If you have substantial retirement savings and are looking for avenues to invest, then the property market might be a lucrative option.
Home prices across the U.S. are just picking up and the time is apt for someone with sufficient capital to purchase a property and resell it for a higher price.
According to the Colorado Springs Business Journal, a number of retirees are digging into their investment funds to grow their fortunes. The paper reported that more than half a dozen properties were bought by at least three investors at the El Paso County Public Trustee’s foreclosure auction this year. Not surprisingly, self-directed Individual Retirement Accounts (IRA) were used to purchase these properties.
“It’s become very popular in the last three years,” Larry Dozier, an advisor at Integrity Bank and Trust, told the paper.
“I know my business has grown dramatically the last three years with self-directed IRAs.” As of June 30, IRA Financial Group, a facilitator of self directed IRA LLC structures, said that its clients have invested over 375 million in the U.S. real estate market, with many even generating above market returns.
The provisions of a self-directed IRA allow the account owner to make investment decisions on behalf of the retirement plan; it doesn’t require the consent of a qualified trustee or custodian.
As homes bought using IRA funds cannot be used for personal use, generally, these properties are rented out, generating a steady flow of income. An advantage of buying rental property with a self-directed IRA is tax-free income generation.
“As an investment readily understood by anyone who's been through the home buying and selling process, purchasing a steeply discounted property that can produce annual income of 10 percent and more is a low-risk strategy for uncertain times -- especially for retirees,” the Wall Street Journal said.
