Supercharge Your Self-Directed IRA Savings

It is one thing to open a Self-Directed IRA account. It is another thing to be diligent about funding it to the max, year in and year out. But every dollar you can sock away in a Self-Directed IRA account now increases your chances of achieving an economically secure retirement, sufficient to provide a reliable income for the remainder of your life and the life of your spouse.

How Much Do You Need to Save?

No one has a crystal ball, but the general rule among retirement professionals is that savers must sock away 15 to 20 dollars in retirement savings per dollar of annual income you need. That is in addition to any income you may expect from Social Security and pensions. For example, if you want to have a retirement income of $100,000 per year, and you expect a combined $50,000 in Social Security and pension income, your Self-Directed IRAs and other retirement savings will need to generate the other $50,000. That amounts to a target nest egg of between 750,000 to $1 million.

Looked at another way, unless your Self-Directed IRA is generating substantially above-market investment returns, for every $100,000 you want to generate in reasonably reliable income from your investments during your retirement years, plan on amassing a total nest egg of $1.5 million to $2 million.

It is doable – especially if you start saving aggressively while still relatively young. Consider:

Assuming you contribute the current maximum annual contribution to a Self-Directed IRA, and you are able to earn an average of 6 percent per year, it would take 42.51 years to save $1 million. If you can get an average return of 8 percent, it would take 35.65 years to save that amount, with an annual contribution of $5,500.

But you are not limited to that $5,500 per year ceiling on Self-Directed IRA contributions: If you are married, you can contribute another $5,500 per year to an IRA, in the form of a “Self-Directed Spousal IRA.” This is true even if your spouse does not work. So now you can contribute up to $11,000 per year to a traditional or – if you meet the income requirements, a Self-Directed Roth IRA.

But if you own your own corporation or LLC, or if you have self-employment income, you can turbo-charge your retirement savings even more. For example, you can start a Self-Directed Solo 401(K) plan for yourself or your small business (with only you or your spouse as full-time employees), or a simplified employee pension plan – both of which enable you to increase your contributions to more than $50,000, given enough income, though Self-Directed SEP IRAs limit your contributions to not more than 25 percent of compensation.

The combination of Self-Directed IRAs and small business retirement plans allow self-employed individuals and small business owners to boost tax-advantaged retirement savings to more than $65,000 per year – and potentially double that figure, in the case of high-earning couples who own their own businesses.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

Private Equity Investing – A Primer for Self-Directed IRA Investors

Many people we speak to are unaware that the Self-Directed IRA and other retirement accounts are flexible enough to allow for all kinds of different asset classes. You do not have to limit your thinking to stocks, bonds, mutual funds and CDs. You can leverage the substantial tax advantages of Self-Directed IRAs while investing in a wide variety of alternative asset classes. And one of the more lucrative and popular asset classes in recent years has been private equity.

If you are new to private equity investing – especially within a Self-Directed IRA – here is a list of the most common terms.

Private equity is stock ownership that is not listed on a public exchange. These are not necessarily corporations; Private equity ownership is not necessarily limited to C Corporations. Some private equity opportunities are formed as limited partnerships and LLCs.

Occasionally, the term is used to the purchase of a publicly-traded company by investors who then take it private in order to unlock shareholder value or minimize the likelihood of outside interference from activist shareholders.

It is entirely legal to own most private equity investments within a Self-Directed IRA, provided you do not own S Corporations, nor take direct ownership in a prohibited investment class, such as life insurance policies, collectibles, art, jewelry and gemstones, certain forms of gold and precious metal coin and bullion of uncertain or insufficient purity, and assets purchased from a prohibited party (yourself, your spouse, ascendants or descendants, and from professionals who advise you on your Self-Directed IRA in fiduciary capacity.)

As a Self-Directed IRA investor, you can hold shares in specialized private equity or venture capital funds, or you can choose to seek out your own investment opportunities and hold them directly, either within or outside of your Self-Directed IRA.

Primary capital raises. An initial round of funding by selling an equity interest to private buyers, rather than floating shares on a public exchange. When a private equity fund does this, they typically package a series of investments as a ‘blind pool.’ Owners typically hope to sell the investment for several times what they paid for it. But assets are often tied up in the investment for a number of years. Furthermore, risk is high throughout the private equity world. Many investments can and do lose money.

Secondary raises. These are follow-on rounds of capital raising designed to provide additional capital to enable a company to continue on a growth path. Time horizons before expected capital return are much shorter than with primary capital raises.

Private equity investing is not for novice investors. Unlisted securities may not have much in the way of a prospectus. Investors have little recourse when it comes to unregistered securities. But the high risk is the key to market-beating returns. However, whether you invest directly in a company via a private equity offering or you invest in the asset class via a fund, you should conduct a thorough due diligence before you invest.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

How to Own an LLC Within a Self-Directed IRA – And Do it Right!

Many people are surprised to learn that you can own limited liability companies (LLCs) within a Self-Directed IRA. It is true, there are certain things you cannot own within a Self-Directed IRA, including S corporations, collectibles, art, alcoholic beverages, jewelry, gems and life insurance. But it is perfectly acceptable and legal to own an interest in an LLC, or even a whole company outright within your self-directed retirement account. Indeed, thanks to the growing interest investors have in leveraging the tax advantages of self-directed retirement accounts with the flexibility afforded by LLCs, the number of people owning LLCs within Self-Directed IRAs is rapidly growing.

LLCs have the advantage of allowing the owner to execute “checkbook control” of his or her investments using Self-Directed IRA money. But it is not necessary to do so and doing so can potentially increase the chance of accidentally running afoul of laws and regulations that prohibit self-dealing using IRA funds. Keeping a very strict separation between your own money and that which belongs to your Self-Directed IRA and the LLCs and other entities within it is critical to staying out of hot water.

If you believe an LLC may be right for you, here are a few things to keep in mind before you get started:

  • Make sure to name the LLC as part of your Self-Directed IRA account, and not in your own personal name. Putting it in your personal name, rather than listing the IRA or other retirement account as the owner, could put the tax advantaged status of your Self-Directed IRA at risk. The same goes for the LLC’s bank accounts, and any other accounts it may have.
  • Get a separate employer identification number for your Self-Directed IRA. Do not use your Social Security number.
  • If you own property within a Self-Directed Real Estate IRA LLC, be sure to use the LLC’s checking account to pay all expenses associated with the property, from maintenance costs to property taxes to mortgage payments. If you elect not to use the Checkbook IRA technique, have American IRA, LLC handle the transaction for you, in a way that is compliant with IRS regulations and applicable laws.
  • Have all rental income and other cash inflows go directly to your Self-Directed IRA’s account, and not your account. Do not collect rent payments directly or route them through your own accounts, or you could accidentally engage in a prohibited transaction, resulting in the possible forfeiture of the tax-advantaged status of your retirement account. This could result in substantial immediate tax liability, plus penalties and attorneys’ fees.
  • Do not try to pay yourself a salary or take any other form of compensation for managing your Self-Directed IRA or any LLCs within it.
  • Do not stay overnight in the property your Self-Directed IRA LLC Do not vacation in the property or allow your children, grandchildren, spouse or advisor who works with you advising you on your Self-Directed IRA to use the property. This would be considered a prohibited transaction.
  • Do not move personal funds into the Self-Directed IRA LLC’s checking account.
  • American IRA requires that all Single-Member IRA LLC documents be prepared by a qualified professional with an understanding of Self-Directed IRAs and LLCS. Self-prepared documents cannot be accepted.  Checkbook Control IRAs require a specialized operating agreement.  For more information please contact American IRA.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

Should You Take an Early Distribution from Your Self-Directed IRA?

You need a financial lift. It is alright; everyone gets blindsided by a large expense at some time or another: your 30-year-old furnace gives up the ghost two weeks into winter, your car’s purring engine is sounding more like a death rattle, or your daughter has requested to have her wedding reception at that exclusive country club.  A Self-Directed IRA could be your saving grace.

Yes, you are facing a bill that could easily run into tens of thousands of dollars, and you are not prepared for it. What can you do?

Sometimes, people in desperate straits look to their Self-Directed IRA for a solution. After all, retirement is not for another fifteen years or so. That is plenty of time to replace those funds before you need them.

If this sounds like the perfect answer to your dilemma, you need to take some time to consider all of the imperfections in it. Here are a few reasons why this short-term solution may end up being a long-term headache:

Taxes and penalties

If you are thinking about withdrawing money from a Traditional IRA and you are younger than 59 ½, you will pay a 10% penalty for starters. So the $20,000 that you need for the new heating system will incur a $2,000 penalty!

But you are not finished paying because now the taxes are due on all the funds that helped you save on taxes when you made those contributions. Depending on your tax bracket, you might have to withdraw around $28,000 from your account to net the $20,000 you need, which means your penalty will be even higher.

If you are taking a distribution from your Self-Directed Roth IRA, you will pay a 10% penalty on any earnings from the account if you have not turned 59 ½ or held the account for at least five years, whichever comes later. Remember, this applies only to the earnings on a Self-Directed Roth IRA. Withdrawals from Roth contributions are always penalty-free.

The most painful cost to you

Take the example of a 48-year-old individual who withdraws $28,000 to pay for a $20,000 purchase. Not only will they pay a $2,800 penalty plus taxes, but they will also lose the opportunity for the future growth of those funds.

If that money had remained in the account and been allowed to grow at a modest rate of 5% for the next 20 years, the $28,000 would have grown to a whopping $74,292! They will have missed out on both the power of compounded interest and on a comfortable retirement.

You can avoid the penalty under certain conditions

While there is no way around paying the taxes and losing out on the growth of your funds, you might avoid the 10% penalty under certain circumstances:

·         You make the withdrawals on or after the day you turn 59 ½ years of age.

·         You are using the money to pay medical insurance premiums during unemployment.

·         You are using the Self-Directed IRA funds to pay non-reimbursed medical expenses that exceed 7.5% of your AGI.

·         You have become permanently disabled.

·         You are a first-time home buyer withdrawing $10,000 or less.

·         You are covering qualified higher education expenses.

But it is my money. Why can’t I have it without penalty?

The early withdrawal penalty is meant to discourage retirement account holders from depleting their retirement funds to solve some short-term problem, leaving them dependent on some form of welfare after they reach old age.

After the government enacted the so-called do-it-yourself retirement system, the Self-Directed IRA early withdrawal fee was attached to encourage savers to stick with the plan and reap the rewards of many years of compound interest and growth in their portfolios. For all those reasons—a hefty penalty, taxes due, and the lost opportunity to accumulate capital—it is practically always a bad idea to cash in your Self-Directed IRA funds.

At American IRA, we believe that Self-Directed IRAs are the best vehicles for growing your retirement account. And we have the experience to handle your transactions, no matter which direction you choose to go with it.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

Is Cryptocurrency or Gold the Better Retirement Investment for a Self-Directed IRA?

It is hard to keep up with the latest in fashion and technology, but that does not keep most of us from trying. Styles in clothing seem to change so quickly that you feel fortunate if you can wear an item for two years without feeling archaic. And smartphones have evolved into gigantic all-around tools that no longer fits into your pocket discretely.  Investing your Self-Directed IRA into cryptocurrency or gold could be a great way to diversify your retirement account.

We can chase the latest and greatest in shirts, skirts, and computers if we choose, without doing much damage, except perhaps to our budgets. But a word of caution is in order when it comes to choosing your investments for your Self-Directed IRA. There is a lot more at stake here than just a minor fashion faux pas.

Right now, investing in cryptocurrency with your Self-Directed IRA is the rage. It is the hot topic of blogs, forums, and podcasts. So far, it is mysterious, tantalizing, and unregulated—the exciting new kid on the block that was just created back in 2009.

By contrast, gold (and other precious metals) have been around practically forever. It needs no explanation because you can see it and wear it as jewelry or invest in it through mutual funds or as a physical asset. It is traded on several international exchanges and comes with regulations and safeguards.

What is cryptocurrency?

According to Webopedia.com, cryptocurrency refers to “digital money that can be purchased, transferred, and/or sold securely using cryptography, which encrypts and protects the data used to help identify and track cryptocurrency transactions.” It is digital money and exists only on the internet. Unlike gold, it is not backed by anything tangible nor is it managed by an authorized third party such as a government or bank.

Although it is not the only cryptocurrency, Bitcoin is the largest and most popular digital payment currency that uses cryptocurrency to create and manage monetary transactions instead of a central authority. This decentralized form of currency features transactions that are changed and verified by a network of computers, none of which is associated with any one single entity.

A less confusing choice

Standing in contrast to cryptocurrency, gold is one of the most established and comprehensible investment assets around. It has a fairly stable price point that is set by established exchanges, and it also has fundamental value and a reputation that was established many centuries ago. As for price, gold tends to trend up or down with moderation, while the value of cryptocurrencies can fluctuate crazily, giving conservative investors more than a few sleepless nights.  These are great things to invest in with your Self-Directed IRA.

Another advantage of gold is its tangible nature. Investors can see and touch it in forms such as ingots, jewelry, and coins. Cryptocurrency does not exist in any physical form but is made up of the algorithms that mine them and the blockchains that track them.

In a nutshell, gold and other precious metals are some of the least complicated assets to hold in your portfolio. Conversely, cryptocurrency is complex—and can be risky!

A $460 million disaster

It was the world’s largest bitcoin exchange. Mt. Gox was thought to be impenetrable until a 2011 hack took the site offline for several days. Then, a few years later, it was discovered and revealed that hackers had been skimming money from the exchange for years. The company eventually admitted that 850,000 bitcoins had been stolen for a loss of about 460 million dollars.

It seems that Mt. Gox was undone by poor management, neglect, and inexperience. A lack of third-party oversight did not help matters.

There is a valuable lesson to be learned from the implosion of Mt. Gox, especially for those investing for their retirement. Confine your portfolio to things you can understand. In the gold vs. cryptocurrency contest, gold is the hands-down victor.

Turn to the professionals for help

At American IRA, we believe that Self-Directed IRAs for Precious Metals are an excellent vehicle for growing your retirement account. And we have the experience to handle your transactions, no matter which direction you choose to go with it—Gold, Silver, Platinum, or Palladium.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

What is the Age Requirement to Contribute to a Self-Directed IRA?

It can get confusing for the average retirement saver to know what is allowed and what is against the rules when it comes to contributing to a Self-Directed IRA. Of course, there are two types of IRAs—Roth and Traditional—and there are contribution limits and age limits to which you must adhere when using them. The rules are not universal, so here is a rundown of what you need to know before putting your retirement savings in either of them.

Are there minimum age limits for contributing to a Self-Directed IRA?

The good news is that neither Self-Directed Roth IRA nor Traditional IRAs have a minimum age requirement for contributions. However, to be eligible to make a Self-Directed IRA contribution, there has to be earned income—taxable compensation from a job—that equals or exceeds the amount of your contribution.

Typically, minors cannot use money earned from household chores as earned income. They will need to show proof that they are on a company’s payroll for it to count as earned income.

Many parents have their teenagers open a Self-Directed Roth IRA after they get their first part-time job. It is a smart thing to do for many reasons, not the least of which is the tax-free growth of their money for what could be fifty years or more. The small amounts they put away today could turn into hundreds of thousands for retirement.

One caveat that goes with this idea is that the children will have access to the account funds once they turn 18 years of age. Once again, it might be wise to enlist the help of a financial professional to find out if there are options for you to retain some control, so the money cannot be frittered away.

There are also contribution limits to consider. Keep in mind that no matter how much they earn, your kids can only contribute the maximum amount each year, which is $5,500 for 2018, or up to the amount they earned if it was less than $5,500. In other words, if they earned $2,000 at their summer job, they cannot contribute more than that to their Self-Directed IRA.

What about maximum age limits?

While there are no maximum age limits for contributions to a Self-Directed Roth IRA, once you have reached the year in which you turn age 70 ½, you may no longer make a Traditional IRA contribution. As long as you have earned income, however, you can keep adding money to your Self-Directed Roth IRA. Of course, you must stay within the contribution limits and have taxable income equal to or greater than the amount you contributed. And once you are over 50, your contribution limit increases from $5,500 to $6,500.

Also, keep in mind that there are no maximum age limits on rollovers or transfers with your Traditional IRA. Even if you are over 70 ½, you can consolidate your accounts by bringing in money from another trustee.

For example, you have $50,000 in your Self-Directed IRA at Investment Company A and want to move that money to Investment Company B, where you have another $50,000. You can do a direct transfer from A to B by simply filling out the necessary paperwork, or you can do a rollover, in which you would withdraw the money from A and re-deposit into your Self-Directed IRA account at B within 60 days. A word of caution on the rollover: If you do not make that deposit within the 60-day limit, the entire $50,000 could become taxable!

American IRA, LLC does not provide individualized tax advice. The information in this article is for general informational purposes only and should not be construed to be tax advice in your case. Engage the services of a qualified tax professional, such as a CPA or enrolled agent, before taking action.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

Why forming an LLC commonly called a Checkbook IRA for your Self-Directed IRA is an ideal way to invest?

Having your own Self-Directed IRA allows you to invest in real estate, business, and other opportunities not directly available through Conventional IRA or 401K plans.

By establishing an LLC for this purpose, you maintain full control over your investment decisions (within standard IRS Guidelines).  Checkbook Control IRAs require a specialized operating agreement.

As the owner of your Self-Directed IRA, you can be designated as the “Manager” of your LLC. This enables you to establish a bank account with check writing privileges so that you can handle your own eligible real estate investments. Having an LLC can also save time, which is often a very important factor in real estate.

There are often multiple offers for properties which are an exceptional deal. Cash is often king when it comes to sellers deciding on which offer to take. If you have enough cash available in your Self-Directed IRA account, you would be able to offer and produce an immediate cash payment.

Without an LLC, it could delay the availability of a check for payment by several days. In many cases, not having the cash immediately available could cause the seller to go with another buyer that has the cash on hand immediately.

When you have your LLC in place to operate your investments, you would already have established check writing privileges on your account through the bank or financial institution which hosts your LLC account.

Once you have your bank checking account for the LLC established and properly assigned to your Self-Directed IRA, the bank will provide you with a checkbook so that you can pay for your investment(s) directly from this account.

By doing this, you enjoy the legal protection which an LLC provides, while maintaining the ability to control your investing with a plan to increase your retirement funds more quickly than through a conventional IRA.

This is the case whether your LLC makes one investment or diversifies into several opportunities.

Suppose that, over the course of two years you have invested in five separate real estate transactions. Of course, each property requires its own paperwork and record keeping along with possible property management and maintenance costs. Even with several properties owned by the LLC, your LLC counts as the sole entity to your Self-Directed IRA.

Operating an LLC for this purpose is not limited to the purchase of real estate. The same situation applies in the event your Self-Directed IRA is for the purpose of private money lending, the purchase of precious metals, or other opportunities which are allowed.

LLC is an abbreviation for Limited Liability Corporation. As the owner, you are generally not personally liable for debts and other liabilities incurred.

Again, you are not able to accomplish this with only a Traditional IRA or 401K. However, you may be able to rollover and existing Traditional IRA or 401K plan into a Self-Directed IRA and take advantage of this opportunity. Your LLC will also have its own tax identification number.

Interested in learning more about Self-Directed IRAs or LLCs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

Self-Directed IRA Transfer vs. Rollover

Perhaps the most important decision when starting your Self-Directed IRA is how to begin and/or add to your funding.

There are two ways you can do this, which are via transfer from an existing IRA account or by a complete rollover of one or more retirement accounts.

Each method has strict procedures which should be taken into consideration sooner rather than later.

It is important to understand that for a Transfer of funds, the financial institution which currently hosts your account needs to implement the procedure. If you elect to do a Rollover, you, as the account holder, are the one that implements the change.

A Transfer of funds is a non-taxable event whether you do so one time to start or as often as needed, and for an amount of money you determine.

To implement a transfer to your Self-Directed IRA you need our transfer form. In addition, you would need to provide a current (or most recent) account statement from the custodian of the other IRA. The funds you wish to transfer must already be liquidated.

This statement provides confirmation that the requested funds are being transferred from the same account type (such as a Roth IRA to a Roth IRA) and that the funds for the amount you are requesting are immediately available. Your statement also provides the account and routing numbers needed to complete the actual transfer.

Please keep in mind that the custodian of your other IRA may also have additional requirements on their end in order to authorize the transfer. For example, some require a hard copy with your signature. If the institution which hosts your other IRA is not local, this could delay your request as many institutions no longer accept faxed documents.

In some cases, original documents are required, which means that copies would not be accepted. You should also be sure that you reference the primary location of the custodian rather than a local branch, since this could also delay your transfer request.

The custodian of your other IRA may have a policy as to how they will send the funds to your Self-Directed IRA. For example, some will perform a wire transfer, possibly for a separate additional fee, while others may only issue a bank check which is mailed directly to the manager of your Self-Directed IRA. In this event, the institution may provide choices such as overnight delivery or some form of expedited service.

It is important that you take every step and provide all documentation necessary at the start to assure that your transfer of funds goes smoothly on the first try. It is also important that you provide all documentation from the “sending” institution to the custodian of your Self-Directed IRA for them to handle on your behalf.

By letting your custodian handle everything with the “sending” institution directly, it assures you that the transfer of funds will be a non-taxable event. It also prevents another delay in the process.

You should also be aware of the time frame needed to complete a transfer of funds into your Self-Directed IRA. If, for example, your transfer would take 30 days from the start to become official, it could impact your ability to close on a real estate deal in time.

When choosing a Rollover as a means to add to your Self-Directed IRA, there are other considerations. One important difference from a Transfer is that you, as the account holder, implement the transaction.

A rollover may or may not be a taxable event, depending upon the circumstances.

Either way, you need to be sure that you have any and all paperwork completed, sent to the proper party, and have an understanding of the amount of time needed from when you initiate the process until you have the funds available in your Self-Directed IRA.

A successful completion of a Transfer or Rollover also means that you will know exactly what to expect for any future requests. The better you can plan for future investing, the better off you will be!

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

Self-Directed IRAs Still a Hot Ticket in 2018

Self-Directed IRAs are still sizzling, thanks to a strong housing market throughout nearly all major metro areas as we approach the end of the first half of 2018. Single-family home prices are setting new records nearly every week, and average listing prices through the first half of May are up over 8 percent over the year-ago period, hitting $297,000. If the growth continues, it’s only a matter of weeks before average house prices zoom through the $300k mark.

Homes are getting snapped up at a frenetic pace. Buyers hoping to get a crack at the action need to have their ducks in a row when they put in an offer. Homes are spending 32 fewer days on the market than they were just six years ago, according to data from Realtor.com. 39 of the top 50 markets are reporting the shortest time-on-market numbers since the organization began tracking in 2012, says Realtor.com’s Director of Economic Research Javier Vivas.

Nationwide, the sheer number of homes being listed is on the market. The current price boom is based on more than scarcity: May saw some 557,000 new listings, up 8 percent compared to April and up 2 percent compared to the year-ago period. Total inventories were up by 6 percent compared to April and up 4 percent compared to a year prior.

Furthermore, the hot market is no longer dominated by California anymore. The housing boom is broad and includes more than just a few gateway cities along the coasts. The hottest market, according to Realtor.com’s researchers? Midland, Texas – a mid-sized oil town that has taken top honors for the second month in a row.

To consider using your Self-Directed IRA here are the current top 10 cities:

  1. Midland, TX
  2. Boston, MA
  3. San Francisco, CA
  4. Columbus, OH
  5. Vallejo, CA
  6. Boise City, ID
  7. Stockton, CA
  8. Buffalo, NY
  9. Grand Rapids, MI
  10. Fort Wayne, IN

So, you do not have to play in Silicon Valley or Manhattan Real Estate to do well. In fact, there are reasons to avoid those markets and concentrate on small and mid-sized towns: There is more room for growth, as rental yields – rent incomes divided by sales prices – are much more reasonable as you get into middle America and away from the marquee cities. This is a much more stable platform for growth, in the long run – and better yields means you get paid to wait.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

Protecting your Self-Directed IRA from ROI Killing Insurance Increases

We all need insurance. Even landlords, and even Self-Directed Real Estate IRA investors. Yes, your personal assets are protected in case of a lawsuit involving a Self-Directed Real Estate IRA property. But a lawsuit could lead to other assets within your Self-Directed IRA being put at risk. And, of course, all investment properties are subject to the risk of fire, flooding, earthquakes and – as some homeowners in Hawaii are now keenly aware – volcanic activity.

Insurance is valuable – but premiums are a cash flow killer. Beware of these items that can cause home insurers to hike your landlord insurance rates:

Swimming pools. Yes, some people may pay a bit more in rent or to buy a home with a swimming pool. But once you subtract the costs of maintenance and additional insurance premiums, a swimming pool can be an actual detriment to your ROI as a Self-Directed Real Estate IRA investor.

This is because of the high potential for liability associated with swimming pools. The insurance industry considers them to be an attractive nuisance. That is, they attract neighborhood kids, who might be tempted to use your pool when you are not home. And even if you are home, there is a substantial risk of tragedy from excited swimmers diving into the shallow end, or toddlers accidentally falling into the pool and being unable to escape.

Vacancy. Is your investment property likely to sit vacant for long periods of time? This can pose an insurance problem: Unoccupied homes can attract vagrants and squatters, who can cause damage, liability, and even destroy the value of the home by using it to manufacture methamphetamines.

They are also vulnerable to pests and mold, both of which have a lot of time to do damage undetected.

If your home is going to be unoccupied more than a few weeks, speak with your insurance carrier about securing special insurance coverage designed to cover vacant homes. This is going to cost a bit more than standard landlord coverage, but standard policies will not pay out for damage caused because the home was left unoccupied for months, in violation of your Self-Directed Real Estate IRA’s landlord insurance policy.

Homesharing. Are you renting your property out via AirBnB? Or are your tenants doing so without your knowledge? Either circumstance may require a change in your Self-Directed Real Estate IRA’s landlord insurance coverage. Insurance carriers regard regular short-term rentals to be a significant liability risk. After all, these individuals may not have passed a background or credit check, and in any case, are not likely to treat the home as if it were theirs.

If you fail to contact your insurance carrier and disclose that the home is being rented out to short-termers, they may not cover your property against liability or damage arising from this activity. You do not want to be surprised at claim time: It is much better to pay the premiums and take that cost into account when charging rent.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.