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Rental House Investments Soar Due to COVID-19

rental house investments
4 Minute Read

If you follow our blog, you know rental house investments are rising due to the current pandemic. Real estate is the king of alternative investments. The most tax-efficient way to invest is with retirement funds. Anyone can use a Self-Directed IRA to invest in just about anything, including real estate. In the following, we’ll talk about how and why you can do it, and why COVID-19 has increased the demand for rental real estate.

Key Points
  • COVID-19 has impacted everyone’s lives
  • Rental house investments are on the rise because of the pandemic
  • Using a Self-Directed IRA is a tax-advantaged way to invest

What’s Going On?

A recent Wall Street Journal article details the boon in prices for rental and vacation homes in popular destination, such as the Poconos and Hilton Head, SC. The article also talks about other vacation hot spots like Ocean City, NJ and Key West, FL. A new analysis from Zillow shows year over year highs in page views, sales price and interest in these popular markets.

The reason for such numbers is that many people are still working and schooling from home due to COVID-19. People are looking to enjoy a vacation closer to home and some are buying vacation properties for themselves. Seeing how many white collar Americans can work remotely, the idea of retreating to a more idyllic setting is very appealing to many.

Further, the pandemic has made traveling longer distances, fine dining and large events almost nonexistent. People are finding other things to do with those extra funds. It may be renovating their own home, finding new hobbies, or even speculating in different asset classes.

Low interest rates and a thriving market make it a good time to look at real estate as an investment. Granted, you pay a little more to buy that fixer upper or income property, but the demand is so high, that you’re sure to make a profit if you do your homework.

Rental House Investments with an IRA

If you search for “real estate” on our website, you’ll see countless articles about how and why you can use a Self-Directed IRA to invest in real estate. It continues to be the most popular and easiest investment you can make with retirement funds. While we’ve certainly seen housing market collapses in the past, real estate always bounces back. Everyone needs a place to live and a job to work at. Because of the pandemic, people are spending more time in their homes and therefore willing to pay for what they want.

So, what does this mean for investors? It’s time to open up your retirement wallets and look at rental house investments. However, you can’t just go to your local bank of favorite online provider. This is because most banks and other financial institutions will not allow you to invest in real estate. You need a special custodian, such as IRA Financial, to invest in alternative assets, including, but not limited to, real estate.

When you use the right custodian, you can open a Self-Directed IRA, which allows you to be control of your investment options. Further, with checkbook control, you are in complete control of your IRA, giving you the freedom to use your retirement funds as you see fit.

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    How Does Real Estate Investments Work?

    A Self-Directed IRA, which can also be called a Real Estate IRA, allows you to be in charge of your investments. This is especially useful for rental house investments. Income properties are usually long-term investments. Transactions can be performed at your convenience, not your custodian’s.

    Obviously, it’s up to you find a property that fits into your investment plan. It might be a popular vacation spot as mentioned earlier, or maybe closer to the big cities. It’s really up to you! Once you have the property chosen, you can now use your Self-Directed IRA to purchase it. Note: if you need to take a mortgage on the property, you must be aware of the UBTI rules. Essentially, the amount borrowed will be subject to tax. For example, if you borrow 50%, half the income generated from the property will be taxed.

    Once the property is purchased by your IRA, you must stay within the IRS rules. The most important thing to remember is that only the IRA can benefit from the property. This means that you, the IRA owner, and other disqualified persons cannot personally benefit. All expenses paid and all income generated should involve your IRA.

    Basically, this means you cannot personally utilize the property yourself, nor can any of your lineal ascendants or descendants and any entities they control. For example, you cannot stay at a vacation house, nor can you hire your son’ company to renovate it. So long as the IRA owns the property, only the IRA can benefit. Once you reach age 59 1/2, you can distribute the property from the plan penalty-free and take possession of it personally. Then, and only then, you can utilize the property yourself.


    COVID-19 has had a terrible impact across the entire world. But, we can’t let it completely dictate how we live our lives. Rental house investments is one way to take advantage of any extra savings you may have accumulated. Real estate is always a good investment for your retirement plan. It’s important you work with experts before make your investments. Financial planners, attorneys and realtors can all help you make a smart and financially rewarding investment.

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