August 6, 2021

Investing in a Private REIT with a Self Directed IRA

Written By: Daniel Gleich

Key Points 

  • Real Estate Investment Trusts or REITS, are companies that own, operate, or finance income-producing real estate.
  • With a Self-Directed IRA (SDIRA), you can invest in private REITs to save for retirement.
  • There are many benefits of investing in private REITs, such as retirement portfolio diversification opportunities and the potential for higher returns.

If you’re looking for a way to diversify your retirement portfolio, Real Estate Investment Trusts or REITs are worth exploring. By opening a Self-Directed IRA (SDIRA), you can invest in private REITs and enhance your retirement savings strategy. Let’s take a closer look at investing in private REITs with a Self-Directed IRA.

What is a REIT? 

A Real Estate Investment Trust or REIT is a company that owns, operates, or finances residential or commercial income-producing real estate. There are three main types of REITs, including:

Self-Directed IRA investor on computer with increasing trend graph and small houses next to him, to show that his investment is growing in a tax-advantaged retirement account.

Regulated by the U.S. Securities and Exchange Commission (SEC), publicly listed REITs are listed on the stock exchange. They’re open to all investors but their share price generally depends on the market.

Public, non-listed REITs are similar to publicly listed REITs in that they must conform to SEC regulations. The difference, however, is their shares are not listed on the stock exchange and they’re usually crowdfunded.

Real Estate Investment in a Self-Directed IRA

Private REITs aren’t regulated by the SEC or listed by them. These REITs are typically reserved for accredited investors with significant income and a net worth of $1 million. Since private REITs may be more flexible in the types of properties they purchase and how they’re managed, they have the potential to generate substantial returns.

What is a Self-Directed IRA?

A Self-Directed IRA is similar to a standard IRA. However, it allows you to invest beyond stocks, bonds, and mutual funds and save for retirement with alternative assets, like private REITs. Once you find a reputable Real Estate IRA custodian and a private REIT you're interested in, such as Madison Trust, you can open and fund your account. You’ll then identify an asset, fill out an investment authorization form instructing your custodian to send funds directly to your investments. It’s a breeze!

Block letters on a table that spell out “SDIRA” next to a calculator and money.

Benefits of Investing in Private REITs

Investing in private REITs can offer several benefits to investors, including:

Benefits of Investing in a Private REIT with a Self-Directed IRA Infographic: Investing in private REITs can offer several benefits to investors, including (1) Portfolio Diversification Opportunities - By investing in Private REITs, you can diversify your retirement portfolio. Take your retirement savings to new heights by investing in assets that are generally uncorrelated to the stock market's performance. (2) Potential for Higher Return on Investment - Investing in private REITs have the potential to offer higher returns than Wall Street products, like stocks, bonds, and mutual funds. (3) Tax Advantages - If you invest in private REITs with a Self-Directed IRA, you can enjoy tax-deferred (Self-Directed Traditional IRA) or tax-free growth (Self-Directed Roth IRA). (4) Passive Income - Investing in private REITs with a Self-Directed IRA can give you the chance to diversify your retirement portfolio with assets that typically generate passive income. (5) Hedging Against Inflation - By investing in alternative assets like private REITs, you can potentially offset certain negative effects of inflation. (6) Property Appreciation - Historically speaking, private REITs have typically appreciated over time and have the potential to maximize your retirement savings.

How To Invest in Private REITs with a Self-Directed IRA

It’s simple to set up a Self-Directed IRA and invest in private REITs with Madison Trust IRA. Here’s an overview of our three-step process.

Investor Standing Next To Phone and Plant Icon to show opening a Self-Directed IRA

Open a Self-Directed IRA with a regulated Self-Directed IRA custodian.

Icon of a Self-Directed IRA investor holding a credit card to signify opening and funding a Self-Directed IRA.

Fund your Self-Directed IRA by transferring or rolling over all - or a portion of - your funds from an existing retirement account, such as an IRA or 401(k), or by making an initial contribution.

Investor Standing Holding Check Icon to show placing an investment with a Self-Directed IRA.

Instruct your IRA custodian to send your IRA funds by writing a check or sending a wire to your investment.

What Else Can I Invest In?

In addition to private REITs, a Self-Directed IRA can allow you to  invest in the following types of real estate assets:

Consider Saving for Retirement with Private REITs

If you’re interested in investing for retirement with private REITs and a Self-Directed IRA, don’t hesitate to schedule a discovery call with Madison Trust. We look forward to hearing from you!

Happy Self-Directed IRA investors smiling and shaking hands with their Self-Directed IRA custodian.

Disclaimer: All of the information contained on our website is a general discussion for informational purposes only. Madison Trust Company does not provide legal, tax or investment advice. Nothing of the foregoing, or of any other written, electronic, or oral statement or communication by Madison Trust Company or its representatives, is intended to be, or may be relayed as, legal, tax, investment advice, statements, opinions, or predictions. Prior to making any investment decisions, please consult with the appropriate legal, tax, and investment professionals for advice.

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