Investing in Multi-Family Real Estate
There are plenty of ways to invest in real estate, but one of the most popular among holders of Self-Directed IRAs is multi-family real estate. Using your SDIRA to acquire real estate assets is a great way to build retirement wealth, potentially see lucrative returns, and build your portfolio. For many people, the real estate market seems too volatile to trust. While it is true that you should come prepared with experience and knowledge when investing in real estate, multifamily properties are almost always promising because, after all, people always need a place to live.
Today, we will be discussing why multi-family real estate investments are so popular in IRAs, and why you may want to consider the opportunity as your next investment. If you already have a Self-Directed IRA and want to learn more about how you can leverage that with a non-recourse loan to invest in real estate, then speak with the lenders at First Western Federal Savings Bank today!
Why Multi-Family Real Estate is on the Rise
Millennials, the second-largest generation, are becoming a force that is changing the real estate dynamic. A majority of Millennials are in their late 20s and early 30s, and many of them are unmarried and delaying home-ownership, looking instead for long-term apartment rentals. Millennials are the primary demographic turning to multi-family rentals, specifically in large cities. There are a few factors contributing to this, including:
- Residency in a larger city means being closer to work and having access to public transportation
- Access to amenities, such as on-site parking, fitness centers, etc.
- Social connectivity
But, it doesn’t start and end with Millennials, as Baby Boomers, the largest and oldest generation, are also downsizing. That’s right, the generation that popularized getting married young and buying a house are making the transition to apartment living. Baby Boomers who can care for themselves prefer to stay in their own home rather than in a retirement community and are likely embracing the next stage in their lives, which could mean leaving their empty nests in the suburbs and embracing city life and apartment living.
Why Invest in Multi-Family Real Estate With Your SDIRA
Real estate is a tangible and secure asset, and as financier Russel Sage once said “Real Estate is an imperishable asset, ever-increasing assets. It is the basis of all security and about the only indestructible security.”
Real estate often grows faster than a lot of other traditional investments, and investing in multi-family properties with your Self-Directed IRA gives you a more proactive approach and far greater potential in building retirement wealth. Let’s now discuss the benefits of such an investment!
Grow Your Portfolio In Less Time
Multi-family real estate is suitable for property investors who wish to build a relatively large portfolio of rental units. Acquiring a 20-unit apartment building is a lot easier and much more time-efficient than purchasing 20 different homes. The property investor doesn’t need to work back and forth with 20 different sellers, conduct 20 different home inspections, and acquire 20 separate loans for each property. Multi-family real estate investments allow investors to avoid all of that hassle and hair-pulling.
You Earn Tax-Sheltered Income for Retirement
Self-Directed IRAs allow account owners to invest in alternative assets, and they get to choose which investments to make. When you invest in real estate with your IRA, all of the income you make, including capital gains from a property’s sale, is directed straight into your IRA. If you invest with a traditional IRA, that income is tax-deferred and you’ll pay it on distributions when you retire. Roth IRAs earn tax-free income.
Greater Cash Flow
More rentals mean more cash coming in on a monthly basis. All income is deposited directly into your IRA on a tax-sheltered basis, which provides two benefits: more cash to reinvest and funds to cover any maintenance issues. Additionally, multi-family investments provide multiple streams of income, not just one as you would have with a single-family rental. If you continually upgrade your property, say with a pool, individual storage rooms, garage, or safe laundromat area, you will likely attract more long-term tenants, and may even get to charge more for rent, which means more money for you.
Fewer Vacancies, or None At All
When a tenant moves out, you won’t have to worry about your income coming to a screeching halt. This largely depends on the location and desirability of your multi-family property, but empty units tend to fill up quickly, especially if you have a property in a desirable area. If you have multiple renters across multiple units, you still have income rolling in, which is always a good thing.
Bottom Line
When you invest in multi-family real estate with your Self-Directed IRA, you can also benefit from valuable tax advantages, including:
- You can eliminate capital gains taxes
- You can eliminate income taxes
- You can eliminate dividend taxes
- There will never be any taxes to pay on the profits from the investments
- You don’t have to worry about withdrawal tax penalties
Much like stocks, real estate allows for one to be successful through several different strategies. Investors who take advantage of opportunities coming in the form of multi-family property may experience access to easier and better financing opportunities, the ability to quickly grow your portfolio, and the luxury of hiring a property manager.
Get Started Now With First Western Federal Savings Bank.
If you already have a custodian and a Self-Directed IRA, then give the non-recourse loan lenders at First Western Federal Savings Bank a call to learn how to leverage your assets to invest in real estate. We look forward to discussing your goals with you and helping you save for retirement!