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The Ultimate Cheat Sheet on Self-Directed Real Estate IRAs
Posted on September 2, 2014 bySelf-Directed Real Estate IRAs are a powerful tool that allow for tax-free and tax-deferred profits. In some cases, capital gains taxes can even be avoided when investing within an IRA. Still many people are still unclear on how to transition from investing in real estate outside their IRA into investing in real estate within their IRA. We’ve compiled a cheat sheet summary in this article to serve as a reference tool.
The Account
First and most importantly, you need to open and fund a Self-Directed Real Estate IRA. This involves simply filling out an application which is quick and easy with American IRA [Hint: The American IRA staff will be standing by to help with this]. The second and most important part is to fund your new account. You can fund an account by making a contribution, transferring funds from another IRA, rolling over funds from another IRA, and/or any combination thereof. When transferring from another IRA, it is important that you follow up persistently with your prior custodian to make sure they move your funds in a timely manner [Remember: You are moving money “away” from them so they are in no hurry.].
Finding Assets
Once your account is open and funded, you are ready to find deals on those assets that you want to purchase. Before making an offer on that asset, make sure you review the list of prohibited assets to ensure that the asset you want to purchase is permitted. Prohibited assets include: life insurance, certain kinds of precious metals, art, alcoholic beverages, and collectibles. You also need to make sure you are not purchasing the asset from a prohibited individual including: yourself, your spouse, your descendants, your ascendants, nor their spouses or entities they own or control. Read More→
How to Add Real Estate to My IRA
Posted on July 28, 2014 byThere’s nothing out there that quite offers the unique advantages of direct investment in real estate:
- Tangible value
- Potential for substantial income from rent
- Potential for capital appreciation
- Effective safeguard against inflation
- Extensive availability of leverage
- Ease of borrowing against the asset for other investing
- Effective hedge even against economic collapse
REAL ESTATE IRA BASICS
The good news is, though, is that it’s quite easy to hold real estate – actual, tangible real estate – within your IRA, provided you adhere to a few basic rules. Read More→
A Self-Directed IRA Investor, a Realtor, or an Investor?
Posted on July 1, 2014 byHave you ever considered which of these options will bring you more money?
- Investing in real estate as a Self-Directed IRA investor
- Using your real estate knowledge to earn your living through commissions (real estate sales as a career), or
- Simply investing in real estate
The truth is that each option has its benefits though, as with any other investment, it is always good to diversify. This means that the best option would be to do “all of the above”.
We have met so many realtors who depend upon their real estate commissions to make a living. While realtors and brokers have a wealth of experience in real estate and while they have the unique privilege of seeing the homes coming up for sale before they are advertised, many of them are not real estate investors.
In our last articles, we spoke to you about educating yourself about Self-Directed IRAs so that you can increase your customer base to include Self-Directed IRA investors. In this article, we are going to take it one step further and encourage you to put your real estate knowledge to work for you at a whole new level. Consider for a moment that you can continue to collect commissions from your real estate sales and you can also use your real estate knowledge to purchase real estate. Read More→
Self-Directed IRAs and Real Estate – Part 2 of 2
Posted on May 31, 2014 byIn part 1 of this article, we talked about the steps realtors can take to attract Self-Directed IRA investors as clients. In part 2, we are going to speak about making it grow.
Once you are familiar with Self-Directed IRAs and you have perfected your follow-up process, you are in a position to run some unique advertising that is sure to generate a bunch of new clients. You simply run ads that say that you are a realtor who services Self-Directed IRA investors. I can tell you from experience that many Self-Directed IRA clients are wishing they had a realtor who actually understood the Self-Directed IRA investing process.
Keep in mind that current Self-Directed IRA investors are not your only source. When you are familiar with Self-Directed IRAs, you will be in a position to educate investors about a source of funds that they may not have previously considered. There is a wealth of investors out there that have money sitting idle in retirement accounts and our experience has shown that they are very happy to learn they have more funds available to invest with than they realized. We can also help you with this. If you have someone you have introduced to Self-Directed IRAs and you want them to have someone in the industry to talk to, we will be glad to discuss Self-Directed IRAs with them. We offer free consultations and can speak to them about their specific situation and how Self-Directed IRAs will work within that situation. Read More→
Self-Directed IRAs and Real Estate – Part 1 of 2
Posted on May 2, 2014 byAs many of you know, our CEO and Senior Vice President are also avid real estate investors. Their experience has proven invaluable in servicing our clients most especially in relation to real estate closings. What you may not realize is that our client base consists largely of people who are using their Self-Directed IRAs to invest in real estate. This is a win-win for both our clients and the realtors who are servicing those clients.
Even more promising for both groups is that the real estate market is perfect for investors. Prices are still relatively low and there is a surplus of homes available. So, you may be wondering how you can benefit from the Self-Directed IRA/Real Estate boom. The answer is simple…any one can benefit from this boom. Whether you are an investor or a realtor, there is plenty of opportunity to increase your wealth. In part 1 of this article, we will speak to realtors about what they can do to obtain new clients and generate more income by working with Self-Directed IRA investors.
The first and most important thing is to get educated about Self-Directed IRAs. Listen, before you think this is a sales pitch, hear me out. Self-Directed IRA investors have something very important, money. They have the funds to close the deals. Consider that for a moment and you will realize that means, in many cases, financing will not be a factor. As you know, financing often results in road blocks along the way that can prevent you from closing the deal and collecting your commission. The other thing that many Self-Directed IRA investors have is experience. They are familiar with the real estate process which lessens the chance of a delayed and/or failed closing due to a buyer’s inexperience. Self-Directed IRA investors are also great repeat clients. They buy numerous properties and the better their success, the more they buy. Read More→
How to Avoid Getting Ripped Off When Buying Turn-Key Real Estate
Posted on April 4, 2014 byMake money while you sleep…
There’s nothing sweeter than making money while you sleep by owning free and clear residential real estate. Think about it, you spend a third of your life sleeping, imagine how much more income you can make if you have passive Cash flow.
Sounds great doesn’t it…
“Making money while you sleep”, “massive passive income”, “owning free and clear residential real estate”…it all sounds great, still we have all heard the stories of people that lost their shirts trying to make this a reality. You can avoid getting ripped off by asking 12 critical questions. The key to making successful turn-key investments it knowing the questions you need to ask.
Question #1: Do the principals actually invest their own money in cash flow real estate?
Would you buy a Mercedes from a guy who drives a Chevy? Ask them what they invest their money in. It’s quite common in the real estate teaching world to find guru’s that make their money from teaching and not by following their own teachings. Read More→
“Subject To” – A Little Known Funding Method that Self-Directed IRA Investors Are Using
Posted on February 28, 2014 byThe problem…
You and/or your client have found real estate to purchase. The inspections go beautifully and then a giant road block shows up. What’s the road block? Your client wants to purchase it with their Self-Directed IRA and their IRA can’t qualify for a non-recourse loan because it doesn’t have the cash reserves for the 35% down payment the non-recourse lender is requiring.
The solution…
Self-Directed IRA investors have a technique they call “Subject To” that can solve this funding problem. The “Subject To” loan qualifies as a non-recourse loan and can be used to purchase real estate within a Self-Directed IRA. It should be noted that the “Subject To” method can be used for deals whether the property is being purchased by an individual or by their IRA.
“Subject To” defined
Subject To means “Subject To the existing mortgage on the property.” Put simply, the owner of the property transfers the deed to the property into the buyer’s name (or the name of the buyer’s Self-Directed IRA) and the buyer (or their Self-Directed IRA) is responsible for making the payments on the seller’s existing mortgage. Read More→
Caution! Inaction Could Disinherit Your “Intended” Self-Directed IRA Beneficiaries
Posted on January 24, 2014 byNow that January is past, it’s time to settle in and think about some of the more important but often forgotten items. Chief among them is your beneficiary designations. The person or entity currently slated to inherit your Self-Directed IRA account may no longer be the person you want to inherit your account. This applies to your Self-Directed IRA, accounts under employer plans such as 401(k)s, 403(b)s, profit sharing plans, pension plans, and the many assets you have worked hard to acquire. There are numerous documented cases of individuals or estates inheriting retirement accounts and assets when the owner wanted the beneficiary to be a different party. The following tips can help you to track your beneficiaries and assets:
- Maintain a beneficiary file: Create a list of all of your retirement accounts/assets and identify the named beneficiaries. If you do not already maintain all of this information in one easily accessible area, now may be a good time to start. This will help you to keep track of both your current beneficiary designations and all of your assets.
- Perform annual check-ups: Check your beneficiary forms and your Will at least once per year to determine if you need to make any changes. Events involving your beneficiaries may necessitate changes to your current named beneficiaries. For instance, you may have gotten married or divorced, and need to update your beneficiary form to add or remove your spouse or former spouse. Read More→
Buying a Business With Your Self-Directed IRA
Posted on December 30, 2013 byStocks, bonds and mutual funds are all well and good – for those seeking ordinary returns. But if you have a particular expertise, or access to a lucrative market for just about any good or service, you have the potential to earn much more by going into business for yourself than you stand to gain by investing in the broad market.
Fortunately, your Self-Directed IRA doesn’t limit you to the mundane investments you read about in the papers all the time. In fact, IRA rules only restrict you from investing in a few things: life insurance, jewelry, gemstones, art and other collectables, alcoholic beverages, and some forms of gold and precious metals of insufficient purity or standardization. Other than that, the sky’s the limit on what you can own!
Owning a Business in Your Self-Directed IRA
By using your Self-Directed IRA to start or acquire a business, you are in control. Rather than hoping against hope the market will be kind to you this year, you can make things happen yourself. Want your business to grow? You can invest in advertising, new equipment, a new truck, more staff – whatever it takes to react to the current economic environment. Many of our clients find that investments like these often pay off far better than anything the same investment reasonably earns in the stock market, at least at an acceptable level of risk. This must be an arm’s length business, you can’t operate the business, and you can’t draw a salary from it. Read More→
Self-Directed IRAs: Investing in What You Don’t Know
Posted on November 26, 2013 byIf you’ve been following our articles, then you know we have often talked about how self-directed IRAs give you the freedom to invest in what you know and understand with your retirement account. This is the first time that we will talk about investing in what you don’t know.
Setting the stage…
Introducing Jenna, she is new to real estate investing and knows some very experienced real estate investors she can lean on for advice. She’s looking for her first deal and has not yet mastered the art of networking.
Jenna’s Goal…
Jenna is looking for her first purchase with her self-directed IRA…a single family home for $60,000 or less in an area that currently has a shortage of rental properties available. She wants 50% equity in the home she purchases and, given her inexperience, she is looking for a home that needs very minimal repairs. Additionally, she wants a net monthly profit of $250 per month. Her goals are ambitious even for an experienced investor. Read More→
Foreign Real Estate in Your Self-Directed IRA
Posted on October 30, 2013 byMany people are surprised to learn that not only can they take direct ownership of real estate within their IRA, but they aren’t even restricted to owning land within the United States. The IRS rules regarding what you may or may not invest IRA assets in are very liberal, and there is no IRS restriction whatsoever on ownership of foreign assets, including real estate.
Benefits of Foreign Real Estate Ownership
Owning assets abroad can be an important way to help diversify your investment portfolio. The economies of other countries and regions don’t necessarily move the same way as the U.S. economy. When U.S. assets are in decline, real estate in other countries is sometimes doing very well. For example, many regions in the Caribbean are benefitting from rapid economic growth due to a rise in traffic from more affluent Europeans. While real estate in Florida continues to struggle, some areas in Jamaica and the Bahamas are experiencing rapid development – creating opportunities for enterprising real estate investors. Case in point: A Chinese company is currently building a massive $3.4 billion resort at Baha Mar in the Bahamas, scheduled to open in December of 2014. If the project succeeds, that casino is projected to boost the gross domestic product of the entire country by 10 percent.
Meanwhile, even a relatively small amount of money, by American standards, can purchase a vacation rental home that will be extremely attractive to a European, Asian or Middle Eastern tourist. Homes in some areas of the world still sell for a fraction of what comparable beach front or other resort area homes would go for in the United States. Read More→
Using Your Self-Directed IRA to Invest in Hard-Money Lending – Part 2
Posted on October 5, 2013 byConsiderations
Hard money lending can be a great place for self-directed IRA or other retirement assets. There are, however, a few things to be aware of before you commit:
- Hard money loans can be illiquid. If you are nearing or over age 70, pay attention to your required minimum distributions. You must make these RMDs, even if the borrower pays the loan late. You may want to earmark RMD money to come from another source besides the hard money lending part of your portfolio.
- RMDs do not always have to be taken in the form of cash, some self-directed IRA investors that do hard money lending have elected to take their RMD in the form of the actual loans themselves. In fact, you can even take a portion of the loan as your RMD thus becoming partners with your IRA on that loan. (For Example: You can take 25% of the loan as your RMD. You would then own 25% of the loan and your IRA would own the other 75% of the loan.)
- Your ability to contribute new money to your self-directed IRA or other retirement account is limited each year. For self-directed IRAs, for example, you are limited to $5,500 in new contributions. Anything over that must be rolled over into the account from another qualified retirement asset, or you will have to borrow the difference.
- You cannot lend money to yourself or certain family members, via your self-directed IRA. You therefore cannot make a hard money loan to any property in which you, your spouse, your ascendants or descendants and their spouses has an interest. Similarly, you cannot lend money from your self-directed IRA to any project in which any legal, accounting or financial professional who advises you on your self-directed IRA investments has an interest. Read More→
