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Using a self-directed IRA is one of my favorite ways to buy real estate. However, I don’t believe in a one-size-fits-all investing strategy. To help you determine if a self-directed IRA is right for you, I’m going to run through some of the pros and cons of using a self-directed IRA to invest in real estate

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The pros:

1) More freedom and more control. This is truly what makes the self-directed IRA stand out from any other retirement plan. The self-directed IRA is flexible and allows for a wide variety of asset types, including real estate. I love that I can choose the specific investments that make up my retirement portfolio… I’m not relying on some financial advisor or company to choose my investments for me. I do have another video that goes into some of the specific investment types you can use, but for the purpose of this video, the self-directed IRA allows you to buy real estate, and for me, that’s a huge win.

2) Higher returns. When you invest in a regular stock-based retirement plan, you’re vulnerable to the swings of the stock market. But because you have more control with a self-directed IRA, you can choose tangible assets with a potential for higher returns & protection from the stock market.

3) Tax-free growth. In addition to the tax benefits of a traditional IRA, a self-directed account has an added bonus. All income that you make inside of your self-directed IRA grows tax-free.
4) Easy to set up. A self-directed IRA can be set up over the phone in about 10 minutes, and it’s simple to fund the account or transfer funds from an existing 401k or IRA.

The cons:
1) It’s not a cash flow strategy. If you’re investing for immediate cash flow, a self-directed IRA is not the path you want to go. This is a retirement account, so you won’t be seeing any cash in your pocket for a while..

2) Strict rules and regulations. In order to protect the tax-free status of the account, the IRS runs a tight ship. There are a lot of rules in a self-directed account, so if you’re not a rule-follower, this strategy might not be right for you.

3) No hands-on approach with your property. While in many ways you have more control with a self-directed IRA, there are some ways in which you actually have LESS control with your actual investment. The IRS prohibits sweat equity, meaning you’re not able to do any work on your property. The IRA must hire and pay someone to do any repairs. If you’re the kind of investor that likes to do-it-yourself, you may want to consider a different investing strategy.
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#morrisinvest #claytonmorris #realestateinvesting

Clayton founded Morris Invest that builds portfolios for their clients and guides them through the buying process, ensuring cash-flowing investments. In his podcast, Investing in Real Estate with Clayton Morris, he offers specific and actionable ways to have financial security and to build a meaningful life. Clayton Morris co-hosts Redacted with his wife, Natali, bringing you news you won’t hear on major networks.

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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.

AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning, at NO additional cost to you, I may earn a commission if you click through and make a purchase and/or subscribe. However, this does not impact my opinion. We recommend them because they are helpful and useful, not because of the small commissions we make if you decide to use their services. Please do not spend any money on these products unless you feel you need them or that they will help you achieve your goals….(read more)

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Retirement is one of the most significant milestones in anyone’s life, and planning for it can be overwhelming. A self-directed IRA is one of the most popular investment options that can help your financial planning and investment strategy by allowing you to invest in real estate. However, just like any other investment, there are advantages and drawbacks to using a self-directed IRA for real estate investments. This article will explore the pros and cons of using a self-directed IRA to buy real estate so that you can make an informed decision.

Pros:

1. Control: One of the advantages of using a self-directed IRA to buy real estate is that you have full control of your investment. You choose the specific property and manage it yourself, unlike a traditional IRA where you have to rely on a third-party custodian.

2. Tax Benefits: The tax benefits of investing through a self-directed IRA are also significant. Any income that the property generates will be tax-deferred, and in some cases, tax-free.

3. Diversification: Real estate is an excellent addition to your portfolio, and using a self-directed IRA gives you the flexibility to diversify your investment with various properties.

4. Higher Returns: Real estate has the potential to generate higher returns than traditional investments such as stocks and bonds, making it an attractive option for retirement planning.

Cons:

1. Risk: Investing in real estate can be risky, and it’s no different when using a self-directed IRA. You need to have a solid understanding of the real estate market and be prepared to take on the risks associated with property investment.

2. Higher Fees: Self-directed IRAs may have higher fees than traditional IRAs. Custodial fees, transaction fees, and other costs associated with managing a self-directed IRA can add up quickly.

3. Time and Effort: Real estate investment requires a lot of time and effort. Finding a suitable property, managing it, and ensuring that it is generating a profit can take up significant amounts of your time and effort.

4. Liquidity: Real estate is an illiquid asset, which means it can be challenging to convert it into quick cash. If you need access to your funds in an emergency, you may face significant hurdles.

In conclusion, investing in real estate with a self-directed IRA can be a good option for retirement planning, but it’s essential to weigh the pros and cons mentioned above before making a decision. If you’re confident in your real estate investment knowledge and have the time and resources to manage your property, a self-directed IRA could be an excellent addition to your investment strategy. If not, traditional retirement investment options may be more suitable for your needs.