3 Ways to Use Your Retirement Savings for a Multifamily Investment

Posted by Steven Davis on December 12, 2017

Would you like to secure a solid retirement income that isn’t dependent on the whims of Wall Street?

If you are a seasoned real estate investor who specializes in fix and flip or rental properties, you can use your retirement money for multifamily investments and generate passive income for retirement through rentals.

Best of all, it’s easier than you think with a lender like 5 Arch on your side. Read on for three ways to use your retirement investments to fund multi-dwelling units (MDU).

1. Sell Your Own Home to Buy an MDU

If you’re a retiree already considering right-sizing your home, you can sell your house and use the money to buy an MDU. Whether it’s a duplex, a fourplex, or a high-rise, you can live in one of the units while renting the others out for retirement income.

2. Tap Into Your IRA to Buy an MDU

If you have an established IRA and you don’t plan to live in your investment property, you can tap into your IRA to pay for your MDU investment. Using an IRA to buy property defers any taxes you may have to pay if you simply withdrew from your IRA funds. You can even roll the money, tax-deferred, into a second property if you decide to sell. You can also roll your earnings back into the IRA tax-deferred.

However, using your IRA to fund your investment property has a number of limitations as well. You can’t live in the MDU, rent to relatives, or claim any depreciation on the property. Additionally, you have to hire contractors to perform any work on the property and a property manager to take care of it and manage your tenants. If you’re looking at generating passive income from MDUs in your retirement, this is not necessarily a negative, but it is a consideration.

If you would prefer to spend a few hours a week managing your property rather than pay someone else, you are not permitted to do so if you invested with your IRA.

3. Take Out a Loan for Your Investment Property

If you do not have an IRA and you would prefer to keep your home, lenders may consider the right property a good credit risk. As long as you can show the property has profit potential and you have a history of successful investment properties, you may be able to turn to a lender like 5 Arch for a loan with single-digit interest rates.

Choosing a Multifamily Rental Property

If you plan to live in your multifamily investment property, your choice may be easy. You will want to invest in the area you want to live, in a building you would want to live in.

Even if you plan to keep your current home or invest in multiple MDUs, it can be wise to invest locally. You know your own region and even if you hire someone else to manage the property, it is easier to keep tabs if you live close by.

MDUs that appeal to today’s families have open floor plans with flexibility. Renters are also looking for lots of closet space, and perhaps a bonus room they can use as a home office or playroom. In addition, MDUs in walkable suburban areas are growing in popularity. Unable to afford homes in city centers, renters turn to the urban outskirts, sometimes called “the urban ‘burbs.”

Overall, most renters are seeking a sense of community, close proximity to shopping, schools, parks, and churches, and access to public transportation to reach the nearest city. If you can find all or most of these things in a multifamily investment property, it may be time to take the plunge. Multifamily investment properties can help you generate passive income for retirement.

5 Arch Can Help You Fund Your Retirement: Apply for a loan for a multifamily property today!



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