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​What are the benefits of investing in turnkey real estate using my 401k or IRA?

Looking for an alternative to stocks and bonds when it comes to investing your 401k or IRA? Turnkey real estate may just be what you’re looking for. Read on to see what investment and real estate gurus have to say on the matter.

Andrew Ervin

Andrew Ervin

Andrew Ervin, President, and Owner of Maxsin Investment Group.

Immediate Cash Flow Every Month

The benefits of investing in turnkey real estate using your 401k or IRA are that you can create immediate cash flow every month while the tenant is paying off your asset. Most importantly, cash flow will be able to help you retire early!

Tax-Advantaged Benefits

Investing in turnkey real estate using your 401K or IRA gives owners control over their funds and investing decisions. As the owner, several plans can invest in real estate such as Traditional IRA, Roth IRA, Solo 401(K), SEP IRA, and even Simple IRA. These plans have the same tax-advantaged benefits and allow you to invest in alternative assets like private equity, cryptocurrency, gold, and real estate.

Make sure to avoid any prohibited transitions such as buy, sell, lease, or exchange assets to yourself or a disqualified person. Don’t pay yourself or a disqualified person to manage the property or do any work on the property. And finally, don’t provide any loans to yourself or a disqualified person. Disqualified persons include family members like moms, dads, grandparents, spouses, or kids.

Eric Ingram

Eric Ingram

Eric Ingram is from Durham, North Carolina, and he is the owner of Ingram Real Estate Investment.
Jake Hill

Jake Hill

Jake Hill, CEO of  DebtHammer

Generating Income 12 Months a Year

A turnkey property is, as the name suggests, ready to use. You can buy it and then immediately rent it out because it's been renovated and is up to code for renting. In today's market where it's hard for families to come up with a down payment for a starter home, renting is incredibly popular and you'll likely never be without tenants. So, you're essentially investing in a property that will generate income for you 12 months out of the year.

It's fairly safe and reliable if you screen your tenants, but it's a slow investment at first. You'll be making mortgage payments and you may only make a small profit or just break even when maintenance is needed. The power of a rental property is in its longevity, so if you are far out from retirement still, I think it can be a good investment.

Diversified Investments Are the Main Benefit

People looking to diversify their real estate investments by exploring commercial property can do so in several ways, such as real estate syndications, private equity funds, and REITs. Accredited investors have easy access to these avenues, which allow them to pool funds to purchase and manage new or existing commercial property. Non-accredited investors can also find several similar crowdfunding opportunities, allowing them to invest smaller amounts to diversify their revenue streams.

Turnkey office spaces are a great way for these types of investors to earn reliable passive income, especially in high-demand areas such as major city CBDs. Countless serviced office providers exist across major U.S. business locations, providing property management services and on-site teams to aid tenants.

The benefits associated with investing in turnkey commercial properties through private equity real estate funds include stability, low risk, diversification, and minimal time investment (as fund managers make the investments for you). However, the events of the COVID-19 pandemic have recently illustrated the potential risks associated with investing in commercial property, as spaces across the United States sat empty for a large part of the past 18 months.

In addition, the passive nature of these funds limits your control over your investment, making it essential that you properly research before committing.

Teresha Aird

Teresha Aird

Teresha Aird is the CMO at Offices.net, an online brokerage that works to connect businesses and freelancers with a variety of commercial property solutions.

Dmytro Serheeiv

Dmytro Serheeiv

Dmytro Serheeiv, Tax Consultant at PDFliner. Dmytro is a professional tax specialist with more than 10 years of experience.

SDIRA – Tax-free Profits

If you want to invest in turnkey real estate using the 401k plan, you have to convert it into a self-directed IRA or SDIRA. Unlike the regular IRA, SDIRA doesn’t limit your investment options to bonds and stocks by adding real estate and many other options to the list.

Purchasing and renting out turnkey properties using your SDIRA, you can receive tax-free or tax-deferred profits. This benefit applies to all types of investments made through SDIRA.

Exposure to the Real Estate Market

Many of the usual benefits such as getting a loan to leverage your buying power and tax benefits are lost when buying with an IRA. The benefit is exposure to the rental real estate market. Rental income is generally seen as a stable form of income. If you have a property that cash flows higher than other asset classes, you will increase your IRA's return without having to invest in things like the stock market.

Khari Washington

Khari Washington

Khari Washington is the broker and owner of 1st United Realty & Mortgage

This is a crowdsourced article. Contributors are not necessarily affiliated with this website and their statements do not necessarily reflect the opinion of this website, other people, businesses, or other contributors.

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