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Investing in the Houston Real Estate Market

Learn how using a Self-Directed IRA to invest in real estate can help build wealth for retirement.

Posted on January 21, 2022

RE invest

Have you ever imagined using your retirement funds to buy real estate? It’s certainly not something you can do with a common IRA at a traditional custodian that offers only stocks, bonds, and mutual funds as investments. However, when you have an IRA account at a Self-Directed IRA (SDIRA) custodian these investment options are available to you. Self-Directed IRAs are putting the power back into the hands of real estate investors across Houston. The thought of using your retirement savings to purchase real estate and other private, non-traditional assets might seem outrageous, but with the right education and the right market, you could be to a tax-free retirement.

A Self-Directed IRA is a type of retirement account that provides real estate investors the ability to hold assets they know and understand, like real estate. These accounts come in many shapes and sizes, from Traditional and Roth IRAs, to SEP and SIMPLE IRAs. No matter which self-directed account you use, the benefits remain the same:  investing with Self-Directed IRAs to earn tax advantages for retirement adds freedom and flexibility for a wider array of investment options.

As the Houston real estate market continues to heat up, more and more local investors are looking for ways to ensure successful deals. Self-Directed IRAs can offer flexibility, accessibility, and added tax benefits for investors wanting to take advantage of a hot real estate market. A Self-Directed IRA gives you the option to invest in all types of real estate, including single-family homes, multifamily and commercial properties, mobile homes, land, oil and gas, small companies, real estate notes, and so much more.

Understanding the Houston Real Estate Market

If you’ve been keeping up with the activity in the Houston market, it’s no shock to hear that it’s the hottest it’s been in a long time. The demand for real estate in Houston is extremely high, and it’s making it difficult for investors to find properties. According to one investor, it’s becoming difficult to simply even go see an available property.

“You have to make an offer first,” says Derreck Long, an expert Self-Directed IRA investor in the Houston area.  “Once the offer is accepted, then you can go look at the property. Properties are just going so quickly, and it has to be a good offer since it’s so competitive. There might be a property listed at $300,000, but if I offer $300,000, it's not going to be accepted, because they know other people are going to offer more. They already are. Everyone's buying anything and everything.” 

The Secret to Investing with a SDIRA in Houston

In a market so competitive, understanding how to use a Self-Directed IRA can be a great tool and could help you get a deal you typically wouldn’t be able to attain. Self-Directed IRAs are designed to hold funds for retirement, and they generally hold a sizable lump sum of money readily available.  In real estate, cash is king! Having cash easily accessible in a Self-Directed IRA could help you lock in a deal faster than a regular investor who may not have those funds laying around.  For most investors, there is usually more cash sitting in their IRA than a normal checking account. With the market so hot, some sellers in the area won’t even entertain anything other than a cash offer.Investing this way also means you don't have an investment that is debt-leveraged. Based on expected trends, if you have the ability to pick up a property right now and sit on it just for a year or two, chances are that it's going to increase in value.

How to Invest with a SDIRA

The process of buying a real estate asset in your Self-Directed IRA is quite simple, but it’s important you and your custodian fully understand the process so that you can move quickly without the risk of losing a good deal. The first step is locating an investment of your choosing. Once you have selected the property you would like to purchase within your IRA and have completed the due diligence, you can complete your investment documents and work with your custodian to fund your deal.

This is where it becomes extremely important to work with a local custodian that is familiar and knowledgeable with the Houston real estate investing market. Processing times are a crucial consideration when selecting a Self-Directed IRA custodian. In a hot market where properties are getting snatched up quickly, finding a custodian that can work fast and efficiently will increase your chances of having a successful deal.

Self-direction can be a great option for those looking to have greater control of their financial future and take advantage of a hot market. If you are interested in learning more about Self-Directed IRAs or would like to get more information about self-directing in the Houston market, Quest Trust Company is the leader in high-quality investing education. For everything you need to start investing for retirement, Quest can help you get started.

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