It’s no secret that rental properties are good business. Rental properties in retirement plans, however, aren’t as widely considered, but the word is getting out. Self-directed retirement plans that hold multiple alternative assets have seen steady increases in popularity over the last several years. Real estate, private equity, and other such investment vehicles are allowing investors to diversify their revenue streams. When combined with the tax advantages offered by IRAs or 401(k)s, alternative assets provide new opportunities for long-term financial success while utilizing business practices that investors are already familiar with.
Passive investment strategies that involve common securities like stocks or mutual funds allow investors to experience growth with minimal effort, but earning potential can be limited. Alternative investments can generate greater returns, but they also involve a new set of IRS guidelines and task the investor with maintaining open contact with a self-directed retirement administrator. Titling requirements, understanding disqualified persons, and other such considerations could make real estate investing with a retirement plan seem impractical.
So how can investors find a marriage between the lucrative opportunities of the real estate market and the tax advantages of retirement plans, all while alleviating the added stress of completing extra paperwork and learning new laws? The same thing that makes everything easier in the 21st century: Safe and prompt transactions online.
Technological platforms are making it easier than ever to manage retirement plans, submit or accept payments, and initiate new investments. These management endeavors allow self-directed investors to efficiently exercise control over their alternative assets and remain within IRS compliance throughout the process.
Just as technology in the self-directed retirement field has advanced, online services have developed to reduce the complexity of once-stressful business relationships. Even as the internet provided a solid avenue for advertising, onboarding a new tenant often meant meeting in person to complete a credit application, submit supporting documentation, or perform other tedious business tasks. Technology has evolved to allow the execution of these steps almost entirely online, which shortens the timeframe between first contact and signed paperwork.
Investors have greater access to their self-directed retirement accounts, and the inefficiencies of the past are being eliminated without compromising the security of personal information and without drawing any undue IRS attention. Therefore, if you’re already in the business of owning and managing rental properties, you’re already equipped to incorporate these same assets in a retirement account. The tax advantages offered by these accounts present new financial opportunities, so you can elect to retain the savings.
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