Let AI Pick Your Perfect Self-Directed Solution!

IRA Financial Blog

Why Banks are Afraid of Real Estate Investing

Self-directed IRA real estate investing

Self-Directed IRA Real Estate Investing

There are multiple reasons that real estate is an attractive investment. It appreciates in value, therefore acts as a hedge against inflation; it offers a relatively predictable cash flow through rental income and it helps diversify investment portfolios. So it’s no wonder that real estate is the most popular alternative investment among self-directed retirement investors. When you establish a self-directed plan, such as the Self-Directed IRA, you can easily invest in real estate with your retirement funds. 

Here’s an important takeaway: establish your Self-Directed IRA through a passive custodian, also known as a Self-Directed IRA custodian. The other route is to establish your plan at a bank or financial institution to set up a “Self-Directed” IRA. But that won’t be a “true” self-directed plan. Let us explain: 

Banks Only Sell Their Financial Products

Did you know there are over 50 million IRAs worth more than $9 trillion? Obviously, retirement planning is big business. There’s competition across all types of financial institutions, including banks, trust companies, credit unions and brokerage firms. They all want a piece of the pie. Generally, these institutions can be trusted to house your IRA funds. However, be prepared to have a limited menu of investment options.

Why, you ask? It’s simple – money! Banks and other financial institutions make profits with the financial products and services they offer you. Further, they prefer you leave your money invested in those products for a long period of time. They charge you high commission fees and leverage the power of your savings.

Therefore, most financial institutions, such as Vanguard and Fidelity, don’t make it known that you don’t have to invest in traditional asset classes. After all, they’re in it to make as much money as possible. If they allow you to invest in alternative assets, such as real estate, they can’t charge commissions. Plus, your funds tend to move from one investment to the next, and never sit there too long.

The only way to take full advantage of your retirement savings is by self-directing them. The use of a Self-Directed IRA with a passive custodian is the only way to have full investing freedom. After all, the IRS only tells you what you cannot invest in, and the list is very short. You cannot use an IRA to invest in life insurance, collectibles and one that involves a disqualified person.

Self-Directed IRA Real Estate Investing

As you can tell, banks are certainly afraid of Self-Directed IRA real estate investing. The more people learn about Self-Directed IRA, the less customers the banks will have. Real Estate is one of the most proven investments around. Plus, when you use your IRA to invest in real estate, all taxes are deferred until retirement. If you use a Roth IRA, all qualified distributions are tax-free!

Real estate investments choices are nearly endless. You can choose residential or commercial, raw land or developments. You may opt for the steady stream of rental income or hit it big with a fix and flip. One of the newer types of investments is crowd-funding. You can invest smaller amounts of money in different properties, giving yourself more diversity.

Check this out: Real Estate Investing with an IRA Made Easy

Real estate will always be big business. While no one can guarantee your success, with the proper diligence, you can make it big. Note: IRA Financial Trust is simply an IRA custodian. All information found on this site (including this article) is for educational purposes. Always consult with a financial planner before investing.


Don’t let the banks decide what you should invest in. There’s no reason to not use a Self-Directed IRA for your retirement planning. Not only can you invest in real estate, but anything else you can think of, including traditional assets like stocks and mutual funds.

Give us a call at 800.472.1043 if you have any questions about Self-Directed IRA real estate investing. We won’t keep any secrets from you!


Latest Content

Send Us a Message!