Americans’ Favorite Long-Term Investment is Real Estate – the Most Popular Asset Class in Self-Directed IRAs

Published on July 1, 2024

A survey from Gallup showed that Americans feel the best long-term investment is real estate. The organization’s annual Economy and Personal Finance survey was conducted in April; 36% of this year’s respondents chose real estate over stocks, bonds, savings accounts, gold, and cryptocurrency. Real estate was selected by between 30% and 45% of respondents every year in the Gallup survey since 2014. The survey is intended to provide a look at sentiments among typical investors.

Real estate’s top rank is no surprise, given that returns on investments in this asset class have been about 215% since 2000; this is according to the S&P CoreLogic Case-Shiller home index, which tracks changes in residential real estate values nationwide. Historical rises in home values may feed the taste for real estate investments. Again from a Gallup poll, 68% of U.S. adults expect home prices in their area to increase in the coming year—up from 56% a year ago.

Real estate as a self-directed investment

Did you know that real estate is the most popular alternative asset in self-directed IRAs? Real estate investments include:

-Vacation property

-Multifamily property

-Private REITs

-Foreign property

–Distressed properties

-Farmland

-Raw land

-Rehabs

-Funds that invest in real estate

-Self-storage facilities

-Warehouses

Why real estate is such a popular investment

People who invest in alternative assets—such as real estate—know that these investments are an excellent way to diversify their retirement portfolios and hedge against inflation. Other reasons for real estate’s popularity are:

• Rental prices and property values tend to rise along with inflation.
• Rental property provides steady passive income to build retirement wealth (as all income and expenses associated with the asset flow through the retirement account).
• As a long-term investment, real estate offers stable returns compared to the ups and downs of the stock market.
• It has potential for appreciation over time.
• When included in a self-directed IRA, real estate investments grow tax-deferred or tax-free.

Buy & hold for long-term gains

Real estate investors that hold rental properties within their self-directed IRA typically fall within the “buy & hold” camp investing strategy, in which the self-directed IRA generates recurring rental income during the hold period (usually five or more years). This long-term strategy enables account owners to build tax-advantaged wealth within their retirement plan, as investors benefit from property appreciation and—as noted above—build a hedge against stock market volatility and inflation. This differs from the short-term fix & flip strategy of buying a distressed property to renovate and sell it right away at a higher market value.

Get started with a self-directed IRA at Next Generation

Next Generation provides full account administration and asset custody for the alternative assets our clients include in their self-directed IRAs. We also offer client education with webinars, white papers, and complimentary educational sessions, which you can schedule here. If you prefer, you can always contact us at NewAccounts@NextGenerationTrust.com or by phone at 888.857-8058 to get answers to your questions about self-direction as a retirement wealth-building strategy.