For those looking for alternative investments during the pandemic, real estate cash sales are an attractive option.
- Cash is still king
- Real estate is the most popular alternative investment
- Real estate cash sales are up across the board
Cash Sales Benefits
By using cash to purchase real estate, retirement account holders are offered a chance to use their passion and knowledge to do what they do best. With cash in their retirement plans, buyers can look to make all-cash real estate purchases, which have a few benefits to both the buyer and seller. Usually these purchases result in rentals, so that there are no legal violations when using retirement funds.
When you invest with a retirement plan, you don’t pay taxes on the assets held by it. If you have a traditional plan, taxes are deferred until you start withdrawing during retirement. On the other hand, if you utilize a Roth plan, all income and gains are tax-free. Further, investing in real estate helps diversify your retirement plan assets. Any expert will tell you that you must not invest in one type of investment. By self-directing your retirement savings, you can spread your money across many different asset classes.
Investment properties, like rental houses, vacation properties and Airbnb spots, produce a steady stream of income. So long as someone is paying you rent, you have a fixed amount of money flowing back to your plan every month. You can’t say that about a lot of investments. Lastly, investing in hard assets, gives one the sense of pride and accomplishment. You are in control of that property. You make the decisions and invest as much as you want. Obviously, the more money you put into it, the more money you can hope to make. The other big advantage, when using an IRA, is that you don’t need to worry about the UBTI tax, since you don’t need a loan.
Some of the markets that have seen the highest rate of cash-only sales are Long Island, in New York, and a few areas in Florida, including Miami and Tampa. Real estate cash sales are usually made by investors looking to purchase homes they can rent out. Markets from Atlanta to Tucson are becoming hot areas for cash buyers to invest in.
There are many ways one can manipulate real estate markets for their benefit using retirement funds, and their Solo 401(k) or Self-Directed IRA. Real estate cash sales are some of the most interesting because they are opportunities to increase your income monthly, and with steady payments. Diversifying your holdings through real estate also allows a investment portfolio to grow without relying only on the stock market or other traditional investments.
Using retirement funds to buy real estate can offer retirement account holders a number of positive financial and tax benefits, such as a way to invest in what one knows and understands, investment diversification, inflation protection, and the ability to generate tax-deferred or tax-free (in the case of a Roth) income or gains.
Real estate, however, is something most us feel comfortable with – lower class, middle class and upper class alike.
Many people worry about inflation, which is another reason they turn to real estate investments. Even if the risk of inflation isn’t real (it may or may not be), inflation can seriously hurt a retirement portfolio. The value of currency today may be worth significantly less tomorrow. Hard assets (real, touchable assets) is a way to protect your retirement plan against inflation. In a way, hard assets act as a buffer against your retirement assets and the havoc of inflation.
Real estate cash sales can be used for many types of real estate opportunities, including but not limited to the below. All of these can be carried out through the Solo 401(k) and Self-Directed IRA.
- Raw land
- Residential homes
- Commercial property
- Mobile homes
- Real estate notes
- Real estate purchase options
- Tax liens certificates
- Tax deeds
And whike you don’t need an LLC for your self-directed 401(k) to buy real estate. The Solo 401(k) Plan itself can take title of the property. In other words, the plan can own the property.
There is no requirement to establish an LLC with your Solo 401(k) Plan funds. However, buying real estate under an LLC provides asset protection. Solo 401(k) owns the LLC, and the LLC will own the property and you’re the manager of the LLC. As manager, you have full control over your investments.