Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

Self-Directed IRAs: The New Face Of The Real Estate Landscape

Written by JD Esajian

Could the use of self directed IRAs dramatically change your local real estate market, and who the leaders in the business are?

It has been reported that U.S. retirement accounts now hold more capital than all of the land in America is worth. As more individuals seize control of their own investments, there could be a sizable shift in capital and equity flows. So what might that mean for real estate markets around the country, and for independent professionals and companies?

Self Directed IRAs

Self-directed retirement accounts are rising in visibility and popularity, especially in real estate investment circles. They have actually been around for several decades, but until the last couple of years have not been widely used. Approximately less than a third of U.S. retirement accounts are currently in self directed plans. according to IRA expert Kaaren Hall.

A self directed IRA will go by a number of names: checkbook IRAs, self-directed 401ks, and IRA LLCs. They are all essentially the same thing. They all provide individuals the ability to direct their own investments, while retaining all of the tax saving advantages of an old school 401k. Ultimately, you get to invest in what you want, and see tax deferred returns. That could be stocks, bonds, mortgage debt, gold, partnerships and LLCs, or directly in real estate.

Market Moving Money

The trillions of dollars that could be rolled over into self directed accounts now have the potential to create seismic shifts. If those fearful of stocks, bonds, gold, and oil get to invest their own money where they see the most safety and reward, it could be extremely disruptive to markets.

There has been plenty of coverage about hedge funds buying and loaning billions in the distressed property niche over the last few years. However, those numbers might seem miniscule in a couple of years from now. Real estate professionals should also realize that it isn’t just America that is seeing a trend in self directed retirement investment. The U.K. recently began permitting its citizens to do the same thing. That multiplies the amount of global capital out there to stampede into new investments.

Let’s use real estate in the U.K. purely as an example. Now that residents can control their own pension funds, local real estate agents and mortgage advisers are reporting a significant surge from interested buyers with an average of 100,000 pounds to use as a down payment (approximately $156,500 US dollars). Many are looking for income property in London, and to take advantage of renting out units via Airbnb. While the Queen of England just legalized short term rentals like Airbnb, many regular buyers are reportedly feeling the pinch as it becomes even more difficult to find homes for sale. Not to mention the obvious home price and rental rate increases.

We are talking about increased competition for properties, less inventory, higher property prices, and more expensive rentals -all with a lot more buyers that are flush with cash. If, (and this is still speculation for now) self directed IRA money is poured into real estate it could seriously add a lot of traction to markets, while anchoring them with significant equity.

Who Gets the Lion’s Share of Deal Volume?

Who gets the king’s share of the new tidal wave of business volume? Clearly those actively serving clients with these trillions in investment funds. For some, it may simply be selling houses, vacation properties, and income properties on the retail side. For others, turnkey properties. For others, fundraising and pooling capital as mortgage debt is the answer. The more of these individuals with IRA money that real estate investors help, the more deal volume they’ll experience.

The results will be compounding. The more individual investors you help, the bigger your war chest and marketing budget will grow. In turn, you will be more competitive in your efforts.

So how can more real estate agents, investors, and businesses put this into play? Get educated about self directed IRA investing. Make some noise about how your opportunity is a good fit for those with this capital. Perhaps even co-host local events and seminars with IRA professionals and service companies.

Get Your Own Self Directed IRA

These tax saving investment tools aren’t just for everyone else. They can be very beneficial to all real estate professionals and CEOs too. It could be a great way to save on taxes and compound growth of the retirement portion of your investments. This can also be invested in real estate, but with the additional protections that IRAs provide.