“You can’t do that!” Supercharge Your Roth Solo (k) with Real Estate!

  • by crv.staff
  • 04.02.09
  • 11:18 AM UTC

After over a decade in the 401(k) plan industry my favorite phrase has always been, “You can’t do that!” Many investment professionals have been incorrectly answering the following question from investors: “Can I invest in Real Estate in my IRA or 401(k)?” YES is actually the correct answer.

After the worst stock market the US has seen in 50 years, an ailing bond market, historically low consumer confidence, a burst US real estate bubble, and no great traditional investments in sight many people are looking at international real estate as an investment alternative.

Any investment advisor worth his/her salt will tell you that diversification is a good thing. While real estate is a good diversification away from stocks and bonds, international real estate is another non-correlated asset class that, when used properly, can increase a portfolio’s returns while decreasing risk.

As of January 31, 2009, the S&P 500 has a 10 year historical return of –2.65%. Compare that to US real estate (residential) over the same time period with a 10 year return of +4.6% and then realize that those returns were achieved with much less risk and you start to wonder why you listened to your broker in the first place.

Wouldn’t it be great if the real estate you purchased and profited on was in a tax shelter? From the IRS’s standpoint, when it comes to your retirement plan, there is little difference between a stock, bond, and real estate.

Once you realize that, and also understand how inexpensive and simple it is to set up your own Roth Solo (k) plan, you have to ask yourself, “Why haven’t I heard of this before?” The simple answer is your broker doesn’t get paid to tell you about the rules of retirement plans. In fact, if you were to put money in to real estate in your retirement plan instead of investing in their commissionable mutual funds or stocks, they would be losing business.

So how do you do it? Tune in next week for my next blog post on the subject…

Bret G. Dudl, Founder
La Joya Perfecta, Costa Rica, “The Center of Wellness”

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