Retirement accounts increasingly used to invest in real estate

February 04, 2013 01:30PM

Self-directed IRAs are increasingly being used to buy real estate as an investment, the Wall Street Journal reported, affording the retired higher returns than the traditional investments, such as stocks and bonds, that retirement funds generally make. The motivation? Self-directed IRAs afford the flexibility to invest in more diverse assets, while maintaining the favorable tax treatment that retirement accounts are afforded.

“I had built that account for retirement, and when March 2009 came along I watched it lose 40 percent of its value,” Gordon Berger, a retired professor who uses a self-directed IRA to buy distressed homes and apartment buildings, told the Journal. “I decided I didn’t want to leave myself vulnerable by having all my retirement in stocks and bonds.”

New Direction, a Colo.-based “custodian of self-directed IRAs,” said that in the past year real estate has made up about 45 percent of new investments, up from about a third in the past, per the Journal.

However, investing in real estate is never entirely simple: new landlords have all the same worries that any other real estate owner would, the Journal said. [WSJ] –Guelda Voien