More and more investors have been turning to real estate as a way to diversify their retirement portfolios. Everything from pre-construction and condominiums to rebabs and rental properties are being held inside of self-directed IRAs and 401(k)s. With larger contribution limits and trillions of dollars currently situated in retirement plans, investors are able to look outside the realm of publicly traded equities and into assets such as real property. Though investors continue to become more sophisticated in their real estate transactions, undeveloped land remains a viable option for IRAs and other retirement plans. The simplicity of raw land allows investors to diversify into real estate while mitigating upkeep responsibilities.
An upside to adding real property to a retirement plan is diversification. Real estate has long offered investors a way to offset fluctuations in stocks and mutual funds. Over the years, millions of investors have utilized this diversification strategy in their personal portfolios, but they have started implementing this method within their retirement plans in larger numbers every year. While some may believe that IRA-owned property may carry significant responsibilities, an attractive attribute of land is its simplicity. Land enables investors to take part in the real estate market with a reduced possibility of complicated management requirements and unforeseen expenses.
Keep in mind that when a retirement plan holds a piece of real property, any expenses involved must be covered by the plan. Simply put, if an IRA owns a rental property, the IRA must pay for any repairs or renovations. Investors who self-direct their retirement plans into assets like real estate will have to be more involved than those who just turn their accounts over to a brokerage house. However, raw land offers a potentially low-maintenance way to invest in real estate. Land has only one relatively predictable expense - annual property taxes. Of course, you could lease your land to a farmer or a timber company, which may incur additional expenses but should also boost your earning abilities.
The goal of a retirement plan is to build your nest egg through wise investments, and diversification can be a key tool in doing so. Understanding every possibility will only make you a smarter self-directed investor. Raw land is an asset that can be purchased and held for the long term, ideally with reduced concerns about repairs or expenses. Be it a vacant lot in a planned development area in Florida or a large track of farmland in California, land provides an avenue for diversifying a stock-heavy portfolio.