Benefits and drawbacks of using a self-directed IRA

Using a self-directed IRA (Individual Retirement Account) to invest in real estate has both benefits and drawbacks.


Investment in real estate can help a portfolio that is heavily geared toward stocks or bonds achieve diversification.
Potential for higher returns: Compared to more conventional assets like bonds or CDs, real estate can be a strong source of passive income.
Tax advantages: You can benefit from the tax advantages that come with regular IRAs, such as tax-deferred growth on your investments, with a self-directed IRA.


Limited liquidity: Real estate investments can be illiquid, which means it might be challenging to sell a home fast if you need to access money from your IRA.
Costlier: Investing in real estate through a self-directed IRA might be more expensive than other investment options since you might be required to cover charges associated with property inspections, appraisals, and other due diligence.
Risk of loss: Investing in real estate can be dangerous. If the asset does not increase in value or produces insufficient rental income, you could lose some or all of your money.Complexity: Self-directed IRAs have their own rules and regulations, and managing the property and making sure you’re not breaching any laws involving prohibited transactions or other compliance issues can be difficult and time-consuming.

In conclusion, self-directed IRAs can be a helpful tool for those seeking to invest in real estate, but it’s crucial to be informed of the fees, risks, and limits involved before making a decision. Before making any decisions about self-directed IRAs, it is always a good idea to get the advice of a financial advisor and a tax expert.

If you have questions about a property you are thinking about selling, or just questions in general, visit us at or give us a call at 504 264 1407

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