Advantage of Holding Your Multifamily Community Investments in a Self-Directed IRA
Investing in multifamily communities offers you a number of tax advantages which you can maximize by holding your investment in real estate in a self-directed IRA.
If you do not already have a self-directed IRA, our company Diversified Real Estate Property LLC can help set one up for you. Real estate in a self-directed IRA receives preferential tax treatment in several ways extremely favorable to you.
To begin with, investors in multifamily communities can defer capital gains taxes with a 1031 exchange, a type of transaction that allows you to qualify for a deferred gain treatment.¹
Second, you can write off any deprecation on the property on your tax returns.
Third, you can invest your IRA into multifamily communities with no withdrawal tax penalty.
In addition to substantial tax benefits, a self-directed IRA with real estate as part of the portfolio offers superior asset protection and estate planning: through the power of compounding interest, real estate IRAs can create lasting wealth for you and generations of your family to come.
Diversify your IRA with real estate for safety with superior returns
Most important, a self-directed IRA provides welcome diversification from the broad markets. It doesn’t restrict your retirement holdings to stocks, bonds, mutual funds, and CDs sold by your IRA custodian.
CDs are safe but have anemic returns. The stock market has also done poorly in recent years and worse, its volatility puts your retirement nest egg at risk.
For instance, in 2014 and 2015, the Dow had average annual total returns on only 3%. On a million-dollar retirement portfolio, that’s an income of only $82 a day.²
In the crash of 2000, investors gave back $8 trillion in wealth to the markets, with many seeing their retirement accounts decline 25% to 50% or more.
In sharp contrast, real estate is a real, tangible, and secure asset. As FDR famously said, “Real estate cannot be stolen, lost, or carried away. Purchased with common sense, it is a about the safest investment in the world.”
What’s more, real estate often provides faster growth than many traditional investments. With a self-directed IRA, you can diversify your account with nontraditional retirement investments.
These investments include private placements … notes … precious metals … tax lien certificates … and multifamily real estate IRAs for potentially better results with greater stability than most stock market investments.
In particular, a self-directed real estate IRA allows investments to grow tax-free or tax-deferred compounded over time to maximize growth.The real estate IRA allows investments in multifamily communities and other real properties.³
Plus, the real estate IRA can also qualify for tax deductions, depending on the account, and provide asset protection. Also, the assets,which can grow substantially in value, may be passed to future generations.
This time tested strategy has been used for many years by those who understand how to maintain their wealth, from the Harvard Endowment Fund to former Massachusetts Governor Mitt Romney.