According to industry projections, the global real estate market is expected to reach $654T in 2025, underscoring its significance as an opportunity for investors. In fact, as of early 2025, real estate market sentiment has shown significant improvement. The RCLCO Real Estate Market Index (RMI) increased by over 25 points in the latter half of 2024, reaching 65 by year-end—a level indicative of positive or improving market conditions. The Future RMI is projected to rise to 82 within the next 12 months, signaling a return to expansion in the real estate sector. Actual market conditions may vary due to factors such as interest rate fluctuations, economic cycles, and regional market dynamics, which can impact real estate performance.
In this article, you'll learn:
- What real estate investing is
- The types of real estate investments
- The potential benefits of investing in real estate
- The advantages of self-directed IRAs for real estate
- How to invest in real estate with Alto IRA
- Whether real estate investing is right for you
What is Real Estate Investing?
Real estate investing involves purchasing, owning, managing, renting, or selling real estate assets to generate income or profit. It has evolved from simple land ownership to a diverse market of assets and investment vehicles. These include:
- Direct property ownership: The act of purchasing and owning physical real estate properties
- Residential real estate: Investments in properties designed for living purposes
- Commercial real estate: Properties used for business purposes or to generate income
- Land investments: Acquiring and managing undeveloped or agricultural land for profit
- Real estate development: Improving raw land or renovating existing properties
- Managed funds: Dedicated investment funds for a specific real estate strategy
- Real estate investment trusts (REITs): Companies that own, operate, or finance income-producing real estate
- Publicly traded REITs: Listed on stock exchanges
- Equity, Mortgage, and Hybrid REITs: Focusing on property ownership, financing, or a combination.
- Private REITs: Not listed on public exchanges.
- Real estate crowdfunding: Platforms for investing in property stakes or loans.
- Pooled real estate investments: Methods for multiple investors to participate in real estate projects.
Each option offers unique potential benefits and risks, catering to different investor profiles and strategies.
The potential benefits of investing in real estate
Real estate has played a significant role in wealth creation, with its roots tracing back to ancient civilizations where land ownership signified power and prosperity. Over centuries, the ability to buy, sell, and develop property has evolved, shaping economies and providing individuals with opportunities to build long-term financial stability. In modern times, advancements in financing, technology, and investment structures have made real estate increasingly accessible to a broader range of investors. Whether through direct property ownership or indirect investments like real estate investment trusts (REITs), individuals can participate in this historically resilient asset class and capture its potential benefits.
Returns
Real estate investments may generate returns through two primary mechanisms:
- Appreciation: The increase in property value over time.
- Income: Regular cash flow from rental payments or REIT dividends.
Additionally, real estate offers several secondary benefits that can enhance overall returns:
- Tax Benefits: Depreciation deductions, mortgage interest deductions, and capital gains tax deferral.
- Inflation Hedge: Property values and rents can often increase with inflation.
- Leverage Potential: Control large assets with relatively small capital.
- Control: Influence property performance through improvements and management.
Investors can leverage these mechanisms through various strategies, from buy-and-hold approaches to more active management and development.
Portfolio Diversification
- Low Correlation with Stocks and Bonds: Real estate tends to have a lower correlation with traditional investments, helping to reduce overall portfolio risk.
- Market Stability: Real estate can serve as a stabilizing asset class during periods of stock market volatility.
While the allure of real estate is clear, it's important to understand that these benefits aren't uniform across all real estate investments. The exact advantages can vary based on factors such as location, property type, market conditions, asset quality, and investment strategy.
Investing in Real Estate Through Self-Directed IRAs
Real estate investments may provide significant tax advantages, including potential deductions for mortgage interest, property taxes, and depreciation. When held within a Self-Directed IRA (SDIRA), these benefits can be further optimized through tax deferral or tax-free growth, depending on the account type.
Benefits of investing in real estate through a SDIRA include:
- Tax-advantaged growth: Investments grow either tax-deferred (Traditional SDIRA) or potentially tax-free (Roth SDIRA).
- Income shelter: Rental income and capital gains within an SDIRA are not immediately subject to taxation.
- Potentially compounding returns: Tax-advantaged reinvestment of investment growth.
- Increased control: Access to investments beyond traditional custodian offerings.
- Increased purchasing power: Access to a larger pool of your investable capital.
- Extended investment horizon: Aligns with real assets’ illiquid, buy-and-hold nature.
These advantages are generally unavailable when investing in real estate outside of a Self-Directed IRA, making it a highly beneficial strategy for tax-efficient investment growth.
Investing in Real Estate through an AltoIRA
Alto IRA simplifies adding real estate to your retirement portfolio while maintaining IRS compliance through several methods:
- Alto Marketplace: Accredited investors can find real estate investing opportunities in Alto’s curated selection of private investment opportunities, See Alto’s current investments here.
- Invest in your own deal: If you already have a specific real estate investment opportunity in mind, you can work with the investment provider or issuer to invest retirement assets through Alto’s Private Raise Portal. Learn how it works here.
- Integrated Partners: Discover real estate investments and more available on our Integrated Partners’ platforms, who offer a range of options for your self-directed IRA. See your options here.
Is investing in real estate right for you?
Real estate investing typically suits investors who:
- Seek potential portfolio diversification
- Have a long-term investment horizon
- Are comfortable with illiquid assets
- Have an interest in real estate markets
While expertise is beneficial, many platforms offer curated options and expert guidance. Investing in real estate requires careful consideration of unique financial situations, and investors must be prepared to suffer total losses of their capital contribution.
Unlocking the Potential of Real Estate as in your Retirement Portfolio
Real estate is a well-established alternative investment, providing opportunities for diversification, income generation, and long-term appreciation. When paired with the tax advantages of an SDIRA, it offers a unique way to enhance your wealth-building strategy.
Looking to take your investment strategy to the next level?Explore how Alto IRA can help you unlock the potential of real estate investments, giving you the tools to take control of your portfolio and shape your financial future.
