A recent survey of real estate purchases by The Entrust Group's self-directed IRA (SIDRA) clients shows that almost 28 percent of them have at least one property in their portfolios, with many buying up multiple properties.
The Entrust Group recently conducted an analysis to provide more insights for investors and financial advisors into the type of real estate its clients are purchasing, and the results proved to be quite revealing.
The survey showed that of more than 300 real estate purchases by The Enturst Group's IRA clients clients, 75 percent showed a preference for residential property. Single family homes accounted for 47 percent of those purchased, while multi-family buildings were selected by 26 percent of clients. Vacant land purchases made up the third largest group of purchases, while commercial properties were also of interest to IRA clients, the study found.
According to Jason Craig, President of The Entrust Group, the results should prove to real estate agents that they are missing opportunities to help clients buy and sell certain types of properties for investment purposes. “Realtors representing commercial property and vacant land should still be mindful of this market,” Craig said. “The third largest group of purchases last year by our clients was vacant land (19 % ) while four percent bought commercial property.”
Craig explained that the IRS allows SIDRA owners to purchase real estate through their retirement accounts. “For many people this is a valuable addition to their retirement portfolios,” Craig explained. “Nearly 30 % of our accounts hold real estate. Some have more than one property. Often people have already identified property they wish to purchase before opening a self directed IRA.”
The Entrust Group's survey also provided plenty of comparative data on where its clients purchased real estate. California accounted for the majority (31 percent of all properties), followed by the states of Florida and Texas (8 percent each), Arizona and Missouri (7 percent), and Nevada (5 percent). In most cases, the purchases were made in the same state where account holders live, reflecting the fact that many prefer to buy locally, in areas they're familiar with.
There were some regional variations in property preferences though. Forty percent of the transactions in California were for multi-family homes, and just 35 percent for single family homes, for example. Meanwhile in Texas, the trend was reversed, with 62 percent of purchased properties being single family homes, compared to just 15 percent for multi-family. There was a much greater interest in vacant land in Florida, where it accounted for 41 percent of all purchases, compared to just 36 percent for single family homes.
“We are not presenting our findings as a national look at this topic but we did analyze more than 300 purchases in 10 states. To our knowledge, no other organization has ever compiled any statistics regarding real estate preferences of self-directed IRA owners,” said Jason Craig, President of Entrust. Highlights of the survey include:
“We believe these results and others from the study can be interpreted as reflecting a strong, yet varied demand for real estate by all individuals throughout the country who have self‑directed IRAs” said Craig. “They believe that real estate diversifies a retirement portfolio and is a hedge against inflation.”
Craig predicted the self‑directed IRA demand for real estate is likely to increase as current account holders continue contributing annually to their accounts and more people open them.