6 Great Reasons to Invest Retirement Funds In Real Estate

1.    Cash Flow - While there are many great reasons to invest Self Directed IRA or Self Directed 401(K) funds in real estate, I believe the single strongest reason is cash flow.   In real estate, as with the stock market, the value of the investment can go up or down, there is always risk.   When the value of your stock portfolio drops, you need to invest to gain back the value lost or hope that the stock recovers its previous value.   A loss of stock portfolio value if you are retired could mean figuring out how to live on less than your original plan.   Although real estate values go up and down, with investment property you still have the cash flow because your renters are still paying the rent regardless of the current value of the property.    With real estate investments, money is flowing into your accounts every month.   And with enough of these types of investments, you can live comfortably on the cash flow regardless of the market value of the investments.

2.   Asset Diversification - Investment advisors are always telling investors to diversify their portfolio.     Adding real estate to a retirement portfolio through the use of a Self Directed IRA or Self Directed 401(K) increases the diversification.  These real estate investments can be made in different markets around the United States, increasing the diversification.   Real estate does not always follow the direction of the stock market.   And for some people, they understand real estate better than the stock market.

3.   Affordable Pricing - Real estate values have dropped significantly in the past few years, making it much more affordable and feasible investment option than in years past.

4.   Upside Capital Appreciation - Real estate values have dropped significantly and the indicators are that most markets have reached the bottom.   In the upcoming years, investors can expect to see appreciation of their investment properties.   Real estate is different from other investments in that you don't have the purchase real estate outright, you can finance a portion of the cost to purchase.   Capital appreciation for real estate is not based on the amount of equity in the property.    Whether a real estate property is owned free and clear or there is a loan covering 60% or more of the value, the property will appreciate exactly the same.   Follow the great advice, buy low, sell high.

5.   Leveraging - When purchasing stocks or most other assets, a $100,000 stock investment requires the buyer to produce $100,000 to purchase the investment.   With real estate, the cost of the investment can be leveraged with a real estate loan.   For example, if you have $200,000 to invest, you could buy one rental property for $200,000.  If the investment doubles in value, you will have made an additional $200,000.    However, if you purchase two investment properties with $100,000 down each and the properties double in value, you now have an additional $400,000.   And back to the cash flow, for the $200,000 investment, you now have 2 rents being collected each month instead of one.

6.  Invest with Partners - Today you may not have the IRA funds necessary to purchase an investment property.   But you could team up with a few friends or investment partners and pool Self Directed IRA or Self Directed 401(K) funds to make that first purchase.   This is very different from the stock market where you purchase everything on your own.    Even investors that don't have hundreds of thousands of dollars in their retirement accounts can take advantage of this investment opportunity.