Investing wisely for your future is important- especially in uncertain economies, and exploring diverse investment opportunities is crucial to achieving financial success. One often overlooked avenue is using a Self-Directed Individual Retirement Account (SDIRA) to invest in real estate syndications.
What is a Self-Directed IRA?
A Self Directed IRA is an IRA account that allows an investor access to asset classes outside of stocks, bonds and mutual funds.
According to the IRS an individual cannot be their own custodian of an IRA account. That is why traditional IRAs and Roth IRAs are offered through companies like Vanguard, Morgan Stanley and Fidelity. Through these companies you can invest in their offerings such as stock, bonds and mutual funds. Traditionally anything outside of these asset types are not available to invest in. The reason for this is due to the fact that with REI, you cannot charge the monthly fees that institutions usually implement. The large corporations generally have less control over SDIRAs and they don’t like that!
To gain access to assets outside of these classes you should consider opening a Self-Directed IRA (SDIRA). A SDIRA is a retirement account that is still overseen by a custodian but you now have the control to invest in a broader range of asset classes including real estate, precious metals or private equity. Many custodians still allow investments into traditional asset classes. The custodial company that holds the SDIRA is meeting all of the rules set forth by the IRS for retirement accounts but puts you in the driver’s seat on where the money will go. After a custodian is selected, opening an account is typically just a non-taxable rollover from other retirement accounts.
There are many benefits to investing inside a retirement account:
- Tax Advantages: Investing inside retirement accounts (IRAs, Roth IRAs and SDIRAs) offer several tax advantages. Depending on how the retirement accounts are set up (pre or post tax) your capital gains from investments could be growing tax free or are taxed at a lower tax bracket than where you will most likely be in the future.
- Diversity: SDIRAs make a great addition to a standard IRA or Roth IRA. If you have a strong investment base in stocks, bonds and mutual funds, a SDIRA is a great way to take some of those retirement funds and put them to work in real estate, private equity or a long list of other assets. This can greatly diversify your retirement portfolio even more and act as a strong hedge against market volatility.
- Affordable: SDIRA custodians typically have very low fees to act as a custodian. Typically you pay a small account setup fee, a small annual fee to cover administrative fees and a transaction fee. If you are only making a handful of transactions these fees are insignificant over the life of the account.
- Control: You decide where your money is invested, not a large brokerage house offering what they see fit to offer.
If you are already investing for your retirement through IRAs, have an old 401-K or IRA not doing anything worthwhile, consider broadening your investment portfolio by utilizing a SDIRA. It is essential to conduct your due diligence on a custodian and any investments made inside of these accounts. Consult with your financial professionals before any investments or movement of money is initiated. Climb Capital can help you navigate this opportunity. Start your journey today, Sign up for our RV Park Investment Webinar And venture into the world of RV PARK INVESTING – Make the Great Outdoors Your Next Great Investment!