IRAs vs. Real Estate?

2 Replies

I'm new to real estate investing and learning about all of the advantages of investing in real estate vs. paper assets – books like Rich Dad and many articles on BP have made that abundantly clear to me. I'm also getting the sense that most real estate investors think putting money into an 401k, IRA, or Roth IRA is a loser's game – and I can definitely see the logic behind that argument as well.

My question is: if you intend to make real estate investing your primary investment strategy for long-term wealth building, should you also invest partly in a retirement account? Or go all in on real estate? 

My situation: age 30, have steady income from my own consulting business (full-time), debt free, about $15k in savings and aiming to get savings up to $30,000-$40,000 for my first rental property in the next year. I don't intend to go into real estate full-time, and so far I think buy-and-hold with a property management company makes the most sense for my goals. I don't have an employer so I can't do 401k matching.

Are there any advantages to opening an IRA/Roth IRA and putting in a nominal amount (I'm thinking $50-$100/month on automatic payments for the next 20-30 years), or would I be better off putting all my money into real estate? 

@Shane Rasnak

Retirement plans provide tremendous tax-sheltering benefits, which allow you to magnify the compounding of savings over time.  If you are self-employed as a consultant, you should seriously examine a Solo 401(k) plan, which allows for very considerable tax-deferrals and/or Roth contributions.

Your question is not an either-or.  You can take advantage of the tax benefits of such a retirement plan and invest in real estate with the tax-sheltered funds using a self-directed Solo 401(k).  Do some reading and chat with your CPA or financial advisor on the topic.

There are several quality providers of such plans here on BP.