What Can You Do with a Self-Directed Real Estate 401K?

Posted on Oct 12 2015 - 6:10pm by Lance Edwards

DmitriyBY DMITRIY FOMICHENKO (Via Sense Financial)— A self-directed real estate 401k investment can provide the diversification you need in your retirement funds. You just have to learn about the different types of investments available.

The most common practice is purchasing a leasehold property and collect monthly rent payments.

For those who know how real estate investment works, the solo 401k self-directed plan is the perfect type of retirement plan for them. This plan is not only designed for non-traditional investment experts, it is also for those who want to take control of their retirement accounts and grow their funds to the maximum potential.

With a self-directed solo 401k, plan owners are free to choose the type of assets they want to invest in. Transactions can be completed as simply as writing a check, without going through a custodian.

Real estate investments are tangible and often considered less risky than the stock market. With the self-directed real estate 401k, it is now possible for plan owners to add real estate assets to their retirement portfolio.

The real estate industry has a wide range of investment opportunities. Aside from purchasing rental properties, a solo 401k plan owner can also choose from other types of real estate investment options.

Commercial real estate – Small office buildings with individual offices that you can lease out to small business owners and companies.

Retail real estate – Investing in retail storefronts, strip mall, etc. On top of the rental fee, the investor can also earn a percentage of the tenant’s generated sale depending on the agreement.

Industrial real estate – Special purpose real estate investment such as carwash, storage units, etc. Payment from the temporary use of the space by the tenant could generate income to the investor’s self directed 401k real estate investments.

Mixed-use real estate – Combination of those mentioned above types of real estate investments.

Real estate groups – These are organizations that develop and buy properties. A self directed real estate 401k can own part of the property without the need to manage it directly. Rental from the unit produces income to the 401k plan. A percentage of the investors’ rent proceeds will go to the organization in exchange for the maintenance, works, and finding tenants. In case of vacancies, the group will pool a portion of investors’ rent to pay for the mortgage payments.