate and other non-traditional investments. For any further information, please visit us at: