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Self-Directed Real Estate IRA Glossary

Basic Self-Directed Real Estate IRA Terms You Need to Know

Beneficiary. The individual named to receive the IRA assets and the IRA itself upon the IRA owner’s death. This has important tax and probate advantages. It is important to keep the beneficiary listed by name on your Self-Directed IRA, and keep it updated as appropriate.

Capitalization rate. Also called “cap rate.” The rate of return of a property based on expected rental income. The formula is net operating income (NOI) divided by the current market value or the acquisition costs, expressed as a percentage.

Catch-up contribution. Additional money you are allowed to contribute to a retirement account once you turn age 50 or older. For Self-Directed IRAs, you can contribute $5,500 (if you meet the income requirements, and another $1,000 each year in catch up contributions once you turn 50.

Disqualified Persons. Persons and entities prohibited by law from transacting directly with your Self-Directed Real Estate IRA. These include your spouse, your children or grandchildren, your spouse’s grandchildren, your parents and grandparents, your spouse’s parents and grandparents, and any entities they control. It also includes anyone advising you in a fiduciary capacity on your Self-Directed Real Estate IRA.

Fair Market Value. The estimated value of assets if they were sold to another informed third party in an arms-length transaction. The fair market value of IRA assets must be reported to the IRS as of December 31st each year.

Inherited IRA. An IRA inherited by someone other than a spouse. Special tax rules apply.

Form 5498. An IRS form you will receive each year from your retirement account custodians or administrators detailing your contributions to your retirement accounts.

Hard money loan. A short-term loan based on the assets within the IRA, typically at higher interest rates.

Non-recourse. Mortgages in Self-Directed Real Estate IRAs must be on a non-recourse basis. The IRA account holder cannot sign a personal guarantee, and in the event of default, the lender must have no security to collect other than the specific property bought with the proceeds of the loan.

Probate. A judicial process used to account for a deceased individual’s assets, pay off his or her creditors and distribute the proceeds to heirs. If you name a beneficiary on your Self-Directed Real Estate IRA or 401(K), however, these assets bypass probate and pass directly to your beneficiary. If you had owned them in your own name, however, or fail to name a beneficiary, these assets are subject to probate.

Prohibited investment. The law restricts Self-Directed IRA owners from investing in certain kinds of assets, including life insurance, collectibles, antiques, art, gems and jewelry, alcoholic beverages and certain forms of precious metal coins and bullion of insufficient or inconsistent purity. Investing in these assets could cause the IRS to strip your Self-Directed IRA of its tax-advantaged status. You may face taxes and penalties if this occurs.

Rollover. A tax-free transfer from one tax-advantaged retirement account to another. Each taxpayer is entitled to one tax-free rollover transaction per year.

Roth IRA. An IRA account that features tax-free growth, tax free withdrawals on assets that have been in the account at least five years but is funded with after-tax contributions.

Contributions are not tax deductible. These accounts can be held in self-directed or conventional IRAs.

Self-Directed IRA. An IRA in which the owner retains direct control of the individual investment decisions within the account, to include the selection of the custodian or broker. Self-Directed IRAs provide more flexibility in choosing alternative asset classes and fee structures. They can be traditional or Roth IRAs.

Self-Directed SIMPLE IRA. Savings Incentive Match Plan for Employees.

Unrelated debt-financed income. A tax that may apply to any realized gains or income within a Self-Directed IRA or conventional IRA, Self-Directed SIMPLE IRA or Self-Directed SEP IRA plan attributable to borrowed money.

At American IRA, we believe that Self-Directed IRAs, including Self-Directed Real Estate IRAs, are the best vehicles for growing your retirement account. And we have the experience to help you with your transactions.

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.

Raleigh and Charlotte Hold Special Allure for Self-Directed Real Estate IRA Investors

The real estate markets in Raleigh and Charlotte, North Carolina remain among the the hottest in the country – and that is great news for local Self-Directed Real Estate IRA investors. In fact, North Carolina – including Raleigh and Charlotte in particular – is one of the best Self-Directed Real Estate IRA markets anywhere.

The North Carolina city took the #2 spot in this year’s “Hottest Housing Markets for 2018” report from Zillow, which looks at house price appreciation trends, rental prices, regional income growth, prospects for employment and low unemployment rates. Self-Directed Real Estate IRA investors have benefitted from a Raleigh economy that is firing on all cylinders, say analysts.

Charlotte, North Carolina, also fared very well, coming in as the fourth hottest market in the country, according to Zillow’s researchers.

All in all, Zillow ranked the country’s hottest markets as follows:

  1. San Jose, California
  2. Raleigh, North Carolina
  3. Seattle, Washington
  4. Charlotte, North Carolina
  5. San Francisco, California
  6. Austin, Texas
  7. Denver, Colorado
  8. Nashville, Tennessee
  9. Portland, Oregon
  10. Dallas, Texas

Continued growth in the technology industries fueled Raleigh’s housing market strength.

Yes, there is lots of technology in and around Silicon Valley, which explains San Francisco, San Jose and Seattle on that list. But Raleigh has something none of those markets can come even close to matching: Lots of room to run.

Why?

Because while people are actually fleeing those other cities as the cost of living continues to escalate, Raleigh can lay claim to being one of the most affordable cities in the country for renters. That’s an important metric for Self-Directed Real Estate IRA investors, who depend on being able to find qualified renters who can afford to pay their monthly rents on time and consistently. Evictions are frustrating, costly and damaging to both the tenant and the landlord. And in a mature market, values in San Francisco and San Jose have lots of room to fall.

The Raleigh market is much more affordable and sustainable for Self-Directed Real Estate IRA owners.

Currently, the median monthly rent payment in Raleigh is $1,441, which equates to just 22.9 percent of the median household income, ranking it the fourth most affordable market for renters in the country – again according to data from Zillow.com.

And once again, Charlotte, North Carolina fares very well using this metric, as well: Zillow ranks Charlotte as the ninth most affordable market in the United States, with an average rent of $1,301, representing 24.7 percent of the median monthly income.

In contrast, the least affordable major metro markets for renters were:

  • Los Angeles, California, where the $2,759 median rent equals 47.6 percent of the median monthly income;
  • Miami-Fort Lauderdale, Florida, where the $1,867 median rent equals 42 percent of the median monthly income;
  • San Diego, California, where the $2,549 median monthly rent equals 40.8 percent of the median monthly income;
  • San Francisco, California, where the $3,425 median monthly rent equals 39.7 percent of the median monthly income, and;
  • New York, New York, where the $2,401 median monthly rent equals 38.3 percent of the median monthly income.

North Carolina also takes the edge for much lower state income taxes compared to California.

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 Real Estate IRAs Can Help Close the Retirement Savings Gap

Most Americans know they really should be saving and investing for retirement. But most Americans are also clueless about how much they realistically need to have saved up in order to provide for a secure and acceptably comfortable retirement income. Self-Directed IRAs are just part of the retirement picture that also includes conventional assets, Roth IRAs, pensions, 401(K)s, 403(b)s, Thrift Savings Accounts (for federal employees), annuities and private savings outside of retirement accounts.

The problem is pervasive: A new study from Bankrate.com finds that more than 60 percent of Americans surveyed have no understanding of how much they need to save to accomplish their retirement goals. 69 percent of millennials between ages 18 and 67 do not know – which is excusable, considering their youth. But Baby Boomers didn’t fare much better: Fully 58 percent of Boomers are unable to calculate their required requirement savings or budgets. 56 percent of Generation Xers surveyed reported they didn’t know.

Other findings:

  • 8 percent of those responding indicated they never plan to retire – though disability and economic dislocation have a way of taking those decisions out of individuals’ hands.
  • 8 percent estimated they needed over $1 million to retire, and 15 percent estimated they would need to amass between $250,000 and $1 million.
  • 8 percent reported they believed they would need $250,000 or less to retire.
  • 61 percent reported they did not know. Which makes it impossible for them to make rational decisions about how much they need to save each week, month and year as their retirement dates march inexorably closer.

Self-Directed Real Estate IRAs can help

One way to close the gap: More Americans should consider Self-Directed IRAs – particularly Self-Directed Real Estate IRAs. The Self-Directed Real Estate IRA technique provides a number of powerful benefits that are not easily replicated using other types of asset classes:

  • Tax-deferred growth of Self-Directed IRAs, Self-Directed Solo 401(K)s, Self-Directed SEP IRAs and Self-Directed SIMPLE IRAs
  • Tax-free growth of Self-Directed Roth IRAs and Roth 401(K)s
  • Protection from creditors in the event of bankruptcy
  • Consistent rental income that can be reinvested or used to support you and your family in retirement
  • Potential for increasing income over time as you are able to increase rents
  • Potential for capital appreciation
  • Easily obtainable leverage – lenders are generally more willing to lend on real estate than most other kinds of assets, and on better terms.

Few other types of investments provide this combination of benefits to the individual investor.

Fortunately, the Self-Directed IRA structure is flexible enough for investors to build quite significant real estate portfolios over time by leveraging the tax benefits of IRAs and other retirement accounts.

Real estate prices can be volatile, of course. But rental real estate tends to pay investors handsomely via rental incomes while they wait for prices to recover. You do not need to sell at a loss: You can continue to collect regular rental income from your Self-Directed Real Estate IRA investment property for years.

Self-Directed Real Estate IRA owners should be aware of unrelated debt-financed income tax: If you borrow money to purchase an investment property, part of your income and part of your capital gains on sale of a Self-Directed Real Estate IRA property will not be entirely tax-free. Any earnings and realized capital gains attributable to borrowed money, rather than your own savings and contributions, will generally be taxable as income, under UDIT rules. However, as you pay down the mortgage on the property, less and less of your income and capital gains will be taxable.

(Tip: Consider paying off any loans on Self-Directed Real Estate IRA properties, if possible, before selling them, to avoid having to pay UDIT on capital gains attributable to other peoples’ money.)

Another idea: Self-Directed Solo 401(K) accounts also support self-directed real estate investing. If you are self-employed or own your own business, you can establish your own 401(K) or Roth 401(K) and use it to purchase investment real estate directly.

However, Self-Directed IRAs and Self-Directed Solo 401(K)s are no panacea: In order to have the greatest chance of success, investors should have a clear idea of what their retirement income needs are, and what kind of savings it will take to amass an investment portfolio capable of generating the income required over many years of retirement.

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 Real Estate IRA Basics: Investing in Raw Land and Timber

Most Self-Directed Real Estate IRA investing is done using basic residential properties as the investment vehicle: Single family 2- and 3-bedroom homes, condominiums, small apartment buildings, duplexes and quads. But there is nothing limiting you to these straight-ahead investments. Self-Directed Real Estate IRAs come in all kinds of varieties. If you find a compelling value in farmland, ranch properties, timber and other kinds of real estate investing, you can absolutely pursue it while still combining the advantages of real estate investing with the power of a Self-Directed IRA.

Advantages of Self-Directed Real Estate IRAs

Land is a unique investment with a number of key advantages:

  • Even in down markets, Self-Directed Real Estate IRA investments almost never go to zero.
  • Usually generates regular income.
  • Land produces food, timber, coal and oil – all of which have economic utility that is likely to last as long as civilization lasts.
  • You can build rental real estate on a piece of farm or timberland or rent space to advertisers and cell phone tower developers to further boost income. Other potential sources of revenue streams include renting barn and other storage space, natural gas rights, solar panel space rental, wind power generation, grain storage/siloing, summer and October hay rides for the community and special events.
  • Rental income and crop/livestock yields from a Self-Directed Roth IRA are tax-free.
  • Land/real estate is a historic hedge against stock market volatility.
  • Potentially increasing rents and yields amount to significant inflation protection.
  • With good tenants, farmland and timber land requires less maintenance and intervention from the landlord than residential and even commercial real estate. You do not have to worry about leaky roofs and faucets and 3 AM calls because of a stopped toilet.
  • Farmers generally pay rent twice per year – once in the spring and once in the fall. Which means fewer collection headaches for you.
  • Property management expenses are lower. This means your Self-Directed IRA can keep more of the rental income that might otherwise go to a property manager.
  • Farmland and timber land is a proven source of passive income – especially when any mortgages are paid off.

Successful land investors are aware of the risks: To do well in Self-Directed Real Estate IRA investing in farm, ranch and timberland, you should have a solid understanding of the industry and the communities in which you are investing.

Be careful to do a thorough title search to ensure you are not buying a property still encumbered with liens.

You should also be in a position to tie up money in the land for a long time. Transaction costs on land can be high, and land is notoriously illiquid. However, this illiquidity is part of the reason it is so potentially profitable – you will not normally need to pay a liquidity premium in the form of lower ROI for the privilege of quick access to your money. This is why Self-Directed Real Estate IRAs and other similar tax advantaged retirement accounts are ideal vehicles for this kind of investing: Time horizons for many Self-Directed Real Estate IRA investors is measured in decades, not months.

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 Real Estate IRA Update: North Carolina Multi-Family Market Remains Strong

It has been a nice run for Self-Directed Real Estate IRA owners focused on the multi-family residential market, but we are starting to see some signs of a slowdown in investment activity.

New data from CBRE and Real Capital Analyst indicate that total multi-family investment activity slipped by 6.9 percent year-over-year, as of the close of Q2 2018. Capitalization rates, defined as the annual net operating income of the property divided by the property value, edged down to 5.5 percent, largely due to a declining investor interest in so-called ‘garden-style’ apartment buildings.

However, the high-rise market continues to attract strong investment activity, with 12.4 billion in sales marking an increase of 12.2 percent on a year-over-year basis.

A disproportionate share of investment dollars is flowing to the already highly-appreciated markets in Los Angeles and New York, with the hot Dallas market coming in third, well behind the other two metros. But that may well leave opportunities in the underserved Southeast, including here in North Carolina, where economic growth, employment prospects and housing demand remain strong, and where rental yields are still attractive to Self-Directed Real Estate IRA investors interested in multi-family housing.

Data from the Apartment Loan Store, a lender that specializes in the multi-family market, indicates that cap rates in and around Charlotte, North Carolina, are in line with national averages, though they vary by type of property:

New Luxury Metro                 4.62%

Class A                                                     5.14%

Class B                                                     5.67%

Class C                                                     6.45%

Value-added Acquisitions     6.34%

The average multi-family rent in Charlotte has increased 2 percent over the past year, also according to the Department Loan Store, though the trend has been towards flattening, overall.

Baby boomers who have recently sold their homes have been migrating to the rental market, offsetting Millennials who are increasingly joining the ranks of homeowners.

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.

Buying Florida Properties in your Self-Directed Real Estate IRA

A recent article in the Sarasota Post features the basics of investing in Florida properties using your Self-Directed Real Estate IRA. Of course, the principles are the same everywhere: The laws governing IRAs, including Self-Directed Real Estate IRAs and the broader category of Self-Directed IRAs, are federal. They are the same in every state. But there are a few considerations that make Florida unique.

Booms and Busts

Florida has been attracting real estate speculators for decades – and is famous for big Florida land booms followed by devastating busts. Many have gotten wealthy from Florida real estate investing, and if you time things well and get in while one of the great Florida land booms has some room to run, you can do extremely well indeed.

On the other hand, many have bought into Florida property at the top of the market and been devastated by one of the big real estate crashes that seem to happen in Florida from time to time.

Those who have been investing in real estate for a while will easily recall that Miami, Fort Lauderdale and Palm Beach real estate investors were all seriously hurt by the 2008 market crash. But they have also done very well in the recovery.

Be Patient

So, Florida is a market that is best for Self-Directed Real Estate IRA investors who plan to buy and hold, or who have a number of years before they expect to need to cash out. Meanwhile, the great thing about real estate is that thanks to the generous and increasing rental income yields available on real estate, Self-Directed Real Estate IRA owners can get paid very handsomely to wait.

No State Income Taxes

Florida is an ideal home for Self-Directed Real Estate IRA investors because it is one of a handful of states that do not have a state income tax. This means that rental income from your Self-Directed Real Estate IRA is only taxed at the Federal level, and if you own the property in a Roth IRA, it is not taxed at the federal level, either.

The lack of state income tax goes a long way to helping make a Self-Directed Real Estate IRA a compelling value proposition, and it makes Florida a great destination for retirees who expect to rely on taxable income from an IRA, 401(K), or real estate portfolio.

Self-Directed Real Estate IRA financing

Because Florida real estate prices so historically volatile, lenders may be more careful about lending to Florida Self-Directed Real Estate IRA investors. For example, in most markets nationwide, it is pretty easy to find financing from a Self-Directed Real Estate IRA lending company for about 65 percent of the value of the property securing the loan. However, some of these Self-Directed Real Estate IRA lenders will not lend on Florida properties. The ones that do may require a 50 percent down payment rather than the 35 percent standard elsewhere in the country.

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.

Due Diligence Checklist for Self-Directed Real Estate IRA Properties

Real estate deserves consideration in anyone’s long-term investment portfolio. Some investors are content to expose themselves to real estate via REITs and straight-ahead stock companies within a larger retirement portfolio. Many of our own clients find they can get better returns on investment via direct ownership of investment properties within their own retirement accounts, using a Self-Directed IRA, Self-Directed Real Estate IRA, Self-Directed Solo 401(K), Self-Directed SEP IRA or Self-Directed SIMPLE IRA account. They simply use the cash in these accounts to purchase investment property and hold it, with their IRA collecting rents and paying expenses.

After working closely with hundreds of successful Self-Directed IRA landlords – men and women who own real estate directly within their retirement accounts – we have come up with some important hints and tips for finding profitable investment properties with a relatively low degree of risk.

  • Compile your own comps. Do not trust the big internet sites like Trulia and Zillow for estimates on what any specific home may be worth. First, everyone else has access to that data, so you will not be at any significant advantage by relying on it. Second, there is no substitute for strong local knowledge of the neighborhood – something that no large nationwide database can provide. Compile your own comps, or work with an agent who has extensive experience with homes in this particular area. Better yet, consult a professional appraiser.
  • Hire a building inspector. Most real estate investors – even experienced ones – inspect just a few homes a year at most. A professional building inspector visits hundreds of homes each year. Few ordinary investors can match that kind of experience, which can normally be had for just a few hundred dollars. That experience can also save you from incurring thousands and even tens of thousands of dollars in needed repairs and renovations, which could destroy the profitability of your Self-Directed Real Estate IRA property.
  • Work with a title company. This is the most reliable way to ensure that your new Self-Directed Real Estate IRA investment property has a clean title, free of encumbrances from unpaid property taxes, contractors’ liens, old mortgages, claims from heirs and estate beneficiaries, lawsuits and judgments or pledges as collateral.
  • Be skeptical of pro forma Occasionally, sellers will show you pro forma accounting documents that show various earnings and profitability projections. These are nice but consider them an absolute ‘best case’ presentation. In 99 percent of actual cases, the Self-Directed Real Estate IRA property will show income and expenses substantially lower than what the pro forma numbers assumed.
  • Look over key property management documents. You will want to look at the previous owner’s rent rolls and compare them to bank statements. Do rental collections match the actual bank statements? Are rents claimed on the rent roll but do not show up on actual bank statements? Does the discrepancy match the non-payment rate?
  • Account for renters’ deposits. State laws vary, but the general rule is landlords must keep renters’ security deposits in segregated accounts. Before you purchase a rental property, ensure your account for each tenants’ deposit in full and that you have access to these accounts, so you can release them to the renter as required by law, or use them to offset expenses that the deposits are intended to cover.

 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.

Charlotte Self-Directed Real Estate IRA Investors Tapping a Booming Market

Real estate has been hot in recent years – and Charlotte, North Carolina, where American IRA, LLC maintains one of our two offices – is no exception. Recent sales figures are in, and Carolina Multiple Listing Service data for May of 2018 is showing an average sales price of a home in the general Charlotte region was $299,690. That is a jump of 11 percent over May of 2017.  This has been great for Self-Directed Real Estate IRA Investors.

Want a Self-Directed Real Estate IRA property within the city limits? Be prepared to pay even more: The average price of a Charlotte home was $332,700 in May, up a solid 13 percent over the preceding twelve months. The median sales price was up 9.5 percent over the same period.

Why the gap between the median and mean sales prices? Part of it is due to the rapid growth of incomes and wealth levels of Charlotte’s most affluent suburb: Davidson. This town of 12,700 residents has recently been named the wealthiest town in North Carolina, according to the most recent Census Bureau numbers.  The median annual income in Davidson, $109,907, is more than double the North Carolina median income of $48,256. And more than a quarter of households in Davidson earn $200,000 or more, compared to just 3.9 percent in the rest of the state.

Meanwhile, the number of homes available for sale in and around Charlotte is starting to fall. Inventory is down 20 percent between May 2017 and May of 2018, according to MLS data and reporting by the Charlotte Observer. The biggest demand for real estate in the Charlotte area seems to be towards the lower end of the price range, say local real estate observers. Self-Directed Real Estate IRA investors need to act fast.

The combination of increasing prices and tightening inventory appears to have taken some of the steam out of the Charlotte regional real estate market.  Despite the low inventory, it is still a great time for Self-Directed Real Estate IRA investors.  The number of homes sold has increased over the past year nationwide, but the number of units sold in Charlotte last May has fallen by 20 percent compared to a year ago.  However, lower inventories may well help support prices going forward, as buyers must compete for fewer and fewer units actually up for sale.

The lower total inventory does not mean buyers are not snapping up homes quickly. Indeed, Self-Directed Real Estate IRA investors may find this a good time to sell: The average time from list to close has fallen from 97 to 87 days in the past year.

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.

Beyond Rent Payments – Creating Multiple Streams of Income Within Your Self-Directed Real Estate IRA

Most Self-Directed Real Estate IRA investors already know that you can charge rents on investment real estate, which can be reinvested for retirement or used to support current projects.

But professional property managers also understand that your income opportunities are not necessarily limited to rental income. For Self-Directed Real Estate IRA property owners who are creative and resourceful, there are endless possibilities for generating ancillary income streams from real estate investments, over and above the normal rental income.

This is especially true for multi-family units and properties where there is a significant amount of land.

Here are some ideas we have seen on different kinds of properties:

  • Vending machines
  • Coin and card-operated laundry
  • Parking space rental for special events at nearby venues
  • Garages
  • Storage units
  • Short-term lease premiums
  • Water delivery service
  • Mineral rights
  • Advertising/billboards
  • Thoroughfare/passage rights
  • Operating a bodega, snack bar or convenience store primarily for residents, or creating one on site and leasing it out to a third-party vendor
  • Buying nearby real estate space and installing needed businesses
  • Farming and ranching
  • Leasing for special events
  • Pest control fees
  • Valet trash collection
  • Delivery services
  • Concierge services
  • Car detailing/washing
  • Whole building WiFi
  • Recycling programs
  • Bike storage
  • Pet rent fees (excluding service dogs and therapy dogs)
  • Communication tower rental
  • Rental furniture
  • Cable and internet bundling service deals

.. and many more!

Of these, vending machine income is among the more common options, and can work well even in smaller apartment complexes and in both residential and commercial contexts. Today’s landlords have more options that can efficiently generate noticeable additional income within their Self-Directed Real Estate IRAs with minimal cash outlays or effort required on the part of the investor.

Do not limit your thinking to snacks and soft drinks: Today, vending machines commonly dispense everything from toilet paper to cell phone chargers.

Increasingly, the trend in recent years has been for Self-Directed IRA landlords who own multi-family units to partner with specialized laundry room vendors, rather than attempt to do all the legwork themselves.

Having some furniture, you can rent out with a unit also increases your flexibility to serve young families, people traveling for work and relocators, while still getting some income for your trouble.

Trash collection fees, lease buyout fees, late fees, non-sufficient funds fees and other reasonable fees can also provide a bit of additional cash flow to cover expenses.

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.

Be Quick: Buying Self-Directed Real Estate IRA Properties in a Competitive Market

When legendary baseball player Ted Williams – arguably the greatest hitter who ever lived – became a coach and mentor to younger players, he had two pieces of advice:

  • Watch the ball
  • Be quick!

While Self-Directed Real Estate IRA investors do not have to try to hit a 100-mile-per-hour fastball from Bob Feller, like Williams did, they still have to be quick: Homes are spending 32 fewer days on the market than they did just a few years ago, according to Realtor.com. Buyers are snatching up properties as fast as they come on the market. And Self-Directed Real Estate IRA investors need to swing a very quick bat in order to have a chance to acquire the assets they need to provide their retirement income portfolios down the road.

Here are some expert tips on how to invest in the fastest housing market we can remember.

  • Do not rely on traditional lenders, unless you are pre-approved. The average conventional loan now takes nearly two months to underwrite and process according to EllieMay.com. Self-Directed IRA and Self-Directed Real Estate IRA mortgages tend not to take as long, since they must be non-recourse loans, they are underwritten based on the value of the property, rather than on income, which can be difficult to document.

But conventional mortgage companies and garden-variety banks are not known for speed in processing. Do not wait until you are bidding against multiple qualified buyers before lining up the financing or getting cash on hand.

  • Pay cash. This is the ultimate dealmaker: Cash is and always will be king, when it comes to getting a deal through quickly. If you have the cash to buy a home on the spot, you have the leverage to get a better price. This price advantage translates to a profit advantage down the road for your Self-Directed Real Estate IRA.

It also leads to a lot less wasted time. Every deal that falls through because you are too slow represents a loss in terms of wasted time and effort that you could have spent on a deal that succeeds.

  • Include a check with the offer. Ideally, you can attach the check for the full purchase amount made out to escrow along with the offer. If not, or if you need to attach some strings to the deal, attach a check for a few thousand dollars in “earnest money.”
  • Focus on homes that have been on the market for a while. Many times, the sellers are frustrated. They know they have priced their homes too high – but they probably are not getting too many offers these days. Buyers are flocking to the new listings. You may be able to get a good deal.
  • Do not let it slip you are in a hurry. Sellers can smell desperation and will drive a harder bargain. Make a good, fair offer at a discount from the home’s intrinsic value (you are an investor, not a retail buyer, after all), and be willing to walk away if the seller walks. If they know you are willing to walk, they are more likely to accept a reasonable offer immediately.

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.