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How To Use Your Retirement Money To Invest In Real Estate

Real estate is a commodity that can make you money in a variety of different ways. To generate an income right now, you can charge rent each month or flip the house for a quick profit. If you keep the house for the long-term, you can sell it 20 or 30 years from now to take advantage of its appreciated value.

Using Your Retirement Money To Invest In Real Estate

In America, you can use an IRA or a self-directed 401k to invest in real estate. This is preferable because you don't have to pay capital gains taxes as the properties accumulate. 

You also don't have to pay taxes on any rent collected until you take it out of your account. At the same time, you can invest any money that you receive in the stock market or in other commodities. 

In Australia, you can use your retirement money to buy a superannuation property or a SMSF property. Overall, the system used there works much like the system does in America.

Use Retirement Funds To Buy Your First Home

It may be illegal to withdraw funds from a retirement account. If it is legal, you may have to pay penalties as well as income taxes. When you use retirement funds to buy your first home, you can withdraw it without having to pay any penalties.

When you take out a loan from your IRA, it is treated like a loan that you pay yourself back. This means that you can take out a loan, grow your own retirement account as you pay yourself back and nothing gets listed on your credit report.

Generally, you are allowed to borrow up to 50 percent of your available balance up to $50,000. The only downside is that you may have to repay the entire loan if you were to lose your job. If you have a self-directed account, you only have to make payments according to the loan schedule.

What Properties Can You Invest In?

You can invest in any property that you want. Commercial properties, apartment complexes and residential properties are all up for grabs when you invest with your retirement account. 

If you invest in multi-family properties, you are going to have to make a larger down payment to satisfy your lender. However, the entire amount of the down payment can come from your retirement account. 

As you are using your retirement account to invest in properties, you can sell at any time and you don't owe any taxes to the government. If you like flipping properties, you should set up an IRA to do so with.

Your retirement account should be working as hard as possible for you. If you don't want to invest in just stocks and bonds, look into getting a self-directed account or choose a retirement account offered by your employer that gives you the freedom to do what you want with your money.

23 comments:

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