I often hear from investors facing a common set of challenges. They're dissatisfied with the underperformance of their retirement accounts and worried about the lack of protection from market volatility and rising inflation. Many wish they could diversify into real estate but find their funds trapped until they hit the age of 59.5. On top of that, the prospect of becoming landlords is unappealing—they'd rather spend their precious free time with family, friends, and hobbies.

What many in the middle class don't realize, a closely guarded secret of the wealthy, is that there's a way out of this predicament. While you might not be able to access your retirement funds before 59.5 without penalties, you can roll them into self-directed IRAs or 401(k) plans. These vehicles offer the freedom to invest in real estate and other alternative assets. And here's the kicker: you don't have to deal with the hassles of being a landlord. There are completely passive real estate investment options available through private equity firms that provide all the benefits of direct ownership without the headaches.

Why Isn't Everyone Doing This?

The middle class remains largely unaware of these options. Their 401(k) representatives offer retirement plans with a limited menu of traditional investments—stocks, bonds, mutual funds, and the like. Even those seeking professional advice often hear about similar products, primarily in the stock market. This is because such investments allow institutions and professionals to collect commissions and fees.

What Is A Self-Directed IRA (SDIRA)

Self-directed investing is the best way to take control of your freedom and invest in assets you trust that offer higher returns than traditional investments. A Self-Directed IRA (SDIRA) is a type of Individual Retirement Account (IRA) that enables investors to hold a broader range of investment options compared to traditional retirement accounts.

Typical 401k/IRAs limit investments to stocks, bonds and mutual funds, hurting the investors ability ot venture out into more lucrative assets. SDIRAs open the door to alternative assets such as real estate, private equity, precious metals and more. The flexibility they provide can be particularly appealing for investors looking to diversify their portfolios and achieve higher returns.

Passive Real Estate Investing with an IRA or 401(k)

Self-directed retirement funds can be employed for passive investments in commercial assets like multifamily apartments, retail, office spaces, and self-storage. Since such acquisitions are often beyond the reach of individual retirement accounts, investors opt to collaborate with sponsors, such as private equity firms like ours. We assemble real estate syndications, pooling together investors' capital to acquire larger assets. This approach lets you remain entirely passive, enjoying the advantages of investing in substantial real estate without the responsibilities of direct ownership.

Here are 5 reasons why more and more investors are choosing to invest in real estate with their retirement accounts:

1. Diversification and Risk Mitigation

We've all heard a story about someone who has saved for retirement throughout their entire working life and does all the "right things", only to see their portfolio take a hit due to circumstances that are out of their control. For some, they have time to recover, but for many close to retirement age, this can be devastating.

One of the primary reasons investors turn to SDIRAs is the opportunity to diversify their retirement portfolios. Traditional investments like stocks and bonds are subject to market volatility and economic fluctuations. By including real estate in the mix, investors can spread risk across many different asset types and markets. Real estate also often behaves differently than the stock market, providing a hedge against market downturns.

2. Tangible Asset With Intrinsic Value

Real estate is a tangible asset that holds intrinsic value and acts as a hedge against inflation as values typically increase alongside inflation. Unlike stocks, which can become worthless if a company goes bankrupt, real estate generally retains its level of value.

Properties can be rented out to generate consistent income, and their value will appreciate over time. This tangible nature that real estate offers provides a sense of security for those who mey be wary of the intangibility of traditional assets like stocks.

3. Potential For Higher Returns

The average 401k/IRA, invested in stocks, bonds and mutual funds, has an an average annual return of 5-8% when you take inflation into account. This makes for a long road to retirement, where individuals who aren't diversified "hope and pray" they have enough to retire comfortably and maintain their current lifestyle.

In real estate, especially with multifamily properties, we can confidently produce 16-20%+ returns annually for investors, making the asset class much more lucrative. The combination of rental income, property appreciation and various tax advantages can significantly boost the overall return on investment. The reason we can achieve these high returns is due to our ability to quite literally control the value of the asset through forcing appreciation with a strong value-add strategy (check out this video where we explain how we did just that on a recent property).

4. Control and Flexibility

As I touched on earlier, traditional 401k/IRA accounts typically limit you as an investor by only offering the options to invest in stocks, bonds and mutual funds. With an SDIRA you have full control over your investment choices. As an investor, you can actively participate in the management and decision-making processed related to your real estate investments. This level of involvement is appealing to those who are looking for investment vehicles that offer higher returns or who have the expertise of interest in investing in other assets like real estate. Unlike traditional IRAs, where investment options are typically limited to those offered by the account custodian, SDIRAs give you back the pwer to explore a wide range of opportunities and take control of your retirement.

5. Tax Advantages

SDIRAs offer several tax benefits that can enhance the profitability of real estate investments. Contributions to a traditional SDIRA are tax deductible, reducing your taxable income for the year. Additionally, the earnings within theSDIRA grow tax-deferred until you start taking distributions in retirement.

Roth SDIRAs, on the other hand, allow for tax-free growth and tax-free withdrawals in retirement, provided certain conditions are met. This tax-efficient structure significantly enhances the compounding effect of your investments over time.

How to Invest in Real Estate with Your Retirement Funds

The first step is crucial: find a company to help set up your self-directed account. These are known as custodians, and they play a vital role in guiding you to the best self-directed account for your needs and facilitating the necessary paperwork for the rollover.

If you're unsure about a custodian, or if your current plan administrator doesn't offer self-directed options, seek referrals from those in the know, inquire with fund managers you intend to invest with, or simply search for terms like SDIRA and Solo 401(k).

We refer all of our investors to our trusted partnerships with industry-leading custodians. Contact us to get referred to our trusted partners.

In Conclusion

I'm often asked, "How can I save up funds to invest in real estate?" The answer is simple: you already have them! By creating a self-directed retirement account and channeling it into real estate, you gain more control over your financial future. You become less vulnerable to market volatility, and you deserve every available option for growth—it's your retirement, after all.

Unlock the potential of your retirement funds today. Invest wisely, invest in real estate. Reach out to our team to learn more on the benefits of passive real estate investing and our current opportunities.

For investors with old retirement funds sitting idle, exploring taking advantage of the benefits of SDIRAs and real estate can open up a whole new world of opportunity that can significantly impact your portfolio. The ability to take control of your investments, achieve higher returns, and diversify to mitigate risk, only enhances your retirement.

Whenever you're ready, there are 2 ways we can help you:

1. Join Our Investor Club + Get Your Free Passive Income Playbook: Join our Investor Club to get exclusive access to highly sought after multifamily real estate investment opportunities. For joining, we'll send you a FREE Passive Income Playbook to show you how our investor's are earning 16-22% annual returns without active management.

2. Investing w/ Your 401k/IRA: Join hundreds of other investors who invest in lucrative real estate investments with their old 401k/IRA's. Our webinar teaches you exactly how to invest in cash-flowing real estate and stop settling for average returns that typical retirement accounts offer. Go ahead and watch the replay for actionable tips on how investors are earning 16-20%+.