Have you heard about the Self-directed solo 401k?

What Is a Self-directed Solo 401K?

A 401K is a legal tax shelter or basically an employer plan. It is governed and created by the Internal Revenue Code / section 401(k). Contributions are made into the 401k account by the employee and they are often tax deductible. Sometimes contributions are to be made into the employees’ accounts as well, by the employers. Accounts usually will grow much faster because asset growth and investment returns happen without taxation directly on gains or income, and that is usually in exchange for taxation as sometimes individuals distribute funds to their accounts for personal use.Did you know you can do THAT in your IRA?

For Whom a Solo 401k Is Designed?

A Solo 401k is specifically designed for individuals who are self-employed, and they don’t have full time employees other than themselves or may be their spouse.

Who Can Have a Solo 401(k)?

The self-employed, Sole proprietors, and anyone really who has a business that produces income can have a Solo 401(k).

The Solo 401(K) was formed by the Congress in late 2006.

How to Use a Self-Directed IRA or Solo 401(k)?

It is normal that most baby boomers today want to have a plan for their retirement funding. Two generations ago, the career world has been completely changed, and a guaranteed pension at the end of a lifetime employment is now something from the past. Most people know that the purchasing power of social security benefits will be decreased by inflation so it’s not reliable anymore; however, not all of them want to have a second plan, and many of people in fact still have relied just on the Social Security to be their sole purpose for retirement, it means their retirement years now will be living in poverty.

Differences Between Solo 401(k)s and IRAs:

401(k)s is more superior to the IRAs due to the following features:

  1. Unlike Roth IRAs, Roth contributions to the Solo 401K is up to $22,000 (depending on age) with no income limits.
  2. 401K has higher contribution limits up to $49,000 per person plus $5,500 tax provision if you are over 50 years old while the limit is only $5,000 for an IRA unless you are 50 or over.
  3. It has no UDIT tax; this is only for debt-financed real estate, if a person would purchase a property and debt-finance part of it with an IRA, the IRA will still owe UDIT taxes.
  4. It has much less onerous prohibited transaction penalties compared to IRAs.
  5. Borrowing from an IRA is not permitted; however borrowing with Solo 401Ks is permitted.

Self-Directed Retirement Accounts for Investors and/or business owners:

Investors or business owners part-time or full-time, have the best chance of controlling the timing and the size of their retirement. If there is an established corporation, a limited partnership, or a limited liability company, the better options would be available. This group of people can control their own retirement destiny because under improved legislation and over time, the range of investment choices have expanded and the dollar limits on contributions have gone up. So instead of relying completely on the stock market which is in most cases unpredictable and risky, reliable profits in the IRA however can be made, besides, the IRA are free of capital gain taxes, so over the years a much faster growth can happen to the total dollar value.

Today More Choices are Available than Ever!

Today, there are many small business retirement plans that people can take advantage of, they include the IRA, the Solo 401(k), the SIMPLE (Savings Incentive Match Plan for Employees), and the SEP (Simplified Employee Pension Plan). To maximize the Solo 401(k) plan, there are really two components to do so: A) the salary deferral contribution for an employee is up to $16,500, which not to exceed the 100% mark of pay plus $5,500 catch up provision if you are 50 years old or over, and B) a profit-sharing contribution for the employer that comes with a limit up to 25% of pay, for self-employed it is 20% only. From both sources, the total contribution would be $49,000! However, for individuals who are 50+ years of age, it is possible to contribute another $5,500 for a total of $54,500 annual contribution.

The self-directed solo 401K and other self-directed accounts can invest in a variety of assets such as real estate, private lending, limited liability companies, precious metals and much more!

American IRA, LLC was established in 2004 and currently has over 250 million in assets under administration. They protect your wealth by making sure that all uninvested cash under their administration is stored in FDIC-insured accounts. As administrators, they do not make any recommendations to any person or entity associated with any type of investment. They offer the most flexibility permitted by law, and allow you to control your investments directly in a very unrestricted platform. Their experts can assist you with setting up a Solo 401K.

If you would like more information on this or any other type of self-directed retirement account, please feel free to contact the team at American IRA, LLC via e-mail [info@americanira.com] or via phone 1-866-7500-IRA(472), or visit their website [www.americanira.com].

The Top Three Retirement Plans for Small Businesses

On a recent business trip, I had a lively conversation with a small business owner who was on a mission to start a retirement plan. He wanted a good place to save some money tax deferred and to take care of his key employees. Great idea!! You know I’m a big fan of putting some money away for down the road.

Just get a 401(k) and go, right? Well, maybe. You may not know this, but there are quite a few different retirement options out there and many specifically designed for small businesses. Let’s go over the essentials so you too can make a great decision for your company.

Three options stand-out depending on what you want to accomplish with your plan and how much flexibility you need. These are: 401(k) plans, SEP IRAs and SIMPLE IRAs. Now for a quick quiz. Simply answer these questions and you’ll start honing in on the best fit for your business:

  1. Can I afford a match for my employees?
  2. Do I want to allow employees to contribute to the plan?
  3. If so, will some want to save more than $11,500 a year?
  4. Do I need flexibility to access the funds prior to retirement for emergencies?
  5. How important are managing future taxes (a Roth option) versus my tax needs today?

Other things to consider include whether you want a profit sharing option or not, and do you have a business that experiences high employee turnover. If you expect high turnover, a vesting schedule for profit sharing and/or matching contributions can be a great way to go.

Are you ready to wade a little deeper into the retirement plan pool? I hope so. Here’s the plain English overview of each of the three plan types including a side-by-side comparison chart to help you sort it out.

The 401(k) Offers the Most Flexibility and High Contribution Limits

The traditional 401(k) is probably the most widely known retirement product on the market. It’s the fully loaded, high performance SUV of retirement plans. It’s generally defined as one that enables a business owner and employees to make consistent, tax-deferred contributions during the length of their careers.

But 401(k) plans offer a lot more versatility than that. 401(k)s not only offer higher contribution limits than most other plan options, but also offer more choices in design to manage business costs and program saving goals. You can choose to match or not, provide a vesting schedule, or enable penalty-free access to funds via a loan if an emergency arises. 401(k) plans also allow for “catch-up” contributions after reaching the age of 50. In 2011, employees can contribute up to $16,500 if under 50 years of age, $22,000 if over.

For small businesses and employees that may fear higher tax rates down the road, the Roth 401(k) enables participants to have their contributions taxed up-front, but withdrawals in retirement are tax-free, earnings and all. This can be a big help in managing your tax situation and money over time.

SEP IRAs are Pretty Easy to Start and 100% Funded by the Employer

Simplified Employee Pensions, more commonly referred to as SEPs, are also a popular retirement plan choice as they offer a contribution limit that’s similar to a 401(k). It doesn’t have all the bells and whistles of a 401(k) plan, but it’s got a good engine under the hood. One of the most important things to understand about SEPs is that 100 percent of the contributions made are by the employer (no employee contributions allowed) and these dollars are immediately vested for the employee. There is no Roth option, no loan option, no profit sharing option, and no catch-up contributions for those over 50 years of age like there are with a 401(k). But it also doesn’t generally have the added IRS tests and reporting that 401(k)s plans do.

The SIMPLE IRA is a Solid, Affordable Third Option

I’m going to move off the car comparison for this one. I compare a SIMPLE IRA to having the middle seat on the airplane. Flying is a much faster way to travel long distances than driving, but it’s just not as good as having the window seat and definitely not as nice as flying first class. The SIMPLE IRA’s name is a bit misleading (it actually stands for Savings Incentive Match Plan for Employees). While both employer and employee can contribute to the plan, the employer must match and matching is vested immediately. Also, the employee contribution limit is set at $11,500 for 2011, a full $5,000 less than a 401(k). The catch-up for those over 50 is also less at $2,500 versus $5,500 for a 401(k). It also doesn’t have Roth or loan options, but like the SEP, avoids those pesky IRS tests and reporting requirements of a 401(k).

A summary of important differences outlined here below:

2011 401(k) SIMPLE IRA SEP IRA
Who can contribute Employee; Employer optional Employee & Employer Employer only; must contribute for all eligible employees
Max Employee Contribution $16,500 w/$5,500 catch-up if over 50 years old $11,500 w/$2,500 catch-up if over 50 years old Not applicable
Employer Contributions Optional, up to 100% of an employee’s compensation with a $49K cap via match, profit share, or other employer contribution Required match of 100% on the first 3% of participating employee contributions or 2% of all eligible employee salaries Optional, but only way to fund; up to 25% of an employee’s pay with a $49K cap
Vesting Timing for Employer Contributions Multi-year options or immediate Immediate Immediate
Access to Funds before age 59 ½ Penalty-free loans or 10% penalty for early withdrawal 25% penalty for withdrawing within first 2 years of participating; 10% thereafter 10% penalty for withdrawal before age 59 ½

Now you have the scoop on what I consider the best retirement plan options for businesses with less than 25 employees.

Source: Forbes

Tax-Free Real Estate Purchases Climb

Boosted by lower real estate prices and growing volatility in financial markets, investors are increasing their purchases of tax free real estate investments. Investors are moving away from investing in equities in the stock market and other financials in growing numbers due to a chorus of concerns, including insider trading, automatic machine trading and criminal conduct.

Retired investors are shopping for higher returns and wider diversification to protect their assets from losses. The Investment Retirement Account (IRA) solo 401-K plan is an IRS approved retirement program created for self-employed investors.

Tax attorneys have seen a large increase in the number of self-employed investors purchasing property through IRA’s in the last year. “The beauty of the solo 401-K plan is that it allows one to defer up to $49,000 annually for retirement while gaining the ability to make real estate and other investments tax-free,” said Scott Krokoff, a tax attorney at a New York based firm.

“A self-directed IRA allows you to buy tangible assets such as real estate inside of your IRA and receive the profits tax-free,” according to Joe Allen, an investment real estate broker in Minneapolis, Minnesota. “This investment approach gives you full control over your investments and is not subject to the ups and downs of the stock market.”

An IRA allows investors to unlock funds held in a retirement account to purchase real estate to generate monthly income, which then can be used to pay for retirement without reducing the account balance.

“Compare this to owning stock in your retirement account,” said Allen. “To fund your retirement you must sell off stock each year to provide funds to withdraw. With real estate, you are not forced to sell your assets for retirement income because your tenants will be providing this monthly income now and in the future.”

Depending upon the type of real estate purchased and region of the country, real estate investments may still produce 7 to 15% annual net returns, according to brokers. Unlike stocks or other financial investments, investing in real estate also provides a tangible asset that can be sold in case of an emergency or redirection of assets.

The trustee of the 401-K plan retains control over retirement funds to make real estate and other investments tax-free.

When it comes to making investments using retirement funds, the Internal Revenue Service code doesn’t define exactly what types of real estate may be purchased with proceeds from an IRA, only what cannot be purchased.

Internal Revenue Code Sections 408 and 4975 prohibit Disqualified Persons from engaging in certain types of transactions. The purpose of the rules is to encourage the use of qualified retirement plans for the accumulation of retirement savings and to prohibit those in control from taking advantage of the tax benefits for their personal account.

Source: Housing Predictor

Taxes and Your Social Security

Your benefits may be taxed. But a little up-front planning today can minimize the hit tomorrow.

After years of planning for that perfect retirement — diligently investing your money, drawing up detailed budgets and investing assets wisely — many investors continue to miss one important detail. As much as 85% of your Social Security income could be subject to federal (and possibly state) income taxes. That can be a real shock when you collect your first check.

How much of your Social Security income is subject to tax depends on a variety of factors, including your marital status and any additional income you earn. But with a little up-front planning, which can include everything from rebalancing your portfolio to structuring certain transactions (like the sale of a home or a business), you don’t have to let taxes derail your plans.

How Taxes Are Calculated

Social Security benefit taxes are based on what is commonly referred to as your “provisional income.” That includes half your Social Security income for the year, plus your modified adjusted gross income, which includes (among other items) any tax-exempt income. (Tax-exempt income includes interest from municipal bonds — often a core component of retirement portfolios.) After you cross these income thresholds, a portion of your Social Security benefits will be considered taxable income. (See the chart below for specifics.) For example, married couples who file their tax returns jointly and have provisional income of at least $44,000 could see up to 85% of their benefits get a haircut from the tax man.

How Provisional Income Is Taxed In 2011

A Longer-Term Strategy

Because of these income thresholds, tax planning experts often advise looking for ways to lower your provisional income. “When you plan for retirement,” says Vinay Navani, a shareholder with Wilkin & Guttenplan, an accounting and consulting firm in East Brunswick, New Jersey, “you need to think in terms of multiyear projections.” For example, if you anticipate a big one-time event such as the sale of a business, you may be better off structuring the sale as an installment sale to be paid off over several years instead of an all-cash transaction This can help lower your overall income and possibly keep you in a lower tax bracket, which would help minimize that tax hit on your SSI benefits.

You may also want to consider a longer-term strategy for drawing out of your qualified retirement accounts. That’s because all withdrawals from a traditional IRA typically will be included in your provisional income calculations. Income drawn out of a Roth IRA, however, is not. So you may want to consider withdrawing from the Roth first.

On the other hand, if you’re earning income in retirement, you can still contribute to an IRA, and contributions into a traditional IRA may be tax tax-deductible, lowering your provisional income. A word of caution, though, if you are considering converting a traditional IRA to a Roth: Any amount you move will also be counted as income. That may be worth it, though, because of the Roth’s other tax advantages.

Another option is to convert an investment that earns taxable income, such as a taxable bond portfolio, into a tax-deferred account, such as a deferred annuity. You could structure the annuity to begin paying income in a few years, when you expect your provisional income, as well as your overall tax rate, to decline.

Know the Penalties

Those hoping to work in retirement need to be especially careful if they’re planning to claim Social Security benefits early. According to a 2010 study by the Families and Work Institute and the Sloan Center on Aging & Work at Boston College, three-quarters of workers age 50 and older say they expect to hold some kind of income-generating job after retiring. It’s important to consider how that income will affect your benefits.

The Social Security Administration caps how much you are allowed to earn if you start taking your benefits before “full retirement age,” which the SSA considers 66 for most baby boomers. In 2011, the annual earned income cap is $14,160, and for every $2 you earn over that limit, the SSA trims $1 off the top of your benefits. So if you earn $20,000 this year, and you haven’t yet reached full retirement age, your benefits will be reduced by $2,920 — on top of any income taxes you may have to pay on the remaining benefits.

There is some good news, however: Because the penalty is determined by your individual earned income, if you retire early and your spouse doesn’t, and if you file separately, your spouse’s earned income will not be factored into any benefit cuts that could apply. However, if you file jointly, your spouse’s earnings will be included when calculating your provisional income. Additionally, when you reach your full retirement age, the earned income penalty disappears.

Forewarned Is Forearmed

Lastly, do a bit of homework. Worksheets in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, available at www.irs.gov, can help you compute your tax liability. Then check with your state to see whether it taxes benefits. You might not be able to avoid taxes, but at least you’ll know what to expect and will be able to plan accordingly. As always, your Financial Advisor can work with your tax professional to find the best solutions.

Source: Forbes

Undoing a Roth IRA conversion

If you converted a traditional individual retirement account into a Roth IRA last year only to watch the value of the account fall, you could save taxes by undoing the conversion by Oct. 17.Undoing a Roth IRA conversion

But there is a risk: When you undo the conversion, the money goes back into a regular IRA and you must wait at least 30 days before you can convert back into a Roth again. If the value of your account soars during those 30 days and you want to convert again, you could owe more tax than if you had left well enough alone.

“It’s a gamble,” says Mike Gray, a San Jose certified public accountant.

Roth conversions skyrocketed in 2010 because it was the first year people with more than $100,000 in income could do it.

At Fidelity Investments, customers converted about 220,000 regular IRAs into Roths last year, more than quadruple the previous year’s total. About one-third of last year’s conversions were done in December, when most stock markets worldwide were higher than they are today.

That means more people than usual will at least consider undoing Roth conversions this year.

Money in a regular IRA has never been taxed, so when you convert it into a Roth IRA, you must add the entire amount converted into your ordinary income and pay tax on it.

Normally you must report the income in the year of the conversion. But for 2010 conversions only, investors had the choice of putting all the income on their 2010 tax return or splitting it 50-50 between 2011 and 2012.

The benefit of a conversion is that once the money is in a Roth IRA, it is never taxed. Investors can take it out tax-free (assuming they meet certain holding requirements) or let it continue to grow. Unlike regular IRAs, they do not have to take mandatory withdrawals starting at age 70 1/2.

Like it never happened

Another perk is that you can reverse – or in tax lingo recharacterize – the conversion if the market turns against you. You simply put the money back into a regular IRA and pretend the conversion never happened.

Suppose you converted $100,000 into a Roth IRA in December 2010 and added the $100,000 to last year’s income.

Now suppose the value of your Roth IRA has dropped to $80,000. If you do nothing, you owed tax on $20,000 that has evaporated.

No problem: You undo the 2010 conversion by putting the money back into your regular IRA by Oct. 17 of this year. This involves contacting your bank or broker and filling out some paperwork.

This move takes the $100,000 out of your 2010 income.

If you haven’t yet filed your 2010 tax return, just leave out the $100,000 when you file it. (The extended tax-filing deadline for 2010 is also Oct. 17.)

If you have already filed your 2010 tax return, you would amend your federal and state returns and remove the $100,000 in conversion income. You can file an amended return after Oct. 17.

What if you were planning to split the $100,000 between 2011 and 2012 income?

If you already filed your 2010 return, you should have stated your intention on Form 8606 and filed it with your 1040. You will need to amend your federal and state tax returns including Form 8606.

If you haven’t filed your 2010 return, you would not have to do anything.

Waiting period

If you undo your conversion, you must wait at least 30 days before you can convert your regular IRA back into a Roth. As long as the value of your regular IRA stays below $100,000 before you convert again, all this maneuvering will pay off, assuming your other income and deductions haven’t changed drastically and your tax rate remains the same.

But what if the value soars above $100,000 – say to $110,000? When you convert back into a Roth, you will owe tax on $110,000 in income instead of $100,000. If your tax rate has not changed, you will owe more tax.

Deciding whether to undo a Roth conversion depends on where you think the market, your income and tax rates are headed.

If the value of the Roth IRA “went down by a small amount, I wouldn’t fuss with it. It’s going to be a pain,” Gray says. For a $100,000 account, he says, “it would have to be down 15 to 20 percent before I would do anything.”

For a $1 million account, the threshold might be lower because the potential tax savings would be bigger. But even on a large account, the smaller the percentage loss in value, the bigger the risk it could bounce above its original conversion value and come back to haunt you.

10 percent loss

Sandi Bragar, a wealth manager with Aspiriant, says her firm is considering it for accounts that are down 10 percent or more.

The Standard & Poor’s 500 index is down 8.5 percent so far this year, so if your Roth IRA is invested mainly in large-cap U.S. stocks, it probably won’t pay to undo it.

Where it usually makes sense is if the Roth IRA was invested heavily in emerging markets or overseas stocks – which are down 15 to 20 percent or more – or in U.S. sectors that have been especially hard hit, such as small-cap stocks or real estate investment trusts, Bragar says.

If you converted into several separate Roth IRA accounts last year, you can undo some and not the others.

If you converted into a single Roth IRA, you can undo a percentage of it. If you want to recharacterize 20 percent, for example, you would move 20 percent of each individual holding back into a regular IRA.

Another trick: Suppose you converted only some of your regular IRA into a Roth last year and now want to undo the conversion but are afraid the market will rebound. To get around the 30-day waiting period, you can convert all or some of your regular IRA into a Roth IRA and the next day, undo your 2010 Roth conversion and put that money back into your regular IRA, Bragar says.

Source: SFGate

Self-Direct Your Retirement

If you didn’t know anything about the stock market before October 4, you’d think the US had the strongest economy ever. The Dow rallied more than 1,220 points since then – a gain of 12%! Naturally, the uninformed investor may think it’s time to jump into this bull market.

However, thousands of investors are waking up to the reality of Wall Street – that it’s become more of a Vegas gamble than an investment based on fundamentals. Nothing is backing this latest rally, except for a few headlines swaying public sentiment.

When the media announces that Europe has found a temporary solution, stocks rise. Then when the uncontrollable debt inevitably rears its ugly head again, stocks plunge. Is this where you want your precious life savings?

Americans have lost over $6.6 trillion of their retirement savings due to the volatile stock market, according to a study commissioned by Retirement USA. Thousands of investors have had enough and are looking into alternatives to traditional tax-deferred retirement plans.

The dream of letting someone else manage their money and expecting it to be ready and waiting for them after 30 years is dead. One of the savvier investor’s best kept secrets is one you probably haven’t heard about from your traditional financial planner: the self- directed IRA.

With a self-directed IRA, you can take control of your retirement by choosing over 45 different types of investments outside of Wall Street – without penalties. Here’s a partial list of what you can do with your self directed IRA:

  • Residential real estate, including: apartments, single family homes, and duplexes
  • Commercial real estate
  • Undeveloped or raw land
  • REITs (Real Estate Investment Trusts)
  • Real estate notes (mortgages and deeds of trust)
  • Private limited partnerships, limited liability companies, and C corporations
  • Tax lien certificates
  • Foreign currencies
  • Oil and gas investments
  • Private stock offerings, private placements
  • Gold bullion

The IRS actually only disallows two investments within the IRA: Life Insurance Contracts and Collectibles (www.IRS.gov Pub 590). Everything else is fair game so long as it’s for “investment purposes only.”

If you wanted to self-direct your IRA to buy real estate and take advantage of today’s bargains, you could not invest in a home for you to live in or a second home to use for vacations. However, you could buy a rental property, and all the rental income would flow back into the IRA tax-free or tax-deferred.

A great benefit of investing with money from your IRA is your ability to let money grow year after year, compounding faster without the loss of tax payments. Real estate values have overcorrected in many parts of the US. If your IRA bought a discounted property that increased in value over time, all the profit upon sale would go back into the IRA – tax-deferred.

Some banks even offer financing for your self-directed IRA. However, to avoid paying UDFI taxes, use a self-directed 401K instead if you plan to leverage your real estate purchase.

A great benefit of a self-directed 401(K) plan is the large annual contribution limits allowed. Businesses with a spouse on the payroll can also contribute to the Solo 401k. Provided the business owner and spouse have sufficient income from the business, taxpayers may be able to contribute up to $49,000 each ($54,500 each if both are age 50+) in 2011.

That Solo K Plan would allow the taxpayer to contribute a total of $109,000 during the year, and save close to $50,000 in taxes. This is significantly higher than the IRA contribution limit of $6,000. You get a huge tax write off in the years of contribution, and the funds can be immediately utilized to invest into real estate and receive tax deferred treatment. (Verify with your tax professional.)

Most types of retirement accounts can be converted into a self-directed 401(k) plan. However, if you discuss this option with your traditional financial planner, you may be highly discouraged to proceed.

Remember, most traditional financial planners only get paid when your assets are under their management. Why wuld they encourage you to leave them, even if it’s a better deal for you?

Source: Townhall Finance

Buying Real Estate for an IRA

I have an investor-client that has purchased several properties with me. He’s from out of state and bought a couple of properties for his college age kids to live in while in Boston. He’s been talking about buying real estate with his IRA for years. Recently, my teammates and I helped him purchase a property for his IRA. Aside from the logistics of moving the money around and an extra layer of paperwork for authorizations, the process was pretty straightforward and very similar to any other cash deal.Real Estate in your IRA

This was the first time that we have represented an IRA as a client. I will share my experience and observations with you. Please understand that this discussion is about buying investment property with an IRA and does not work for a primary residence or a second home.

Why buy real estate with an IRA?

Financing for investment properties can be challenging and expensive, depending on the property or the buyer. It appears that using an IRA to purchase a property for cash eliminates the expense and challenges of financing and also allows the investor to take any profits tax-free later, after age 59 ½.

The disadvantages of buying investement property with an IRA include:
– loss of all tax benefits. (The IRA can not deduct mortgage interest, property taxes, condo fees, maintenance or take depreciation.)
– The IRA must have enough cash to purchase the property.
– The IRA must have enough cash on hand or positive cash flow from rental income to pay maintenance costs, taxes and management fees.
– All income and expenses must flow in and out of the IRA.

Not all IRAs can be used to purchase property:
To buy property with an IRA, you need a “self directed” IRA. To find one, search online for “buying real estate for an IRA”, “self directed IRA” or “IRA for real estate”.

As I see it, with current IRA investments being marginally profitable or risky, it might make sense for some knowlegable investors to divert the funds from an IRA into investment property, assuming that they know the business and can use it to generate tax savings. This might make sense for investors that are looking to buy low in the current market and resell the property at a profit within a few years, or sooner if they are renovating and flipping properties.

My research led me to several interesting articles on the subject:

There is a good article on the subject with an example of a contractor/investor who is using an IRA at Kiplinger.com. Another article at MarketWatch.com gave six reasons to consider using an IRA to buy real estate. These articles would probably make an interesting starting point for anyone interested in exploring the topic.

Source: Boston Real Estate Now

Home prices heading for triple-dip

The besieged housing market has even further to fall before home prices really hit rock bottom.

According to Fiserv (FISV), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.

Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment, explained David Stiff, Fiserv’s chief economist.

Should home values meet Fiserv’s expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.

The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.

In the second dip, which was reached last winter, prices were down 33% before staging a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.

Now that the scandal is mostly resolved, lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.

Earlier this month, RealtyTrac reported the first quarterly increase in foreclosure filings in three quarters. Even more discouraging: new default notices were up 14%.

Home prices: Check your local real estate market forecast

There’s also a “shadow inventory” of homes in foreclosure that have yet to go back onto the market.

The specter that those foreclosed homes could flood the market at any time and drive prices significantly lower is a huge concern, said Mark Dotzour, an economist for Texas A&M University. “That’s the elephant in the room,” he said, noting that there are 6 million home currently in shadow inventory.

Biggest losers

Many of the regions that will be hardest hit were already beaten up during the previous two dips.

Naples, Fla., for example, is expected to take the biggest hit of any metro area, a price drop of another 18.9% by the end of next June, according to Fiserv. Home prices in the area have already fallen 61% from the peak.

Other cities expected to be hit hard include the not-so-lucky Las Vegas, which is expected to see home prices fall another 15.9% for a total loss of 66%; Riverside, Calif., is projected to fall another 14.8% (for a total decline of 61%); Miami is expected to decline by 13.2% (total loss: 57%), and Salinas, Calif. could drop by another 13% (for a total loss of 66%).

There will be some winners, however, led by Madera, Calif. and Carson City, Nev., which will each gain 15.5%. That’s some consolation for hard-hit residents: The average home in each of these metro areas has lost more than half its value.

Other metro areas Fiserv expects to recover nicely are Yuma, Ariz. (up 9.5%), Yuba City, Calif. (9.2%) and Farmington, N.M. (8.3%).

Slow recovery ahead

Even after the housing market begins its comeback in mid-2012, the recovery is predicted to be modest at best. Nationwide, Fiserv is projecting that home prices will climb just 2.4% between June 2012 and June 2013.

A few individual metro areas will do better, with 31 of the 385 markets Fiserv monitors expected to pile up double-digit gains. Another 71 markets are expected to post increases of 5% or better.

I bought my dream retirement home — cheap!

Many of the markets that will record the biggest increases are vacation or retirement communities that had taken some of the biggest hits during the bust.

The biggest “winner” will be Ocala, Fla., with a 22.4% spike for the 12 months ending June 30, 2013. Ocala was one of the hardest hit communities in the U.S. over the past several years, with home prices falling some 50%.

Others anticipated gainers will be Napa, Calif., which Fiserv projects will improve by 20.9% over that same period; Panama City, Fla. (an estimated 18.2% jump) and Bremerton, Wash. and Carson City, Nev. (both expected to see home prices climb 17.9%).

Some cities will continue to fade, however. Fort Lauderdale, Fla.’s forecast is for a 9.2% drop through next June and another 6.7% the 12 months after that. Its neighbor, Miami, will endure 13.5% and 5.2% declines, respectively.

Source: CNN Money