Investing in Distressed Commercial Property with Self-Directed IRAs: Insights from Next Generation's CEO
TL;DR
Investors with self-directed IRAs can take advantage of distressed commercial properties, providing a new avenue for potential investment.
Declining asset valuations and transaction volume, along with loans facing maturity, have contributed to the growing pool of distressed commercial properties in the U.S.
Investing in distressed commercial properties can revitalize struggling areas, provide job opportunities, and contribute to the growth of local economies.
The emerging decline of commercial property tenancy and increasing delinquency rates among office building owners present new opportunities for alternative asset investment.
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Jaime Raskulinecz, CEO of Next Generation Trust Company, has shed light on the growing opportunities for investors to acquire distressed commercial property using self-directed IRAs. The decline in commercial property tenancy, exacerbated by work-from-home trends and the rise of online shopping, has created a substantial market of distressed assets.
According to Raskulinecz, the market value of distressed commercial properties reached nearly $86 billion by the end of 2023, with offices comprising 41% of this value. Additionally, a Wall Street Journal report indicates that over $2.2 trillion in commercial mortgages are set to mature by the end of 2027, contributing to the pool of distressed properties.
In a recent blog article on her firm's website, Raskulinecz highlighted that the pool of potentially distressed properties was $234.6 billion at the end of 2023, with multifamily markets representing $67.3 billion and offices $54.7 billion. Delinquency rates among office building owners have also increased significantly, from 0.57% in January 2023 to 6.28% in January 2024, marking the longest period of increasing delinquency rates since 2019.
Raskulinecz emphasized that while the current environment may seem dire for property owners, it presents a unique opportunity for savvy investors. Self-directed IRAs allow for investing in various types of commercial real estate, including office buildings, multifamily properties, warehouses, self-storage facilities, strip malls, shopping centers, and hotels. These investments can offer long-term returns through asset appreciation and potential rental income.
In a Forbes Finance Council article, Raskulinecz discussed the benefits of using self-directed IRAs for real estate investments. She noted that income and expenses related to these assets flow through the account to avoid prohibited transactions, maintaining the tax-advantaged status of the IRA. Next Generation Trust Company executes transactions and holds custody of these assets on behalf of its clients.
For those interested in understanding how real estate investments are handled within self-directed IRAs, a comprehensive explanation is available in the blog article on the Next Generation website. This strategy, once reserved for the very wealthy, is now accessible to a wider range of investors looking to build retirement wealth through nontraditional investments.
Curated from 24-7 Press Release
