Real estate investors are often drawn to this market by its earning potentials and security. Many investors have successfully built their wealth upon real estate, one property after another. But what about their retirement funds? Many investors assume that retirement funds can only be invested in stock and mutual funds, and they leave it all to their custodian to manage the portfolio. This, however, is not necessarily true, as now innovative retirement solutions such as Solo 401k Plans can help real estate investors take charge of their future.
Is real estate a wise choice for retirement funds?
Most real estate investors are in for the long haul, not expecting to cash out until years later. This actually makes real estate a perfect fit for retirement planning, which often holds investment for years until account holders make withdrawals. Many investors choose to add properties to their portfolio. With these, they can collect rental payments as a steady return, while waiting for the value to appreciate over the years.
Investors who prefer fast return can also attain that with real estate investments, by engaging in house flipping. In this case, investors would purchase a property, remodel it, and sell for a profit. It involves more risk and more effort from the investor, but can potentially generate much larger returns.
The biggest advantage of adding a property to any investment portfolio is its security. Investors can always recover their initial investment by selling the property itself, so they are less likely to lose everything.
Solo 401k Plans Allow Real Estate Investment
As much as real estate professionals know about the industry, why do they still have nothing but stocks and funds in their retirement accounts? The answer is simple: not a lot of people know that retirement plans can hold other assets.
For some traditional retirement plans, it is true that investment choices are limited. However, there are innovative solutions, such as Solo 401k plans, that allow virtually any legally available investment. Plan participants can invest in real estate, including commercial and residential properties, trust deeds and notes. The plan allows high contribution limit and self-directed option, giving plan participants even more control.
Self-directed Solo 401k plans give full control to plan participants as they can now act as the trustee of their accounts and make all the investment decisions. In order to succeed however, investors need to have a good understanding of the investments they choose.
For real estate investors, obviously, real estate is the best investment choices, as the account holders have the knowledge and experience required. In these cases, adding real estate to a retirement portfolio can potentially secure and grow the portfolio more effectively.