When we talk about non-volatile investment options, we all know that real estate is the best. In fact, it is the best long term investment choice among other types of investments. Even reputable survey companies could attest that majority of Americans would choose real estate over stocks and mutual funds. Retirement investors particularly those who own self directed individual 401k are switching to this kind of investment vehicle because of the low-risk and high returns it could provide, and not to mention the stability of this tangible asset for their retirement income.
There are different kinds of real estate investment options for your individual 401k and knowing which one(s) will suit you best can maximize your retirement earning potential
Investing in real estate using retirement funds like in individual 401k plans are permitted way back then, but it is only during the effect of the recession that account holders began to take notice of this powerful investment tool. The trauma caused by the economic crisis made a lot of individuals become allergic to financial risk and real estate had proven them that high returns can also be achieved without putting too much risk in an investment. Below are some of the possible real estate investment types that you can utilize with your self-directed individual 401k:
• Purchasing of rental properties is the most popular type of real estate investment using one’s retirement account. Here, you can purchase different kinds of properties like apartment rentals, residential homes, condo units, multi-family units, and commercial spaces. All income generated by the rental property must be directed to the 401k account and all expenses must also be shouldered by the 401k account. You and your tenant could agree for triple net lease if you want to avoid paying for expenses taxes and maintenance of your purchased unit.
• Your best individual 401k plans can also acquire raw land which you can divide and develop or you can sell them for profit.
• If you are the type of investor who already know how flipping houses works, you can invest your retirement funds in this kind of business in which you are more likely to avoid capital gains tax.
Buy and sell of real estate options as well as land contracts are also possible. This type of investment lets you get rid of the risk of UBTI and it could allow you take advantage of effective leveraging.
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