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How to Invest in Self-Storage with an SDIRA

Explore the benefits and considerations of investing in self-storage facilities through a Self-Directed IRA.

Posted on April 7, 2023

self storage
As the world becomes more uncertain and traditional investment options offer lower returns, many investors are turning to alternative assets like real estate investing, notes, and private equity to diversify their portfolios. One option for investing in these assets is through a Self-Directed IRA (SDIRA), which allows investors to take control of their retirement savings and make investment decisions that align with their financial goals. Investing in private assets like self-storage through a Self-Directed IRA has become increasingly popular due to their steady cash flow and low volatility. In this article, we will explore the benefits and considerations of investing in self-storage facilities through a Self-Directed IRA.

SDIRA Investment Options

Many investors are not aware that they can use the funds in their old 401k accounts to invest in non-traditional assets such as real estate, private equity, and other private assets through a SDIRA. A Self-Directed IRA offers investors greater flexibility and control over their retirement savings and investment decisions. Traditional retirement accounts, like the 401k, are typically limited to a narrow range of investment options such as stocks, bonds, and mutual funds. By contrast, an SDIRA allows investors to choose from a much broader range of assets, including real estate and other private assets. Because SDIRAs allow investors to diversify their retirement portfolios beyond traditional assets like stocks and bonds, this can help minimize risk, while potentially increasing returns. Self-Directed IRAs also allow investors to take control of their retirement savings and make investment decisions that make sense for their financial goals.

Self Storage as an Alternative Asset

There is no doubt that self-storage has become a popular investment option in recent years. Unlike other real estate investments, self-storage has low operating costs and requires minimal maintenance, making them an attractive option for investors. Self-storage facilities typically generate steady rental income, too, as people need storage space for various reasons such as downsizing, moving, or renovating their homes. As a result, self-storage facilities can provide a reliable cash flow stream, which can be particularly beneficial for retirement investors seeking a steady source of income and want to be passive. Self-storage also tends to be less affected by economic downturns than other real estate sectors like retail or office space. Even during a recession, people may still require storage space, and self-storage facilities can remain in demand.

Self-Directed IRA Funding

  1. They must find a custodian that specializes in self-directed IRAs. These custodians are typically not affiliated with traditional financial institutions, but rather specialize in self-direction.
  2. Once investors have found a custodian, they must fund their Self-Directed IRA. This can be done through contributions or by rolling over funds from an existing IRA or 401k account. Investors should work with their custodian to ensure that their Self-Directed IRA is properly funded.
  3. It is important to do their due diligence and understand the tax implications of their investment.
  4. After the Self-Directed IRA is funded investors can begin looking for their investment, like self-storage.

Investing in self-storage assets through a Self-Directed IRA offers investors a unique opportunity to diversify their portfolios and potentially increase their returns. Investors can take control of their retirement savings by making financial decisions aligning with their financial goals through alternative investments. While investing in self-storage facilities carries some risk, careful evaluation and working with a Certified IRA Specialist can help investors make informed investment decisions. To learn more about how you can take control of your retirement investments and invest in self-storage, contact a representative at Quest Trust Company today!

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