Bankrate.com
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Equity
Auto CDs &
Investments
Retirement Checking &
Savings
Credit
Cards
Debt
Management
College
Finance
Taxes Personal
Finance

Ask Dr. Don
Bankrate.com

IRA real estate investing

Dear Dr. Don,
In an effort to diversify my portfolio, I am considering adding real estate to my IRA investment portfolio. Given the current market trends, would you consider this a wise selection?
Barbara

Dear Barbara,
I encourage people to take a holistic approach with their investments. If you have a net worth of $400,000 and half of it is the equity in your home, then you already have a substantial investment in real estate. Don't just look at what's in your IRA when deciding how to diversify.

That said, the easiest way to add a real estate component is to invest in publicly traded real estate investment trusts, also known as REITs. Besides the ease of investing, some REITs offer diversification benefits across geographic regions and among types of properties that would be hard to duplicate on your own. Economies of scale in managing the properties make for lower administration costs too!

You can own individual properties in your IRA; you just have to find a trustee to administer your self-directed IRA. The administrative costs can be expensive, but the potential returns may justify that expense. Read "Buying real estate with your IRA" to learn the steps you need to take to structure this account. Consider the tax implications of making this a Roth IRA vs. a traditional IRA.

- advertisement -

A Ginnie Mae bond mutual fund is one of the most conservative ways to invest in real estate. These mutual funds invest in mortgage-backed securities. It's not what most people have in mind when they think about investing in real estate, but buying securitized mortgages does count as a real estate investment.

Two bad years in the stock market is a strong reminder that your portfolio needs to be diversified across investments, but it isn't a reason to rush for the exits and abandon investing in stocks. A real estate slump can negatively impact your returns, too.

-- Posted: May 6, 2002

Read more Dr. Don columns here
top of page
See Also
What is a REIT?
Buy real estate in your IRA
More Dr. Don stories

Print   E-mail

30 yr fixed mtg 4.32%
48 month new car loan 2.91%
1 yr CD 0.68%
Alerts


Mortgage calculator
See your FICO Score Range -- Free
How much money can you save in your 401(k) plan?
Which is better -- a rebate or special dealer financing?
VIEW MORE CALCULATORS

BASICS SERIES
Begin with personal finance fundamentals:
Auto Loans
Checking
Credit Cards
Debt Consolidation
Insurance
Investing
Home Equity
Mortgages
Student Loans
Taxes
Retirement

MORE ON BANKRATE
Ask the experts  
Frugal $ense contest  
Quizzes  
Form Letters


- advertisement -
 
- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

Bankrate.com ®, Copyright © 2014 Bankrate, Inc., All Rights Reserved, Terms of Use.