Of course, you most likely guessed that I’m going to bring up the fact that rental properties are a good investment strategy because, unlike stocks, bonds, and the like, they’re not affected by the roller coaster that Wall Street is typically on. However, there is much more to it than that; real estate investments actually offer many advantages that a 401(k) and traditional IRA can’t offer when it comes to growing your nest egg.
Below, I’ll cover some of the main reasons why rental properties are a good investment for those saving for retirement:
From the above discussion, you’ve learned that when all your funds are tucked away in a stock-based retirement account, you have no way to safeguard your money.
In contrast to this, rental real estate, which is not controlled by Wall Street, can provide you with a stable and secure investment option for building retirement wealth. When your retirement account is real estate based, you can go to bed each night knowing that when you wake up, there isn’t going to be $100,000 unexpectedly missing from your retirement account due to the economy being affected by a war, a pandemic, or an announcement made by a government official.
The truth is that your rental property will perform just as well, no matter how bad the economy gets. Why is this the case? Well, because the performance of a rental property is not attached to the economy, and everyone needs a place to live, right? So, rent checks will continue to flow in as planned.
Related to the above point on recession-proofing your investment, the current economy has been causing uncertainty within many industries with food shortages, staff shortages, and a lack of inventory of general items; however, the effects of the current economy have actually caused the real estate industry to thrive. What do I mean by this? You see, there is also a shortage of rental properties, and this is due to the affordable housing crisis that has been moving people away from home ownership and funneling them into becoming renters.
This supply and demand issue has created the rental real estate industry to flourish, to the point where new rental properties must be built to meet the demand
A traditional retirement account such as a 401(k) is typically under the direction of a brokerage house where the rules only allow for specific types of investments such as stocks, bonds, and mutual funds. In addition to this, let’s face it, most 401(k) account holders open the account and basically “set it and forget it” and let the brokerage run the show. Many individuals don’t even know what they’re even investing in, or what fees are being withdrawn from their accounts each month.
Really think about what the employees at your brokerage firm are controlling; they’re controlling your life’s savings, possibly, hundreds of thousands of dollars. And on top of that, let’s throw into the mix the fact that the economy and Wall Street are controlling the balance of your retirement account – are you starting to see the big picture here?
Now, let’s look at another scenario where you’re using rental properties as an investment vehicle, and you have 100 percent control over the decision-making process, your investments, and your money. This is the case when you use a self directed IRA instead of a 401(k)/traditional IRA to save for your retirement.
A self directed IRA puts you in the driver’s seat of your assets, and as the name suggests, you “direct” your account instead of a random brokerage firm employee that may not have your best interests at hand.
With this type of scenario, the cash flow that’s produced from your rental properties goes directly into your SDIRA. Now, imagine owning multiple properties and how much money would be funneled into your retirement account each month, untouched by anything that’s stirring up within the economy.