How to Compare Real Estate Investments with Other Investment Types

Estimated reading time: 3 minutes

real estate investmentIt can be financially risky for an investor to become overly committed to a single investment class, Becoming too focused on a particular type of investment makes it difficult to maximize the performance of an investment portfolio because not all investment options are being considered.

While the single most important factor in each investment choice you make is likely to be the expected or anticipated investment performance, most investors are also likely to consider overall portfolio diversification as well as suitability of any particular investment to their individual risk profile. Comparing investments within a particular investment class (for example, one stock versus another stock) is relatively straightforward, but it can be more challenging to compare across different investment types.

Since real estate is a particularly popular investment for individuals that have a self-directed IRA with a custodian such as Quest Trust Company, let’s examine some of the factors that are relevant to comparing real estate investments to other investment types.

Liquidity. Liquidity is perhaps the biggest distinguishing factor between real estate and many other types of investments. When you hold investments in publicly traded stock, for example, it’s easy to open or close investment positions whenever the market is open. Some investors may even trade in and out of a particular stock multiple times within a given trading day.

In contrast, the timing of a transaction to buy or sell real estate is generally measured in days or weeks (and often even months). It’s therefore important to assess your liquidity needs before making any real estate investment. Investors or retirement savers with significant other assets, or whose investing timeframe is very long) are generally in a better position to bear the potential downsides of relatively illiquid real estate investments.

Leverage. Using leverage (i.e., borrowing money to make an investment) is generally much more common for real estate investments than other investment types. With the proper use of leverage an investor can significantly boost their investment returns, but only if your total cost of borrowing is low.

Furthermore, in the context of a self-directed IRA, using leverage to purchase real estate can trigger certain unrelated business taxable income (“UBTI”) liabilities for the IRA. If the UBTI rules are not fully understood, an investor who uses leverage to purchase real estate in a self-directed IRA can find themselves in a very bad financial position trying to come up with the funds to pay those taxes.

Expenses and Taxes. Real estate investments generally involve a much higher level of ongoing expenses. Whereas investments such as stocks and mutual funds may not cost you anything beyond your brokerage commissions to buy and sell, owning real estate comes with property tax liabilities, maintenance and upkeep fees, as well as possibly even management fees. These expenses are generally tax deductible against any income you receive on the property, but the value of this deduction will generally be lost within a self-directed IRA. When trying to compare real estate with other investments, be sure to fully consider all associated expenses.

Regardless of the size of your self-directed IRA, there’s a good chance that real estate can help you meet your retirement goals. Understanding how to compare real estate investments with other investment types is the first step in making the right financial decisions.

Finding a Property Manager for Your Self-Directed IRA Real Estate Portfolio

Estimated reading time: 3 minutes

property managerThe potential upside and cash flow possibilities of investment real estate make it a highly attractive option for retirement savers who have self-directed IRAs. Unfortunately, some investors may be somewhat reluctant to invest in real estate because of the higher level of attention that particular asset class demands.

Unlike equity and debt investments, investing in real estate involves a physical asset that the owner is responsible for maintaining, promoting and safeguarding. The most common solution to these issues is for real estate investors to retain the services of a property manager. Here are some options for finding the right manager for your self-directed IRA real estate portfolio.

Hire an Individual. If your real estate portfolio is relatively small, you might be able to hire someone you already know to manage the property. Sometimes a local handyman can be all the assistance you need to manage a single property. If you choose an individual manager, then be sure that person carries an appropriate type and amount of liability coverage.

Hire a Property Management Service. If you own multiple properties, or are looking for a higher level of service, then you should look to hire a professional property management service. As you might expect, the property management industry is fairly well developed. This means that for practically any area of the country you’ll be able to find a service that can manage your real estate holdings. Make sure to understand the services that are available, as well as the fees that you will be responsible for.

It’s worth noting that a professional property manager may also be able to provide you with valuable assistance if you ever find yourself in a situation where your tenant is not complying with the terms of their lease. A manager that has experience with eviction or similar proceedings can be invaluable.

Understand What You’re Looking For. Before you start trying to find a property manager for your real estate investments, you should evaluate the types of services you need. The first step is likely to be making a list of all the maintenance and upkeep obligations that you are responsible for as the property owner. For example, if your rental property is a condominium, or a single-family home that’s subject to homeowners association (HOA) rules, then you need to be confident that your property manager will be able to meet all of those obligations.

If you own a multi-family home or apartment building, there may be some local or state regulations that you also need to satisfy. If you’re not familiar with these duties, an experienced property manager can help you bridge the gap in your expertise.

Finally, there’s one last option to consider – managing your real estate investments yourself. You won’t be able to pay yourself any compensation from your self-directed IRA (whereas fees can be paid to a third party property manager), but you might find that you have fewer worries about your investments knowing exactly what’s happening with them.

Visit here to grab more information on self directed IRA and investment plans.

Funding Your New Self-Directed IRA

Estimated reading time: 3 minutes

Self-directed IRAs are still not quite as widely known as IRAs that are opened with traditional custodians. But there is some evidence to indicate that the self-directed IRA is becoming a more popular option, and an ever increasing amount of funds are flowing into the self-directed IRA structure each year.

As is the case with IRAs where a bank or investment broker serves as custodian, the first thing you’ll do after opening a new self-directed IRA is fund your account. There are several different funding options to choose from.

Direct Contributions

You can set up an IRA at almost any bank, insurance company, brokerage, or mutual fund. There are a wide variety of investment options to choose from, and your earnings are untaxed until they are paid out of the account.

Since a self-directed IRA can be set up as either a traditional IRA or a Roth IRA, your annual direct contribution limit will be $6,000 (or $7,000 if you’re 50 or older), or less if your earned income for the year is less than these amounts. However, if your self-directed IRA is set up as a Roth IRA, then you are also subject to contribution limitations depending on your modified adjusted gross income for the year.

Rollover From an Existing IRA

If you only make direct contributions to your self-directed IRA, it can take a number of years before you have a large enough account balance that you can afford to make certain kinds of investments. Because many individuals choose to open a self-directed IRA so that they can invest their retirement funds in things like real estate and private businesses, they are often anxious to have a greater account balance at their disposal. If you already have other IRAs, you can simply roll the balance from one or more of those accounts into your new self-directed IRA. Just be sure that the account types (traditional or Roth) are the same as your self-directed account, otherwise there could be some unintended negative tax consequences.

Rollover From 401(k)

Similarly, there’s a good chance you have a 401(k) account with your current employer, and perhaps even multiple 401(k) accounts still on deposit with prior employers. It’s easy to roll these account balances into your new self-directed IRA, but you need to be careful if your self-directed IRA is set up as a Roth account. Rolling over 401(k) funds into a Roth IRA generally triggers a tax on the full amount of the rollover. The long-term benefits of the Roth structure may outweigh the immediate tax, but that’s something for you to determine with your tax advisor.

As with any other retirement savings account, it’s important to save as much as you can, and invest as often as you can.

Quest Trust Company, Inc. is a leading provider of self-directed retirement account administration and consultation. We are the experts when it comes to “alternative” investments including real estate, currency notes, precious metals, oil & gas, and private placements. We administer client’s self-directed IRA’s from across the US. For any further information, please visit us at:

The Advantages of Converting One or More of Your Current Retirement Accounts into a Self-Directed IRA

Estimated reading time: 3 minutes

Many people are unhappy with the performance of their IRA. Limited in their investment opportunities, they often end up spending more in fees than they earn. Their savings is stagnant at best. It’s no way to save for retirement. If you’re tired of watching your retirement savings’ lackluster performance then you may be interested in transferring some of it into a self-directed IRA. Quest Trust Company, Inc. can provide you with the tools to take control of your own retirement investments and make sure your finances are performing the way they should.

What Is A Self-Directed IRA?

A self-directed IRA is an IRA account that you direct. This means you choose what you invest in. Your custodian does the legwork, you make the decisions. We have experience providing advice for a wide range of non-traditional investments, and can provide you with top-notch administrative support and education to help you make the right decision for your finances.

Self-directed IRAs provide you with a greater number of investment opportunities. You can invest in real estate, mortgages and loans, and even private stock. There are a few limitations, of course. You can’t invest in life insurance, collectibles, or use the money to benefit a family member.

The Three Primary Advantages of Transferring One or More of Your Current Retirement Accounts into a Self-Directed IRA

#1 The Potential To Make More Money

Why sit back and hope that your mutual funds grow enough so that you can retire comfortably? Self-directed IRAs offer you the potential to invest in potentially more lucrative markets and opportunities. For example, you can purchase an apartment complex and fund your retirement with the rental profits. You can invest in private business or offer loans or mortgages.

#2 More Control Over Your Money

Instead of paying someone to manage your account for you, with a self-directed IRA you are in charge of your investments. In fact, many custodians are merely passive custodians. They don’t promote any investment products nor do they offer investment advice. They merely manage the necessary transactions for you.

#3 Wider Investment Opportunities and Diversification

As previously mentioned, self-directed IRAs open up a whole world of investment options. This simple fact helps you create a more diverse portfolio. Diversification reduces risk to your overall portfolio. Potential investment opportunities include but are not limited to:

  • Real estate
  • Tax liens
  • Mortgages or Loans
  • Businesses
  • Private stock
  • Precious Metals
  • Oil & Gas
  • Live Stock – Cattle & Horses

Finally, converting an account to a self-directed IRA is easy. In fact, your current financial institution likely offers self-directed IRA accounts.

Some Guidelines to Consider

  • Diversification – How much of your existing investments should you use to open a self-directed IRA? Experts suggest between 10% and 20% of your traditional IRA or 401k savings can be rolled over to open your self-directed account. The choice is up to you and you may want to talk to a financial advisor.
  • Make sure you’re comfortable with your investments and any potential risk – With a self-directed IRA, you’re directing the investments. You’re in the driver’s seat. We can give you the tools and knowledge to succeed, but you are ultimately calling the shots for yourself. It’s important to be comfortable investing and to know what is and isn’t allowed.

Self-directed IRAs provide you with the potential to save more for retirement. It gives you more control over your assets and investments. And finally, it’s easy to get started. At Quest Trust Company, Inc., we will work closely with you to put the control of your financial future squarely back in your hands.