Investing in a Private REIT with a Self Directed IRA
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:
Publicly Listed REITs
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
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.
Private REITs
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!
Benefits of Investing in Private REITs
Investing in private REITs can offer several benefits to investors, including:
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.
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.
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).
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.
Hedging Against Inflation
By investing in alternative assets like private REITs, you can potentially offset certain negative effects of inflation.
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.
1. Open an Account
Open a Self-Directed IRA with a regulated Self-Directed IRA custodian.
2. Fund Your Account
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.
3. Invest in a Private REIT of Your Choosing
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:
- Rental Units
- Multi-Family Properties
- Vacation Homes
- Fix & Flips
- Office Buildings
- Warehouses
- Retail Locations
- And Many More!
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!
