What to invest in? CD's, IRA, or Real Estate

I chose R.E.

I got this thing in the mail from some investment place that caught my eye. It had a breakdown on what you would earn if you put in $100.00 per month, for 30 years. I think it was an IRA of some sort (don’t know much about these things). It got me thinking a little bit so I ran some numbers.

I currently do a little bit of R.E. wholesale in the SF Bay Area, but it is extremely difficult in this market. I plan on moving back to the midwest within a year or two to wholesale more successfully. Now the numbers I came up with are below.

The thing I got in the mail said you could put $100 per month in some sort of IRA, I think around 4-5%, and in 30 years will have put in $36,000 and have accumulated $150,000. So will have gained $114,000. Ok sounds good right.

Now, if I move back to the midwest, the appreciation rate has been traditionally around 4% per year, sometimes more, hardly ever less. It is much more steady and predictable than the Bay Area. That means if I buy a house for $100,000 to rent it out, in 30 years it will be worth around $220,000. That means it will have gained $120, 000, and if done right will not have had a dime out of pocket (in all actuality it will have out of pocket expenses at some point). Thats if it cash flows, which in the midwest isn’t hard to do if bought correctly.

To me R.E. just makes a heck of a lot more sense. I’m glad there are so many “traditional” investors. Meaning people who work their 9-5 with two weeks vacation per year, put a little bit of money into an IRA and retire at age 65 (or later) with a little bit of money (don’t get me wrong, there is absolutely nothing wrong with doing that). Less competition for me.

Just thought I’d share my thoughts. Let me know what you think!

It’s all about diversification. Real estate is nothing more than another asset class in which to invest. But direct investment in real estate can be labor and time intensive; dealing with tennants, making repairs etc. Prudent diversification across multiple asset classes (stocks, bonds, RE etc.) not only increases overall return but reduces risk.

Why not do a Self Directed IRA for the purchase of real estate. This will allow you to purchase real estate within an IRA