[Editor’s Note: The following guest post was submitted by Bernard Reisz, CPA, and founder of ReSure, LLC, and 401kCheckbook.com, companies that help their clients to invest their tax-sheltered funds in alternative assets. We have no financial relationship.]
Real estate is an attractive asset class for many reasons and should have a place in every diversified portfolio. There are many ways to obtain exposure to real estate, with varying risk, reward, and liquidity characteristics. In the past, real estate investments were most easily accessible through publicly-traded real estate investment trusts, or REITs, as well as non-traded REITs. In recent years there has been a considerable increase in real estate investment through other channels, especially syndications, crowdfunding, and direct real estate investment. While REIT investments may be accessible through a traditional brokerage account, the newer avenues of real estate investment are not.
Investing in Real Estate Through Tax-Advantaged Accounts
Increased interest in the real estate asset class has led many investors to ask if tax-advantaged accounts – IRAs, 401(k)s, HSAs, ESAs, and others – can invest in real estate via syndication, crowdfunding or direct investment. Investors are cognizant of the unavailability of such investments in their brokerage accounts, leading to the erroneous conclusion that regulated tax-advantaged accounts are precluded from pursuing illiquid investments.
The truth is that the Tax Code imposes few restrictions on the types of assets in which tax-advantaged accounts may invest in. As such, all retirement accounts can invest an array of alternative assets, including private lending, hard money lending, litigation finance, cryptocurrency, livestock, tax liens, and many others.