Why Self-Directed Real Estate IRA Investors Should Focus on Cities with Growing Populations

Population growth is one of the big drivers of residential real estate investment returns. Self-Directed IRA investors would do well to focus their efforts on cities that are experiencing strong population growth. This the primary long-term driver of housing demand, and ultimately supports increasing home values and rental prices.

Look for solid price gains that are supported by actual new people moving to the area, and not just speculative price gains. Returns generated as a result of the actual need to house more people are much more solid than returns generated by speculative bidding. Speculators can vanish as quickly as they arrived. It’s a lot harder to move a family that’s been living in a neighborhood for years than it is for a real estate investor to move capital. So, build your Self-Directed Real Estate IRAs fortunes on actual families living in homes and apartments, not on phantom price increases.

So what cities are experiencing the greatest population growth?  According to the editors of National Mortgage News, here are the top 12.

  1. Houston, Texas.
  2. Dallas, Texas
  3. Phoenix, Arizona
  4. Atlanta, Georgia
  5. Miami, Florida
  6. Seattle, Washington
  7. Riverside, California
  8. Washington, D.C.
  9. San Francisco, California
  10. Orlando, Florida
  11. Tampa, Florida
  12. Denver, Colorado

The vast majority of these markets are in the southern United States – a testament to the power of the invention of air conditioning, which makes even Miami and Phoenix great places to live, even in the summer.

Dallas, Texas has enjoyed one of the hottest housing markets in the country over the past several years – largely by poaching employers and workers from California. One example: Toyota recently switched its entire headquarters from the Los Angeles suburb of Torrance California to the north Dallas suburb of Plano – bringing more than 3,000 high-paying jobs with it – possibly as many as 6,500 — and pushing housing within commuting distance of Plano up fast.

“It was really about affordable housing,” Albert Niemi, dean of the Southern Methodist University Cox School of Business said recently, according to the Dallas Business Journal.

Indeed, the migration to more affordable housing seems to be the primary driver of the decision to move to a new city: National Mortgage News estimates about 18% of all inter-city moves are driven by affordability concerns. People want more affordable places to raise their families.

Plano’s pretty pricy. But while California slaps an income tax of at least 9.3 percent on income over $53,980 for single filers and $107,960 for married couples, Texas has no state income tax. And real estate in the better Los Angeles school districts got so high that Toyota’s executives had had enough.

Now, the flight to more affordable cities is relative – Riverside is pricey compared to Meridian, Mississippi. But it’s within commuting distance of Los Angeles and is much cheaper – and so LA families are migrating there.

There are employment and lifestyle considerations, too: San Francisco and Seattle are both beautiful and are centers of employment for the technology industry and continue to attract young people looking to make a name for themselves in the technology industry.

But San Francisco famously imposes rent control, and Seattle may soon impose rent control, which make those two markets less-than-friendly for long-term Self-Directed Real Estate IRA investors going forward.

Instead, look to the strong organic population traffic and more modest house prices in family-friendly cities like Phoenix, Denver, Tampa, Orlando and Houston, where house prices are still affordable for middle and upper-middle class families with normal jobs!

That’s your market, and markets that become wholly unaffordable for truckers, skilled tradesmen and young professionals have limited upside potential – and a lot more risk.

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

Self-Directed Real Estate IRAs Provide Refuge from Stock Market Volatility

The higher the stock market goes, the more important it is to diversify into real estate and other asset classes. A Self-Directed Real Estate IRA provides important tax advantages, while still preserving the diversification benefit, income, long-term capital appreciation and access to leverage that real estate investing historically provides.

Rental property has important advantages and features that in combination are unusual in most stocks and mutual funds:

  • Regular income, over and above the costs of ownership in many cases;
  • Long-term capital appreciation;
  • Depreciation benefits;
  • Tax-free exchanges;
  • Asset protection: While any given stock can become worthless almost overnight…

… a house and land has tangible value that, absent a volcanic eruption, almost never goes to zero. People will always need a place to live, businesses will always need a place to operate. And that’s true no matter what the stock market does. Even an out and out market crash like we have not seen since 1929 did not destroy the market for housing – people needed to live somewhere.

And that’s the logic of real estate investing.

Meanwhile, the monthly rental income provides a valuable ballast that can see you through times of market volatility: Even when prices fall, you get paid a steady rental income to wait it out. You can even use that rental income to buy more property at a discount.

Taken as a whole, real estate tends to be less volatile than the stock market. But individual investments can vary substantially. The stability of real estate is largely in the steady cash flow of rental income, as well as the ready access to cash, since it’s usually not hard to get a loan against equity.

Some of the advantages do not apply within Self-Directed Real Estate IRAs. For example, there are no tax-free exchanges like you can make in taxable accounts. But that’s because Self-Directed IRAs already provide shelter from current year taxation. There’s no need for tax deferred exchanges, because sales of IRA properties are already generally tax-deferred (or for Roth accounts, tax-free).

Self-Directed IRAs also provide some added protection from the claims of creditors – which is important for those who own multiple properties.


Direct ownership of Self-Directed Real Estate IRAs is not for everybody.

First, direct ownership of rental real estate either requires the willingness to be a landlord (and answer the phone for those 2 AM plumbing emergencies that always seem to come up) or hire a property manager to handle those problems, tenant screening and collections from late-payers on your behalf at around 10-15 percent of the monthly rent.

But if you buy at a good price, the rental income you receive can even more than offset this cost of doing business as well.

Real estate is also not very liquid. The monthly rental income is quite liquid, and that can go a long way to cushioning the blow, if you need cash for some reason or other. But if you need to access a very large sum all at once, real estate takes a lot of time and expense to sell. You can potentially get an equity loan in a few days, assuming you have equity in the property. But you cannot personally access loan proceeds in a Self-Directed Real Estate IRA. The money has to remain within your IRA.

If you want access to the real estate market without direct ownership of real estate itself, you may consider REITs, or Real Estate Investment trusts. These can be excellent income vehicles that still have potential for capital appreciation.

Their key advantage: Unlike C corporation stocks, REIT stocks can pass income to you free of federal income tax at the corporation level. Corporations have to pay corporate income tax on earnings before they pay it out as dividends. That corporate income tax was 35% until late 2017, when the Tax Cuts and Jobs Act was passed into law. Now the corporate income tax is much lower – 21% – but still significant. You take a 21% haircut on earnings before you even see the cash from a C corporation stock dividend, which comprise the vast majority of publicly-traded stocks. And then you have to pay personal income taxes on the dividend. The double taxation is quite a nasty bite.

But if you hold the asset in a real estate Roth IRA, there is generally no federal income tax due at all. *

*If you have a mortgage, you may be subject to unrelated debt-financed income tax, in proportion to the amount of income you received that is attributable to borrowed money, rather than your own equity. So, if you have a mortgage balance of 33% of the value of the property, you may be subject to UDIT on 33% of the income, and on 33% of the gain if you sell at a profit.

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

US News Best Places Ranking Offers Promising Self-Directed Real Estate IRA Opportunity

Want to find great potential Self-Directed Real Estate IRA investment opportunities? Concentrate on finding places that are simply great cities to live in. That’s a great driver of long-term investment returns, and helps prevent big market downturns, because great communities always have people who want to live in them, and that generates long-term demand for housing, as well as commercial real estate.

Of course, you want to concentrate on cities with substantial economic diversification: If you invest in houses in a company town, and the company goes under, or just decides to move its operations somewhere else, it will be landlords left holding the bag.

U.S. News and World Report just released its annual “Best Places” list of top 25 cities to live in, and the results read like a who’s who of great Self-Directed Real Estate IRA markets.

U.S. News ranked cities by affordability, job prospects, quality of health care, school districts, low crime rates and median household income, along with a number of other factors. Here’s what they came up with:

  1. Austin, Texas (for the third year in a row!)
  2. Denver, Colorado
  3. Colorado Springs, Colorado
  4. Fayetteville, Arkansas
  5. Des Moines, Iowa,
  6. Minneapolis-St. Paul
  7. San Francisco,
  8. Portland, Oregon
  9. Seattle, Washington
  10. Raleigh-Durham, North Carolina
  11. Huntsville, Alabama
  12. Madison, Wisconsin
  13. Grand Rapids, Michigan
  14. San Jose, California
  15. Nashville, Tennessee
  16. Asheville, North Carolina
  17. Boise, Idaho
  18. Sarasota, Florida
  19. Washington, D.C.,
  20. Charlotte, North Carolina
  21. Dallas-Fort Worth, Texas
  22. Greenville, South Carolina
  23. Portland, Maine
  24. Salt Lake City
  25. Melbourne, Florida

Austin was ranked number 1 for the third year in a row, proving that it pays to be weird. However, we are getting reports that it’s becoming pretty pricey for the people who live there. It’s certainly expensive compared to other nearby real estate markets. But the lively arts, culture and emerging technology scene make Austin worth the price.

We were pleased to see several cities from the Southeastern United States named, including our own Asheville and Charlotte, where American IRA has offices, as well as Raleigh-Durham and Greenville. Winston-Salem also did really well, clocking in at #31 on U.S. News’s list. Jacksonville, Florida was #52, and Charleston came in at #45. Knoxville was #46. Chattanooga was #55 and Tampa was #56.

Many of our own clients are naturally here in the Southeastern United States, and our region has done well for Self-Directed Real Estate IRA investors in recent years, and should continue to do well, as the region continues to balance natural beauty, a pleasant climate and affordability.

You can still buy Self-Directed Real Estate IRA properties at very favorable rental yields (capitalization rates) throughout the region – especially as you get 20-30 minutes out from the major cities like Miami and Atlanta.

In contrast, Northeastern cities have not been fairing as well. “Our Northeastern cities, which are epicenters of higher education and economic development, are not growing nearly as much as places in Florida, California and Texas,” said U.S. News real estate editor Devon Thorsby.  “They are expensive to live in. Top-ranked places have the characteristics people are looking for, including steady job growth, affordability and a high quality of life.”

New York City was #90.

We were curious about how San Jose, CA made the top 20 in any index that ranked affordability, but it turns out that the epicenter of Silicon Valley also has the highest average salary in the country.

Huntsville, Alabama took the top honors for housing affordability, so this could be a great market for value-focused Self-Directed Real Estate IRA investors.

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

Worried About Stock Market Risk? Diversify into a Self-Directed Real Estate IRA

For those who are worried about excessive stock market volatility, an allocation to real estate continues to prove itself an effective diversifier.

It’s still a risk investment, so prices may fall during periods of flight-to-safety. But historically these are short-lived, while the steady income stream from rent provides ballast.

Real estate investments can involve direct ownership of individual properties, or be indirect, through ownership of real estate investment trusts (REITs). Investors can also own real estate directly in taxable accounts or take the increasingly popular route of holding real estate within specially-set-up retirement accounts, called “self-directed retirement accounts.” The most popular of these is the Self-Directed Real Estate IRA.

Ownership of real estate within a Self-Directed Real Estate IRA allows the investor to combine the advantages of real estate as an asset class with the advantages of tax-advantaged investing – a powerful financial alloy.

Let’s consider each of their advantages, separately:

Advantages of real estate investing

  • Steady stream of rental income.
  • Increasing income over time as rents tend to increase year over year.
  • Potential for capital appreciation.
  • While dividend stocks also provide income and the potential for increasing income and capital appreciation, federal regulations limit the amount you can leverage a stock portfolio with margin lending. Real estate investors have much greater access to leverage, which can increase both income and total return on investment. (Greater leverage also magnifies downside risk, as well).
  • Real estate investors constantly maintain, expand and upgrade the national housing stock, improving the standard of living for all Americans.
  • Depreciation (in taxable accounts), which helps improve the cash flow from real estate investments. Investors can deduct a portion of their real estate income for wear and tear, in anticipation of the need for eventual replacement of roofs, carpeting, furnaces and other components. Depreciation does not apply in Self-Directed Real Estate IRAs, however, because the tax advantages in IRAs are even greater: Current income is not taxed at all. So, there’s nothing the Self-Directed Real Estate IRA investor needs to deduct against.
  • Intrinsic value. Unlike paper assets, any of which can plummet to zero overnight – real estate has intrinsic value as a place to live, work, grow crops, mine, place billboards, cut timber or any number of other value-producing activities. Unlike stocks, a given real estate investment almost never becomes worthless.
  • Tax-free exchanges. In taxable accounts, rental properties (of “like kind”) can be exchanged as often as you like, capital gains taxes deferred, under Section 1031 of the internal revenue code. In a Self-Directed Real Estate IRA or 401(k) or other tax-advantaged retirement account, there is no capital gains tax at all, except on amounts attributable to someone else’s money (borrowed money) in IRAs.

Advantages of Self-Directed IRAs and other retirement accounts

  • Income attributable to investments made with your own money is not taxable in the current year. It’s either deferred, or in the case of assets in Roth accounts left in place at least five years, tax-free. You only have to pay current income taxes on income earned with someone else’s money – i.e., a mortgage.
  • Capital gains taxes on gains attributable to your own money rather than borrowed funds are deferred, or in the case of assets in Roth accounts left in place at least five years, tax-free.
  • Asset protection. Unlike assets held in personal taxable accounts, assets in self-directed retirement accounts, including Self-Directed Real Estate IRAs, enjoy substantial legal protection against the claims of creditors. Even if you personally go bankrupt, it is very difficult for creditors to touch assets in non-inherited retirement accounts.
  • Limited liability. Real estate is, by its very nature, a liability-generating asset. Landlords can get sued for any number of things, real and imagined. But you personally cannot be held liable for any liabilities generated from within an IRA, since you are not a personal guarantor of IRA debts. Even if a plaintiff wins a judgement against the owner of the property – your IRA, not you, personally – they cannot then collect your personal assets. Collections are limited to the assets within the IRA, or the LLC or corporation that owns the property within the IRA.

Owning real estate within a Self-Directed Real Estate IRA allows the investor to combine the best of both worlds.

Disadvantages of Self-Directed Real Estate IRA Investing

The disadvantages are few, but include the following:

  • Real estate is generally illiquid. It takes time and money to sell a real estate holding if you need to raise cash in a hurry.
  • Real estate assets need maintenance. There are ongoing costs associated with maintaining a rental property. You will need to fix roofs, sinks, toilets, doors and windows. You will need to keep the wiring up to date, install new carpet and flooring, appliances and make rent ready repairs between tenants. Your rent prices and purchasing decisions need to account for these factors.
  • Property taxes. You will need to pay property taxes to local or state governments, depending on the jurisdiction. Your total returns need to be enough to compensate you for the ongoing property tax costs.
  • You will need to maintain landlord insurance, flood insurance and other types of insurance coverage to protect your investment.
  • Income from non-Roth retirement accounts is taxed at ordinary income tax rates. Lower long-term capital gains taxes do not normally apply to distributions from IRAs and 401(k)s. But income from Roth accounts, once the assets have been in a Roth account at least five years, is tax-free.
  • Required minimum distributions. IRAs are such a good deal, and the tax advantages so powerful, that Congress decreed that you cannot defer income and capital gains taxes on Traditional IRA investments forever. Except for Roth accounts, you must begin taking distributions and paying taxes on those distributions no later than April 1st of the year after the year in which you turn age 70½.
  • Transaction restrictions. You have to use the tax advantages of an IRA for the purposes for which they are intended: To create income security for yourself and your family in retirement. Congress forbids transactions that tend toward self-dealing, or the enrichment of your immediate family. So, you cannot use your IRA or other retirement account to transact directly with yourself, your spouse, direct ascendants or descendants, or any fiduciary advisor who advises you on retirement matters.

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

Five Reasons a Self-Directed Real Estate IRA May Be Your Best Investment Vehicle

There are few ways to build wealth as efficient or even as exciting as real estate. But what is the best way to start investing in real estate? The answer may come in retirement preparation, such as an IRA or Solo 401(K).  Many real estate investors refer to Self-Directed IRAs as a Real Estate IRA.  Holding real estate within an IRA comes with several advantages—as well as responsibilities—that even seasoned real estate investors should want to learn about.  Here are five reasons you might consider a Self-Directed Real Estate IRA as your next vehicle for investing in real estate assets:

Reason #1: Extra Protections via the Tax Code

The tax advantages that come with Self-Directed IRAs are obvious to anyone who has invested through a retirement account before. Long-term growth in a Self-Directed Real Estate IRA can minimize tax burdens over the years, which in turn helps investors save money. Profit collected from rental real estate via a property manager can then enter an account tax-free or tax-deferred.

But in the world of Self-Directed IRAs, it is also important to note these tax advantages will mean some additional regulatory work for your real estate investment. For example, the real estate held within a Self-Directed IRA will not be available for personal use by the account holder or any disqualified person to the account.  As such, it should be regarded as a separate investment entity.

Reason #2: A Plethora of Options

Those who invest in real estate regularly are used to having unlimited options available to them. The temptation is to view a Self-Directed Real Estate IRA as a way to restrict these options.

Real Estate IRAs include plenty of options, including the ability to use leverage to make real estate purchases with non-recourse loans, provided by North American Savings Bank, These loans give a degree of separation between Self-Directed IRAs and the investor, which in turn helps protect the retirement nest egg. Options such as using a property manager are not only available but may be preferable.

Another option is the ability to use a property manager to handle day-to-day oversight and management of the property and possibly even the rare eviction process.  Sure, you may make a punch list of repairs needed at the property, meet potential tenants, and even collect the rent check to drop off or mail to our office, but careful consideration should be made not to enter any activity that could result in sweat equity as this would be prohibited.

Reason #3: Moving Property Without Capital Gains Taxes

Selling property on your own will mean capital gains taxes. Conversely, you sell property within a Self-Directed Real Estate IRA, it is then protected from capital gains taxes. This reason alone is a great motivator for real estate investors; even if they are not excited about the non-personal use limitation.  The tax advantages could far outweigh not being able to personally use the asset.

Reason #4: Diversification

By this time, you have probably heard about “diversification” so much the word has lost all meaning. The problem is even the “Experts” think of diversification as owning lots of different types of stock. But what if the stock market enters a bear market? Diversifying your interests across asset classes—such as using non-traditional assets like real estate—gives the protection to continue investing without paying attention to one portion of the stock market.

Reason #5: Financial Security

By utilizing the wealth protections available in Self-Directed IRAs, a real estate investor can compound these gains into something even more substantial for retirement. That means the goal of financial security is even more possible with a well-placed real estate investment within a Self-Directed IRA. That Self-Direction has the potential to unlock financial security, which means peace of mind. Adding all of these advantages up together means real estate can be one of the best ways to build a sizeable nest egg by the time retirement arrives.

Interested in learning more about Self-Directed IRAs, download our free e-guide.  Contact American IRA, LLC at 866-7500-IRA (472) or visit us online at

Five Little-Known Benefits to the Self-Directed Real Estate IRA

The concept of self-directing an IRA can be intimidating to a lot of investors. They do not know much about specific assets or investment classes, so they would prefer to outsource the thinking to a financial adviser. But to many, real estate is different. Real estate requires direct involvement—or at least management. That is why real estate investments in a Self-Directed Real Estate IRA often appeals to those investors who want to take control of their financial destiny.

However, not everyone knows why the Self-Directed Real Estate IRA is so beneficial—or why it can be such a tremendous way to start building a retirement investment plan. That is why it is important to understand the little-known benefits to building a nest egg with a Real Estate IRA:

Benefit #1: You Can Still Borrow Money in a Self-Directed Real Estate IRA

Sure, you can always borrow money in a Self-Directed Real Estate IRA. But the protections and regulations on retirement accounts sometimes have investors worried that they cannot always use leverage within a retirement account. The good news, you can. Non-recourse financing terms are acceptable within a Real Estate IRA and help ensure that the person who owns the IRA has a degree of separation from the retirement account itself.

Benefit #2: Collecting Rental Income Tax-Free

The ability to collect rental income at a profit is one of the most enticing aspects of real estate: mostly passive income that generates a consistent cash flow for investors and retirees. Within a Self-Directed Real Estate IRA, however, there is an added benefit, tax protection. The income generated by investments within an IRA is separate from income to the individual (which is one reason the IRS requires such clear boundaries between the IRA and the individual). That means consistent income from rent within the Real Estate IRA, even if the stock market is not performing well.

Benefit #3: Selling Real Estate and Protection from Capital Gains Taxes

Capital gains taxes can be a major reason some investors hold on to an investment for longer than they might need it—they don’t want the sudden tax liability that comes when they realize their capital gains. Within a Self-Directed Real Estate IRA, however, an owner can sell real estate easily without having to worry about the substantial capital gains consequences in the immediate future. This provides an extra degree of freedom in decision making for buying and selling real estate when the value is there to be realized.

Benefit #4: Real Estate Partnerships are Just as Easy

Real estate can be expensive. Anyone who has ever tried to build up a real estate career from the bottom up does not need to be reminded of that fact.

That is why it is so beneficial to partner up to make real estate investments, pooling together money to make those key purchases that could otherwise not be made.

There is a perception out there that using a Self-Directed Real Estate IRA makes this impossible. But you would be surprised. You can still partner up using a Real Estate IRA and make investments.

Benefit #5: A Self-Directed Real Estate IRA Keeps Things Simple

Getting personally involved with your real estate can sometimes muddy the waters. Real estate held within a Self-Directed Real Estate IRA, however, requires separation. You cannot live in a real estate investment held in your IRA. This will not only help you to become a better manager of your investments, but to better understand what it means to keep your assets and your personal life separate.

Interested in learning more about Self-Directed IRAs, download our free e-guide.  Contact American IRA, LLC at 866-7500-IRA (472) or visit us online at

Buying a Short Sale Home in a Self-Directed Real Estate IRA

We have had a nice, long bull market in real estate over the last decade. But despite the long string of increasing house prices nationwide, more than 1 home in 11 in still seriously underwater. A new report from ATTOM Data Solutions found that about 8 percent of homes – more than 5 million dwellings, were worth at least 25 percent less than the outstanding debt that these homes secured. That’s a record low, down from 28.6 percent of homes in Q1 2012 – but Self-Directed Real Estate IRA investors should take note that some of these sellers will be very motivated. The downside, of course, is that in order to buy one of these homes at an acceptable price, they will probably need to get the lenders to agree to a short sale.

What’s a short sale?

A short sale is one in which one or more lenders on the property agree to accept less than the amount owed on the home, in order to get the home sold. They may do this if they understand the homeowner needs to move and/or cannot continue to make payments on the property and cannot pay the balance on the loan. If everybody wants to avoid a foreclosure, but the homeowner’s situation is otherwise hopeless, then a lender may agree to the short sale, releasing the owner from the balance, recovering what they can and getting a non-performing or soon-to-be non-performing loan off their books.

Where are the most underwater homes?

Louisiana and Mississippi lead the country with the greatest percentage of seriously underwater homes, at 20.8 percent and 16.9 percent, respectively. Arkansas is next, at 15.9 percent, followed by Illinois (15.6 percent) and Iowa (15.2 percent).

Boiling things down to the city level, the towns with the greatest percentage of seriously underwater homes are divided between the Deep South and the Rust Belt, with Baton Rouge, Louisiana (20.7 percent), Youngstown, Ohio (19 percent), New Orleans, Louisiana (19.0 percent), Toledo, Ohio (18 percent) and Scranton, Pennsylvania (17.7 percent) topping the list.

Boiling things down still further, there are 27 zip codes nationwide where the percentage of homes securing debt worth 25 percent or more than they are worth – including areas of Detroit, Virginia Beach, Chicago, Cleveland, St. Louis and Atlantic City.

More than 70 percent of homes in area code 08611 in Trenton, New Jersey, were underwater by 25 percent or more. Following Trenton are zip codes 63137 in Saint Louis, Missouri (64.8 percent); 60426 in Harvey, Illinois (62.3 percent); 38106 in Memphis, Tennessee (60.5 percent); and 61104 in Rockford, Illinois (59.6 percent), according to ATTOM’s research.

New Orleans and the surrounding parishes, as well as southern Mississippi are of course still feeling the after effects of much of their housing stock being literally underwater after Hurricane Katrina in 2005.

Buying a home in these areas for Self-Directed Real Estate IRA accounts can be tricky. But in many cases, lenders may be willing to take a haircut because their ability to continue to collect on these mortgages is doubtful. Eventually these homes will wind up in estate sales and auctioned off at fire sale prices, or owners will simply walk away from their mortgages and mail in the keys, leaving the bank to auction off the home to investors at steep discounts. In many cases, they would rather sell the home to you and eat a relatively small loss on the loan than risk a much bigger loss, later, after undergoing the time and expense of a foreclosure.

Some of these struggling areas may have incentives for real estate investors and homebuyers to develop in the area, so check with local real estate agents and other experts first for the latest homebuying and investment programs.

Buying a short sale in a Self-Directed Real Estate IRA

If you can get a good price on a short sale home, it may be a great addition to a Self-Directed Real Estate IRA. But be prepared for some challenges:

  • It can take time to get the lender’s approval.
  • Secondary lienholders, such as home equity lenders, may also need to agree to the short-sale, and not just the original lender.
  • You will probably need to buy “as is.” And troubled or struggling homeowners tend to defer a lot of needed maintenance. But it may be less risky than buying a home at a foreclosure option: At least you will be able to inspect the property.
  • These transactions sometimes fall through at the last minute if a struggling seller cannot come up with some cash of their own at the closing.
  • The seller could file for bankruptcy, which would halt the short sale negotiating process.
  • The lenders may not buy the seller’s story, or not be willing to take as big a loss on the loan as you require to buy the property – in which case, it’s back to the drawing board.


  • Work with an experienced local agent. Especially if you are new to Self-Directed Real Estate IRA investing and/or do not know the lenders in the area. Experienced agents will know what local lenders have a track record of approving. This knowledge may be more than worth their commissions.
  • Do not lowball the original offer. The banks know what area homes are selling for. If you lowball, and they have multiple offers, they may not even bother with a counteroffer.
  • Put up substantial earnest money. This shows the bank you are serious.
  • Include a pre-approval letter if you are getting a mortgage, or proof of funds.
  • Work closely with the lender’s Loss Mitigation Office. They are the ones who need to approve any short sales, so stay on good terms with them.

Interested in learning more about Self-Directed IRAs, download our free e-guide.  Contact American IRA, LLC at 866-7500-IRA (472) or visit us online at

Best and Worst Markets for Self-Directed Real Estate IRA Investors

If you are looking for a solid place to own some property within a Self-Directed Real Estate IRA, what qualities would you look for?

Well, you would want price levels to be reasonably affordable, compared to local incomes and prospects for economic growth. After all, future home price appreciation and rental market value increases have to come from somewhere. A recent market study from looked at all the major metropolitan areas with populations of more than 1 million people, and ranked them based on the following criteria:

• Median sales prices for single-family homes
• Average differences between sale and list prices
• Average number of days on market
• Average number of homes for sale
• Average change in rent from previous year
• Percentage of properties listed sold.

Based on their ranking system, Virginia Beach-Norfolk-Newport News, Virginia took the top spot, despite a relatively flat rental value compared to a year ago: On average, rental prices rose just $7 in Virginia Beach over the past 12 months. But sellers have been discounting their homes for sale, with the average difference between sale and list price amounting to $8,376 against a median sales price of $245,000.

The area has a lot of government and defense employees, so home prices could be somewhat cyclical depending on defense budgets.

The other top markets for Self-Directed Real Estate IRA homebuyers according to’s study, in order, are:

• Hartford, CT
• Philadelphia-Camden-Wilmington, PA-NJ-NE-MD
• Orlando-Kissimmee, FL
• Tampa-St. Petersburg-Clearwater, FL
• Cleveland-Elyria, OH
• Jacksonville, FL
• Miami-Fort Lauderdale-West Palm Beach
• Chicago-Naperville-Elgin, IL
• Pittsburgh, PA

The priciest market in the top ten, by a large margin, is the Southeast Florida market, with average single-family home prices of $339,900, according to the study. The South Florida markets also led the way when it comes to rental value increases, with the average monthly rent rising by $67 per month compared to a year ago.

Those looking to snap up lower-priced homes with their Self-Directed Real Estate IRA might consider the Cleveland-Elyria, Ohio area or Pittsburgh, Pennsylvania, with average single-family home prices of $148,500 and $157,000, respectively.

“It’s not surprising that West Coast cities continued to be strong seller markets in 2018, however the data shows that markets like Texas are becoming more desirable for home buyers, likely because home prices there are more affordable than in other areas of the country,” said Dario Cardile, Vice President, Growth at “While home prices will likely remain high in these top 10 markets, sellers should look for opportunities to work with a brokerage that offers the data and technology to help them understand the market, set the right price and get the most from their sale, while also enjoying professional agent support throughout the process.”

The Owner’s study also sought to identify the most overheated markets, defined as those markets where the average residents have spending more than a third of their household incomes on mortgage payments to buy a typical home in the area. For Self-Directed Real Estate IRA investors this would mean limited upside for home prices, because without some significant income increases, many residents would have trouble qualifying for a mortgage at prices that get much higher.

Unsurprisingly, the vast majority of the most overheated markets in the country are in California, with San Jose, CA, home of the famed Silicon Valley, topping the list, as well as Santa Cruz, Los Angeles, Napa and San Diego.

According to the researchers, the top ten markets for home sellers this year are:

• San Francisco-Oakland-Hayward, CA
• San Jose-Sunnyvale-Santa Clara, CA
• Dallas-Fort Worth-Arlington, TX
• Salt Lake City, UT
• Portland-Vancouver-Hillsboro, OR-WA
• Kansas City, MO-KS
• Sacramento-Roseville-Arden-Arcade, CA
• San Antonio-New Braunfels, TX
• Denver-Aurora-Lakewood, CO
• Houston-The Woodlands-Sugar Land, TX.

The median home sales price in San Jose-Sunnyvale-Santa Clara, California was $1.29 million! That’s compared to a national median of $234,300. San Francisco-Oakland-Hayward homes were selling for $940,000.

Interested in learning more about Self-Directed IRAs, download our free e-guide.  Contact American IRA, LLC at 866-7500-IRA (472) or visit us online at

Self-Directed Real Estate IRA Corner: How Much Should You Have Saved by Now?

Experienced Self-Directed IRA investors know: You need to monitor your investments, and how they perform over time. This is true with any individual security, and it is true with a Self-Directed Real Estate IRA rental property: If you own a house as a Self-Directed Real Estate IRA investment, you would want to know, how is it holding up to the elements? Is the roof in good repair? Is the wiring up to the demands of the modern household? Is the plumbing in good condition? Is it reasonable to expect that the home will generate acceptable income and capital appreciation in the future?

Because if you fail to monitor the status of your investment, you will not know if it’s time to take some corrective action – fix the roof, for example – until it’s too late and the damage is irreparable.

The same is true of an individual’s retirement portfolio as a whole. It’s important to take some vital signs from time to time, to ensure that your total retirement portfolio is in good shape, and that you are making acceptable progress toward your goal: An investment portfolio that is sufficient to continue to generate adequate income and financial security when you leave the work force.

Fidelity Investments – the Boston-based mutual fund behemoth, came up with a useful concept that may make it easier for you to check your progress toward a successful retirement: Their analysts estimate that the minimum amount an individual should have saved by the age of 67 should be about ten times his or her annual income.

This, combined with Social Security, should be enough to see most people through, if they’re careful about expenses.

Well, if you know your target is 10 times your income at age 67, then it’s possible to work backwards from that number, given reasonable savings rates and assumptions about expected future returns over time, to arrive at a target multiple for other ages, too.

Here’s what Fidelity came up with:


If you want to be on track to hit that 10 times income multiple at age 67, then you should be hitting the other guideposts along the way:

Save your income by age 30, and twice your income by age 35. Save triple your income by 40, and so on.

Fidelity’s analysts calculated that this is very doable, for those who contribute at least 15 percent of their incomes to their 401(K)s beginning at age 25 – just a couple of years out of college.

If you got a late start, or if you are falling behind, then you’ll need to take some corrective measures. Specifically, you are probably going to need to take some combination of these actions:

  • Increase the amount you are saving each year.
  • Increase your annual expected returns (but this probably involves taking on more investment risk).
  • Reduce the amount of unnecessary fees and expenses you’re paying within your retirement account.
  • Reduce your lifestyle expectations in retirement.

Nearly everyone falls behind at one point or another. Some fall behind because of bear markets. But these can be great opportunities to increase your retirement savings contributions, because you can buy great assets at big discounts. They are also great opportunities to increase your annual expected returns: Those who moved heavily into Self-Directed Real Estate IRAs and stocks in 2009-2010, for example, made profits that substantially exceeded the long term returns of either the S&P 500 or the residential real estate market – simply because they bought at the bottom.

And as Warren Buffett points out in this great speech to Columbia University students, buying assets everybody else thinks of as “risky” at the bottom isn’t necessarily so risky at all.

That’s where Self-Directed IRA investing can play an important role: You want to buy assets that are on sale – that sell at low prices compared to their intrinsic value or discounted expected future income streams. But those are not always publicly traded securities. Stocks and bonds are both pretty expensive these days, as are most mutual funds that rely on them.

A Self-Directed IRA does not limit you to publicly traded securities. Those are the securities that Wall Street wants to sell, anyway.

Instead, using a Self-Directed IRA (or Self-Directed Solo 401(K), Self-Directed SEP IRAs, Coverdell education savings accounts and health savings accounts for that matter) let you combine the tax advantages you get with IRAs with the freedom to diversify into any asset class you like (except life insurance, jewelry/gems, alcoholic beverages and collectibles).

This also helps you increase expected returns without taking on much more risk with your overall portfolio: Adding alternative asset classes like rental real estate, tax liens and certificates, private lending, farm and ranchland, LLCs, partnerships and other common Self-Directed IRA investments can help cancel out volatility in other areas, smoothing overall portfolio performance without forcing you to ‘pull in your horns’ by buying low-risk, low-reward assets such as money markets and other cash equivalents.

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

Hot Housing Markets for Self-Directed Real Estate IRA Investors

When most of our Self-Directed Real Estate IRA-owning clients read up on real estate investing in the national financial media, the headlines are dominated by the highly-appreciated and largely unaffordable markets. That is, in hot gateway cities and technology and financial centers like San Francisco, New York, Miami and Los Angeles.

Self-Directed IRA Case Study
Robert (50) and Rachel (47) took advantage of the collapse in house prices to buy several investment properties in and near Burlington, North Carolina in 2010-2011. They had sizeable 401(K)s from former employers that they rolled over into Self-Directed IRAs with American, which represented the bulk of their real estate investing capital. They “flipped” several houses over the next couple of years as prices recovered, and kept others on as rental properties, delivering steady income. They chose to reinvest income not needed into their flipping activities. The result has been an annualized 24 percent rate of return, given current price levels. But thanks to leverage, their return on invested capital has been nearly twice that amount so far, as they commonly use mortgages to finance about 50 percent of their real estate activity.

They do have some unrelated debt-financed income tax liability each year, but it has been more than worth it as they have been able to handily beat stock market returns since then, even while the stock market has been relatively strong.
These cities grab headlines, of course, with their spectacularly high prices. But there are lots of great bargains available in smaller towns that also have strong fundamentals, solid economics, steady and significant growth in house prices, and better affordability for most of us who do not have millions to throw around to buy an investment property.

Analysts at took a close look at some of America’s best housing markets in smaller towns and cities across the country.

We will deal first with North Carolina’s entry in the field: Burlington.

Many middle-income buyers have been priced out of the Durham area because of the tech boom and Research Triangle Park. But buyers have discovered much better affordability just 30 minutes away in Burlington, where the $245,100 median house price is much less of a burden on the family budget compared to Durham’s median list pricing of $356,800.

Burlington, North Carolina is a viable commuting option for those working in Durham and even in Raleigh, the state capital, which is about an hour away.

Migration to Burlington from Durham and activity from LabCorps, a significant Burlington employer and S&P 500 company, helped push home prices up by 20.7 percent just in the past year.

Burlington came in number 7 in the top hotspot category, according to Here are the top three:

1. Odessa, Texas.

Odessa is benefitting from the recent increase in oil prices, simultaneously with a boom in oil shale development in West Texas, which has created a job boom. Prices have increased by over 34 percent over the last year as workers flock to the town, bidding the median list price up to $271,400.

This market is probably best for risk-aware investors who can withstand the ups and downs of the oil market. Oil towns have a long history of boom and bust cycles, and Odessa’s in the midst of a boom.

2. Wichita Falls, Texas

Witchita Falls was hit hard by a drought a few years ago, but the rains came back and so did the town. Strong hiring from the nearby Vitro Architectural Glass plant also contributed to the recent boom, which saw house prices rise by 27.2 percent over the past year. But home prices are still very affordable, with a median house price of $140,000.

3. Homosassa Springs, Florida
This sleeper community is a popular destination for snowbirds and retirees from Canada, New England and New York/Pennsylvania seeking relief from the brutal winters up north. After a long period of economic sluggishness, hiring is picking up in the area, thanks in part to Duke Energy’s $1.5 billion natural gas plant on Crystal River.

This and strong economic activity in nearby Hillsboro County and the Tampa area, an hour to the south, helped push the median house price in Homosassa Springs to $225,100 – a 22.1 percent increase in one year.

Other solid housing markets include:

City Median List Price One-Year Change in Median Listing Price
Terre Haute, Indiana $109,600 21.8%
Battle Creek, Michigan $140,000 20.9%
Bowling Green, Kentucky $260,000 20.9%
Boise City, Idaho $335,100 19.6%
Las Vegas, Nevada $330,000 16.8%
Indianapolis, Indiana $250,100 16.4%

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