As Traditional Stocks Fail, Self-Directed Investors are Capitalizing
When the stock market declines, there are some investments that manage to shine. Current extraordinary economic events notwithstanding, there are assets that historically tend to provide stability during market volatility. These “safe havens” may even be a source for growth. Certain real estate investments fall within that category. Savvy investors are able to take advantage of them with a Self-Directed IRA.
Diversify with Alternative Investments
COVID-19, as with past stock market crashes, has highlighted the need for investors to be ready for the unprecedented to happen and that those heavily weighted in the stock market may wish they were better prepared. You can better handle the unforeseeable by keeping your investments diversified. A Self-Directed IRA gives you the flexibility to choose from alternative investments not available in traditional brokerage accounts to provide greater diversification potential.
Self-Directed IRAs can hold a large variety of alternative investments including precious metals, cryptocurrency, private equity, and debt instruments, just to name a few. The superstar of Self-Directed IRAs, however, may be real estate.
Using Real Estate to Diversify Your Portfolio
Real estate offers many benefits, though in tough market conditions its low correlation to the stock market may be the one most keenly felt.
There are many long- and short-term benefits to real estate investing, including:
Protection from market fluctuations. Its low correlation to the stock market means that when you invest in certain real estate assets, the value of those investments won’t be mirroring stocks during times of market volatility. Real estate also provides protection from inflation when property values and rental income tend to go up.
Cash flow. Portfolios benefit when they have positive cash flow with which to make additional investments. The rental income, interest income, and profits generated from real estate investments can be reinvested or used to cover expenses of the capital asset or the IRA’s distribution requirements.
Capital appreciation. Ideally, real estate values increase over time and you can realize gains when you sell a capital asset.
ROI potential. While some real estate investments carry additional risk, if you’re in a position to take advantage of them they may also offer higher than average returns, without capital gains tax.
Tax advantages. All of the tax advantages of a traditional IRA apply to Self-Directed IRAs. Earnings in the account are tax-deferred (traditional IRA) or tax-free (Roth IRA), which helps the value of your investments grow even faster.
Numerous investments options. Self-Directed IRAs can hold real property like single-family and multi-family housing, mobile homes, and commercial properties as well as indirect investments like tax liens, tax deeds, and land contracts.
Why Consider Multi-Family for Your Self-Directed IRA
With a Self-Directed IRA, investors aren’t limited to the typical real estate mutual funds and REITS, they have access to a world of real estate investment options. Multi-family housing in particular provides a number of benefits, to both investors and the general public, particularly during market downturns.
Low turnover. Uncertainty surrounding the stock market often leads to skittishness. Residents generally like to stay put and not make a big move during a stock market crash or its aftermath.
Affordable housing. A bad market has far-reaching economic consequences. Many people can’t afford to buy and are looking for affordable housing options such as multi-family rentals.
No hassles. Home ownership may be the American dream, but it brings with it a number of maintenance costs and hassles that many residents would rather avoid.
Cash flow. Investors receive a steady passive income stream from multi-family dwellings, and rent amounts generally don’t go down during a recession.
According to U.S. Census Bureau stats, the U.S. home ownership rate is generally declining and tends to fall during a recession. There is an increasing preference toward renting, even during times of expansion, particularly among a couple of key demographic populations.
Both baby boomers and millennials represent a large portion of the renter population. Whether looking for the affordability, hassle-free living, or trendy nature of certain active communities, many Americans are making the choice to eschew home ownership in favor of renting. Multi-family asset owners are the ones poised to benefit.
iPlanGroup Can Help You Add Real Estate to Your Self-Directed IRA
Investing within a Self-Directed IRA gives you control over your investments and opportunities, such as real estate, that aren’t available in traditional accounts. iPlanGroup is an independent administrator experienced in providing support and guidance to Self-Directed IRA investors and can help you gain stability during times of market volatility as well as potential for extraordinary growth of your retirement nest egg.
iPlanGroup provides same day processing, personal client support, and one-on-one IRA strategy sessions, at no additional cost. Our focus is simple: Your needs as an investor. To schedule your FREE strategy session, click here. For more information on alternative investments during times of stock market volatility, click below for our FREE guide on Weathering a Stock Market Crash with Alternative Investments.