Are you shocked at how your 401K has turned into a 201K over the past three years? If you are tired of watching your IRA collapse during COVID and then crawl back in 2022 only to be decimated by soaring interest rates, then you should consider investing in the Safety, Security and Stability of commercial real estate. Investing in commercial real estate is easier today than ever before. By taking control of your destiny and converting your Individual Retirement Account (or 401K) into a Self Directed Retirement Account (SDIRA), you can diversify your investments out of the roller coaster that is the equities market and into REAL property—real assets that retain value over time.

You do not need to be a millionaire to invest in commercial real estate assets! Here at Millcreek Commercial, fractional ownership of commercial real estate is our expertise. With our product you can play the commercial real estate game with as little as $100,000. Millcreek acquires and/or develops high quality commercial assets throughout the country and makes them available for your proportional investment. You can purchase a fraction of a surgery center or a 5% interest in a national retail outlet. If you are ready to exit the volatility of the stock market and are interested in a safe, secure, and stable real estate investment through your SDIRA, then we are here for you! Browse our available properties here.

In this article, we will explore four reasons why commercial real estate is the best SDIRA investment: Steady Passive Income, Underlying Appreciation Potential, Portfolio Diversification, and RMD (Required Minimum Distributions) Management. 

 

Steady, Passive Income

When considering investing in commercial real estate, the most popular reason is the passive, steady income stream. Corporate real estate leases are consistent and predictable. Cash deposits appear in your SDIRA account monthly from the tenant. 

Commercial leases are often structured as NNN (triple net). A triple net lease means that the tenant is responsible for paying for all conceivable expenses related to the property. This includes the property taxes, utilities, insurance, and maintenance of the property. This is absolutely game-changing for people familiar with residential rental properties. This lease structure eliminates unforeseen expenses and ensures that the rental income is truly passive. 

Commercial real estate rental income is particularly attractive for IRA investors primarily because it can provide that steady income for their retirement years – more on this under the RMD section below!

Moreover, many commercial real estate leases are long-term and come with built-in rent escalations, meaning the rent will increase over time. This allows investors to protect against inflation and maintain purchasing power; for example, a lease may start with a rent of $10,000 per month and increase by 2% annually, meaning that by the end of the lease term, the rent will exceed $12,000 per month. Rent escalation allows investors to increase their cash flow and build wealth throughout the life of their SDIRA investment. Good news: we have properties with rent escalations built into the lease—click here to view our available properties.

 

Underlying Appreciation Potential 

While we focus our investment properties on Safety, Security and Stability, investing in commercial real estate also affords an investor potential for underlying appreciation. When a commercial asset is built in “The Path of Growth”, the demand for commercial real estate tends to grow at a rate that often outpaces the rent escalations contained within the lease. The result of this is an increase in the underlying property values. This increase in value can be recaptured at the end of the lease term when the property is leased to a new tenant or the existing tenant renews. 

Here at Millcreek Commercial, we are experts at locating properties in the path of growth— located in growing markets and/or in areas with limited commercial real estate supply. We rigorously vet our properties to be sure that they are fully-managed, so you can have more time to do the things you love. 

 

Portfolio Diversification

Commercial real estate values do not follow the volatile stock market. Commercial real estate is a separate asset class from stocks, bonds, and other traditional investments, and can help to reduce the overall volatility of your SDIRA investments. Investing in commercial real estate is considered by most financial advisors as inherently secure, and Millcreek Commercial properties are especially safe, secure and stable.  

Within the commercial real estate asset class, there are a range of property types, tenant sectors and locations. With Millcreek Commercial, investors can distribute their real estate portfolio among multiple properties even further diversifying their investment portfolio. We refer to this diversification as a “Bespoke” (custom) REIT. An investor with as little as $300,000 can divide their investment into several of our properties to help diversify a portfolio even more. For example, an investor may choose to invest in a retail store in Alabama, an education center in Illinois, and a healthcare clinic in Texas. By diversifying their investments across property types, tenant business sectors and locations, investors can reduce their exposure to any one particular market or property type, reducing their overall risk. Click here to schedule a consultation with our team to discuss how we can help you diversify your SDIRA. 

 

RMD Management

At some point, retirees want to begin withdrawing from their retirement accounts to augment their golden years. Most IRAs are fully vested in equities, so withdrawing cash from these assets requires the sale of stocks or bonds, thus depleting the value of the portfolio. This practice has been particularly painful this past year as most equities fell into negative territory, meaning investors were selling at a loss to secure their income or meet their RMD.

At the age of 72, the federal government requires that you begin withdrawing from your retirement account regardless of need. These mandatory distributions increase every year. Lacking a strong cash producing asset, RMDs require investors to begin depleting the size of their retirement accounts. However, with a strong real estate allocation, investors are able to use monthly rental income (often in excess of a 6% annual return) to satisfy the RMDs well past their typical life expectancy. This allows investors to preserve their wealth for future generations. 

 

Overall, investing in commercial real estate with an SDIRA offers a wide range of benefits to investors and can build incredible wealth, while being completely passive. From the steady stream of rental income to the potential for appreciation, portfolio diversification, and RMD management, commercial real estate can provide investors with a reliable and profitable investment option with minimal risk. Investing in commercial real estate can be a lucrative and rewarding experience for SDIRA investors—especially when investing in a Millcreek Commercial Property. 

Interested in learning more? Schedule a free consultation today or call us at 385.248.0613 to discuss how we can help you build your wealth and legacy.