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Jim Hitt, CEO of American IRA-A National Self-Directed IRA Provider, Answers A Frequently Asked Question…Is Retiring Through Rental Real Estate Wise?

Jim Hitt, CEO of American IRA-A National Self-Directed IRA Provider, Answers A Frequently Asked Question…Is Retiring Through Rental Real Estate Wise? Jim Hitt has over 29 years experience investing in real estate and is expertly qualified to field this important question.

Jim Hitt says “Retiring Through Rental Real Estate can be a wise decision if you are careful about your investments. There are some very important things you must do to ensure your success:

  • Do your ‘due diligence’ before you make your purchase
  • Always consult with professionals when putting together a deal
  • Use the real numbers (sometimes people are tempted to use numbers based on the profit they ‘think’ they can make instead of looking at the actual profit the investment is already making)
  • Know your market (many investors make the mistake of buying a property that is listed at a great price only to find out the price they paid is much more than the property is worth in that location).
  • Remember not to cut it too close (A common mistake investors often make is not keeping enough cash in reserve. You have got to keep cash on hand for repairs, months where you have a vacancy, taxes, insurance, and other expenses that may arise.)”

One thing people should keep in mind is that ‘retiring’ through rental real estate may or may not be fully retiring. People need to decide the level of involvement they would like to have in their retirement years with these rental properties. In this light, they can decide to be hands on landlords during their retirement years or they can decide to employ a property manager if they prefer to have a more passive role.

The other thing that people should keep in mind is that there are tremendous benefits to using a self-directed IRA or self-directed 401(k) as the funding source for rental real estate properties. The most significant benefit is tax-free or tax-deferred income streaming into their retirement account.

Jim Hitt concludes “There are far too many benefits and scenarios to include in this press release. Having said that, we are currently offering free 1-on-1 consultations and free educational videos to anyone who would like to learn more about the benefits of investing in rental real estate with self-directed IRAs and self-directed 401(k)s.”

Flipping Houses in an IRA

Flipping Houses in an IRA

For the purposes of this article, flipping is defined as the purchase of property with the intent to sell at a profit shortly after making significant improvements. If you have particular expertise in buying and selling real estate, and you are looking for ways to expand your real estate investment practice in a tax-advantaged way, flipping real estate in an IRA is an excellent way to do so, and you’re in luck: IRS rules allow you to hold a wide variety of assets in an IRA – including real estate. This means that real estate investors can take advantage of all the tax benefits of using an IRA, SEP-IRA, SIMPLE IRA, or solo 401(k) plan. For now, we’ll talk primarily about IRAs.

Advantages of Real Estate Investing

The many advantages of real estate investing are well-known to market veterans. And the vast majority of these advantages apply to retirement accounts as well. Using a self-directed IRA to invest retirement assets in real estate, including property flipping, allows you to take advantage of these lucrative aspects of real estate investing.

Leverage. Real estate has intrinsic value that is well understood by lenders. It is therefore relatively easy to borrow money to leverage your real estate portfolio. While historic unleveraged capital growth in the real estate market are modest and in line with many other asset classes, the judicious use of leverage has historically put real estate in a class of its own, when looked at on a return on invested capital basis. The IRS allows you to borrow money within your IRA to leverage real estate purchases, as well as handle immediate cash flow needs. Any loans taken out by your IRA need to be non-recourse loans only. The lender can have no claim to any collateral outside the IRA, and you cannot sign a personal guarantee.

Diversification. Real estate has historically provided an important diversification benefit against more traditional retirement investing asset classes such as stocks, bonds and funds.

Inflation Protection. As the purchasing power of the dollar declines, real estate potentially provides an important hedge against the ravages of inflation. A given plot of land, for example, will still yield the same number of bushels of wheat or corn, regardless of whether the dollar collapses or not. And no matter what happens to inflation, people still need to live somewhere. Demand for housing transcends inflation and everything else in the market.

Potential for Growth. Unlike bond income, the income from real estate investments tends to grow over time. This, in turn, supports gradual appreciation in property prices, and leads to eventual capital appreciation. In some cases, economic development or expansion in an area can cause a rapid and substantial increase in property prices – leading to ‘flipping’ opportunities.

Control. When you invest your IRA assets in a mutual fund, for example, you give up control. You have no input as to what happens with your money, and no control over how the fund manager invests it. You won’t even know what they’re doing with it for weeks or months, when the fund publishes its portfolio. By electing to self-direct your retirement investments, and by investing in real estate, you maintain full control over the investment. You can take positive steps to help the property appreciate in value, such as making renovations and improvements that improve the expected selling price of the property.

Advantages of Using an IRA or Other Retirement Account

Your IRA generally allows you to defer taxes on ordinary income or on long or short-term capital gains – though there are certain exceptions, in some cases, for profits attributable to leverage. This means that you can collect an unlimited amount of rental income, tax-deferred, or tax-free, if you use a Roth IRA. Your IRA generally allows you to defer taxes on profits generated by the IRA–unless, of course, it’s a Roth, which is tax free—until you reach age 59½. If you use a Roth IRA, you never pay income or capital gains taxes. However, if you have profits attributed to leverage, that percentage of your profits will be subject to unrelated debt income tax (UDIT) because it is not IRA money.

Likewise, you can buy or sell an unlimited number of investment properties within your IRA, tax deferred. However, you should be aware of unrelated business income tax. If you are determined to be engaged in the business of “flipping properties” – that is, if the IRS determines you to be a dealer in real estate, you will be judged to be operating a business within your IRA, which may generate a UBIT liability. This is a question you should raise with your tax advisor. Qualified tax advice is a must. American IRA does not provide individual tax advice.

If you use a Roth account, rather than a traditional IRA, your income and capital gains can grow within the account tax free. True, you can also get a deferral on capital gains taxes using a 1031 exchange. But you can only do so as long as you are exchanging one real estate investment property for another, and only during a specific time period. By using an IRA, you can move in and out of real estate as often as you like, provided you keep the sales proceeds in the IRA itself. If a transfer is delayed for whatever reason, you don’t have to worry about incurring a current capital gains tax liability within an IRA like you do if you don’t execute a 1031 exchange by the deadline. This may help you be much more selective about the real estate trades you make.

Considerations

There are some things to be aware of when using your IRA for any kind of real estate investing:

  • You cannot use the property for your own personal benefit.
  • You cannot lend to or borrow from your IRA, nor can your ascendants, descendants, their spouses or any entities they control.
  • You cannot do business directly with your IRA. For example, you cannot set up a construction company and have your IRA hire your company to work on the house. The same restriction applies to your ascendants, descendants, their spouses and any entities they control.
  • You cannot stay in properties your IRA owns, even overnight.
  • If you use leverage, the IRS may impose a tax, called “unrelated debt income tax,” on a portion of the IRA’s profits. In some cases, however, this tax does not apply to assets held in self-directed Solo 401(k) plans. Consult your tax advisor for more information on how this tax may affect you.
  • Any money your IRA borrows must be in the form of non-recourse debt. This means that the lender can hold no claim on any assets outside of the IRA whatsoever. The entirety of the loan must be either unsecured or secured by assets within the IRA. You cannot sign a personal guarantee in this debt.
  • Because there is no tax on current income to deduct against, you cannot take deductions for depreciation of rental properties held in a retirement account.
  • Be aware of the restrictions on contributing new money to retirement accounts. Any expenses your IRA incurs over and above the $5,000 annual contribution limit for IRAs ($6,000 if you are over age 50), for example, must be paid for with money in the IRA already, money rolled over from other retirement accounts, or borrowed. You cannot make a massive cash infusion from outside the IRA using a traditional or Roth IRA account. However, you can take advantage of the higher contribution limits of SEP IRAs or Solo 401(k)s to intervene during a cash crunch, if you hold your property within one of these plans. SEP IRA contribution limits can be as high as $49,000 per year – many times that of an IRA.

Where We Come In

American IRA is a third-party administrator with particular expertise in self-directed retirement accounts, including real estate IRAs, 401(k)s, SEP IRAS and SIMPLE IRAs. Although not IRA products, you can also self-direct Coverdells and health savings accounts (HSAs) as well. This is a very specialized area of investment, and not every broker or other advisor has the skills to navigate the various rules and regulations that apply to self-directed retirement accounts. It’s important to partner with a firm that has skills and experience specific to self-direction and real estate within an IRA or other retirement account.

For more information, or to simply explore your options, call American IRA today at 1-866-7500-IRA (472). We look forward to working with you.

Legions of Frustrated Investors Turn to Real Estate Investing: “Play and Pray” Amateur Property Flippers vs. Landlords

Rental Properties in Your IRA

For legions of investors frustrated with puny yields on savings and bonds, slow growth retarding stock market returns, and the usual substantial risk involved in security investing (any given stock or bond can potentially become worthless overnight), we have good news: The combination of declining real estate prices and steady or increasing rents have opened up a window of opportunity in real estate for income-oriented investors. In fact, years after the “smart money” was selling off real estate ahead of the bubble collapse, we are seeing signs that smart money is getting back in the real estate market. Indeed, up to 20 percent of residential real estate now sold is sold to investors – and not just to “play and pray” amateur property flippers, but to value-oriented investors as well, who are seeking to generate immediate positive cash flow.

Advantage for IRA Owners

This is a big development for IRA investors, because generating cash flow sufficient to maintain properties is important for IRA owners. Because you are restricted to $5,000 in new contributions to IRAs every year ($6,000 for those over age 50), you have to pay for any needed repairs or renovations to properties either with cash in the IRA, bringing on a partner, nonrecourse debt financing, or other retirement assets you can roll over into the account. When you can realize immediate positive cash flow from a property, however, net of financing costs and taxes, that takes a lot of the pressure off, and makes owning real estate in an IRA much simpler.

Getting Started in Real Estate IRA Investing

Owning property within an IRA is simple: Open an account with American IRA, a third-party administrator specializing in self-directed retirement accounts. Identify a property, fund the account, and direct us to purchase the property on your IRA’s behalf. We will work with your team of advisors to ensure that the property is titled and held in accordance with the IRS’s regulations pertaining to retirement accounts.

Using Leverage

If you can’t pay cash for the property, you can have your IRA borrow most of the purchase price. Typically, you can finance a property in an IRA with banks that specialize in non-recourse financing through IRAs which generally requires a down payment of about 35 percent, plus reserves. The loan must be a non-recourse loan, meaning the loan can only be collateralized by the property you’re buying, within the IRA. You cannot sign a personal guarantee on the debt nor can your IRA or any other prohibited person. Fortunately, in many markets, it is still possible to generate substantial free cash flow from well-chosen rental properties, even carrying a mortgage of 2/3ds of the value of the property.

In addition to a 35 percent down payment, lenders will typically look to see if they can expect a positive cash flow of 20 to 25 percent, net of expenses. Again, this is very doable in many real estate markets today.

Looking for more flexibility? The IRA is not limited to borrowing funds from banks that specialize in non-recourse loans, your IRA can also borrow from private lenders. Borrowing from private lenders has some added advantages to it as the terms and down payment are negotiable. When entering into loans with private lenders make sure to do your due diligence, use professionals to draw up the paperwork, and remember that the loan must be non-recourse.

One caveat: Because borrowed money is not IRA money, any profits attributable to borrowed money could be subject to unrelated debt income tax (UDIT). American IRA does not provide individualized tax advice – it’s important to retain your own tax advisor for advice on how this affects your personal situation.

Advantages of Holding Property in an IRA

IRAs allow you to defer all the income your rental property receives. This is a crucial consideration for real estate investors, because of the substantial amount of rental income, which would otherwise be taxable in the current year. If you hold the property in a Roth IRA, the income and potential capital appreciation is tax free.

Because there’s no current tax liability on rental income, you can’t take depreciation deductions on rental property you hold in the IRA. However, you aren’t paying current year taxes on the property, it’s a wash. Real estate investing in tax-advantaged accounts does not rely on depreciation allowances to make sense. You can still frequently realize positive cash flow very quickly or even immediately, even without depreciation.

Note, however, that if you have leveraged the property, you can deduct all the normal expenses, such as interest, taxes, insurance and depreciation in the percentage applicable to the percentage of debt on the property.

Other Accounts

Real estate investing in retirement accounts is not limited to IRAs. If you prefer, you can buy real estate within a self-directed Solo 401(k), SEP IRA or SIMPLE IRA as well. Many investors choose to do so because of the higher contribution allowances available in these types of accounts. For example, as of 2012, you can contribute up to $49,000 to a SEP IRA, or 25 percent of your compensation – whichever is less.

As a point of interest, Solo 401(k) accounts are not generally subject to unrelated debt income tax. You can use leverage within the Solo 401(k) account and the account remains fully tax-deferred, though you must still pay applicable property taxes and property expenses.

Considerations

The IRS imposes a few rules on what you may and may not do with real estate within your IRA. For example, neither you, nor your parents, grandparents, children, grandchildren or your spouses or legally adopted step-children can borrow from, lend to or buy or sell goods and services from your IRA, nor may any entities they control. Note that un-adopted stepchildren are not prohibited.

You also can’t use the property for the direct benefit of any prohibited individuals. They can’t even stay overnight in a property, whether or not the property charges rent. Assets in IRAs must be solely used to grow and to generate eventual retirement income for yourself or your beneficiary, and for no other purpose. However, one great strategy commonly used by investors is to buy a retirement home now with their IRA, rent the property until they retire, and then – after having reached age 59½, take the house as a distribution for personal use. If the account is in a Roth IRA, there won’t be any taxes due on the distribution.

For more information, or to explore your options, call American IRA today at 866-7500-IRA(472). We look forward to working with you.

What About George?! Like Many of Us – He Dreams Big – Will His Dream Come True?!

The Dream

George L., a client of American IRA, LLC, wanted to purchase a 56 unit, 1.2 million dollar mobile home park inside his IRA account.

The Details

George was determined to make this dream a reality and worked hard in negotiations with the owner of the mobile home park finally settling on these details:

  • Purchase price $1,200,000
  • Down Payment $200,000 from an old 401(k) plan
  • Owner financing $1,000,000 at 6% interest

A Word of Caution about Loans inside an IRA

The American IRA account specialist informed George that the owner financing needed to be “non-recourse” to qualify for IRA financing.

The account specialist explained further that “non-recourse” means the property is the only collateral; neither George L. nor his IRA can be held liable.

George went back to the table with the owner and was able to negotiate non-recourse terms for the owner financing.

George is Self-Employed – Why Does That Matter?

It is important because George L.’s self-employed status means he qualifies for a Solo 401(k).

Even though a self-directed IRA and a self-directed Solo 401(k) work in a similar fashion, there are some significant differences.

  • UDIT applies to an IRA and does not apply to a Solo 401(k) on purchase money debt.
  • This saves thousands of dollars that will stay in the Solo 401(k) and grow tax free.
  • Purchase money debt is debt that is originated ‘at the time of purchase’.
    • If George L. adds a second mortgage to the Solo 401(k), the second mortgage WILL be subject to UDIT.

 

  • The American IRA account specialist explained the differences to George L. and then asked him to meet with his professionals to determine whether a self-directed Solo 401(k) was the right tool for him.
    • George L. met with his professionals and decided a Solo 401(k) was the right tool for him.

 

Living the Dream!

George L. successfully completed the transaction purchasing the mobile home park. George was now the proud owner of his 1.2 million dollar, 56 unit mobile home park!

Time to Refinance?

In January 2012, George L. told his professional that interest rates are low and that he was thinking of refinancing the mobile home park that was held by the Solo 401(k).

  • George kept in mind that
  • The loan had to be non-recourse
  • He needed to consult with a tax specialist because he would lose the exclusion from UDIT on any refinance of the mobile home park.
  • He needed to determine if the interest savings was worth the UDIT that would now be due on a balance of $850,000.
  • George L. met with his tax specialist and decided not to refinance.

Key Point

The IRS allows an IRA to borrow money, however the borrowed money is not part of the retirement plan so there is a tax assessed call UDIT. UDIT applies only to the borrowed portion of the transaction. (As mentioned earlier purchase money debt inside a 401(k) is exempt from UDIT).

Example: 100,000.00 purchase price 60,000.00 from the Ira and 40,000 from a non-recourse loan. The UDIT income tax is assessed only on the 40,000 that was borrowed after taking all the normal deductions that are available to real estate investors, such as depreciation, interest, maintenance etc.

Now you may be thinking, ‘Why do I want to pay taxes inside my IRA?’ There are three reasons to subject your IRA to UDIT:

  • Leverage is the key to real estate investing.
  • All profit made outside an IRA are taxed at every level.
  • Profits inside the IRA will compound tax deferred or tax free depending on the type of account you have until they are distributed at the age of 59 ½.

Disclaimer

American IRA, LLC does not give investment advice. They do offer guidance as to the rules and regulations related to their self-directed accounts and the benefits of different account types so that their clients can take that information to their professionals to discuss the ramifications of various decisions on their individual situation.

For more information, or to explore your options, call American IRA today at 866-7500-IRA (472). We look forward to working with you.

Tidal Wave Warning: Real Estate Investors know the Real Estate Market is Swelling with Opportunity! Grab those Real Estate Investment Opportunities and Get that Cash Flowing!

Cash Flow Real Estate in Your IRA? You Betcha!

The folks on TV talk a lot about the importance of funding your IRA – and they’re always on about investing in stocks, bonds and mutual funds. Some of the more conservative pundits also mention annuities and CDs. But what if you’re not thrilled with the prospects for return in any of these assets?

After all, interest rates are still near record lows all along the length of the yield curve, and bonds may well not even keep up with inflation. Stocks, as an asset class, are limited by a slow outlook for growth – and stock dividends are nowhere near what they were a generation ago. Mutual funds? Well, you can’t get blood out of a stone. Fund returns are limited by the opportunities in the asset classes from which they come.

One option that is less well-known is this: Investing in real estate within your IRA. The tax code doesn’t restrict you to stocks, bonds, annuities and CDs in your IRA or any other retirement fund. In fact, with just a few restrictions on investing in life insurance, jewelry, gemstones, collectibles and certain forms of precious metals, you can take advantage of tax deferral in an IRA to invest in almost anything you can imagine.

Benefits of Real Estate

True, it’s not for everyone. Not everyone is cut out to be a landlord. But a good property manager is great for helping you eliminate this aspect of real estate investing. If you are comfortable with investing in real estate – and you have assets in retirement accounts you can put to work without relying on generating a current income – allocating part of your IRA to cash-flow positive real estate investing can make a lot of sense.

First, you can employ leverage – even in an IRA. As we all know, leverage is the key to making real estate investment work. Contrary to what some believe, your IRA can borrow money. It just has to be a non-recourse loan. That means you can’t use anything outside the IRA as collateral. The lender can only come after the IRA’s assets, and can have no claim on anything else.

Second, with a substantial down payment, real estate has a long history of generating substantial positive cash flow. This is important in a retirement account because there are certain restrictions on how much new money you contribute.

The Best Way to Create Cash Flow

The best asset there is for generating free cash flow is free and clear real estate. Investors find that paying cash for real estate inside their IRA can generate significant cash-on-cash returns that are substantially higher than those available in stocks, bonds, CDs or dividends. After all, lifestyle is based on cash flow.

Keys to Cash Flow Real Estate in an IRA

Build Equity Right Away. If you are not able to pay all cash but you can make a significant down payment, you can still create above average cash-on-cash returns using funds available in your IRA. When leveraging, most non-recourse lenders require a 35 percent down payment, plus cash reserves. This means you can leverage up to just under 2:1 on cash invested.

Maintain Adequate Liquidity. To increase safety, prepare for potential maintenance costs, prepare for vacancies, increase the predictability of cash flow and reduce your anxiety levels, it is important to keep available funds in your IRA. This is because retirement plans limit the amount of money you contribute in a given year. Other solutions include having your IRA borrow money or bring in a partner. However, with proper cash flow planning, you can eliminate a cash crunch as a potential issue.

Remember, the IRA is responsible for paying all of its expenses, including taxes, insurance and maintenance. The IRA is also entitled to all income the assets generate. The IRA’s beneficiary may not receive any benefits until they are eligible to take distributions, which is generally age 59½.

Observe Rules Against Self-Dealing. The IRS gives IRAs a substantial tax advantage in deferral of income and capital gains. In return, they expect you to treat the IRA as a long term asset designed to provide for your retirement security. You can use it for no other purpose. This means you can’t do business directly with your retirement account. You cannot hire your own firm to do the windows and the plumbing. You cannot act as a money lender to your IRA, nor can you borrow money from it. You also cannot stay in the property, even overnight, even if you pay the fair market value rental on the property.

Keep Transactions at Arm’s Length. The restrictions above don’t just apply to yourself. They also apply to your parents, grandparents, children, grandchildren, their spouses, and any businesses or other entities they control. However, the law does not specifically include brothers and sisters.

Understand the Tax Law. While your IRA may not be subject to ordinary income taxes, as long as the money is kept within the IRA, you do have to be careful if you employ leverage. In some cases, the IRS may levy a tax on your IRA’s profits attributable to leverage. This tax is called the unrelated debt income tax (UDIT). However, in some cases, self-directed Solo 401(k) plans may not be subject to this tax. Another tax, unrelated business income tax (UBIT) may apply if your IRA owns an interest in a partnership that employs leverage. This aspect of the tax code can get involved. For more information, consult your tax advisor, or call American IRA at 1-866-7500-IRA (472).

American IRA, LLC CEO, Jim Hitt, Thanks And Congratulates Another Successful Self-Directed IRA Client

American IRA, LLC CEO, Jim Hitt, thanks and congratulates another successful self-directed IRA client. Using self-directed IRAs this investor was able to increase their net worth by $168,000 and their monthly cash flow by $1,550!

American IRA, LLC respects the privacy of their clients; therefore, the name of this successful client will be withheld.

Jim Hitt extends his appreciation and congratulations, “First and foremost, I would like to thank you for allowing us to share your success story. Through hard work and dedication you created income and wealth for you and your family. And, perhaps more importantly I would like to publicly congratulate you on your success!”

So, what is all the fuss about? How did this client achieve such success?

First and foremost this client formed a plan and stuck to it. The plan was to spend 2 hours every single week working investments by studying Zillow, MLS, and county records and through weekend drives looking for ‘for sale’ signs and properties that looked neglected. Neglected properties are usually an indication that the current owner has more on their plate than they can handle and thus they may potentially sell the property at a discounted rate. Secondly and of equal importance, this client kept their eye on their goal at all times; their goal to build enough cash flow so that when they had children, they could ‘stay home with their babies’.

Deal One:

Cash at Closing and Instant Equity

They purchased a 3 bedroom/2 bathroom, 1400 square foot home via a short sale. They borrowed $55,000, incurred $800 in repair costs, and paid $50,000 for the home…this netted them $4,200 in cash at the closing. The market value of the home was $90,000 which netted them $35,000 in instant equity upon closing ($90,000-$55,000).

Monthly Income

The monthly rental income was $875 and their monthly expense were $665 which left them a net monthly income of $210.

Deal Two:

Cash at Closing and Instant Equity

They purchased a 3 bedroom/2.5 bathroom, 1600 square foot home well below market value from a wholesaler who was not aware of the market in that area. They borrowed $66,000, incurred $1,500 in repair costs, and paid $60,000 for the home…this netted them $4,500 in cash at the closing. The market value of the home was $110,000 which netted them $44,000 in instant equity upon closing ($110,000-$66,000).

Monthly Income

The monthly rental income was $1100 and their monthly expense were $655 which left them a net monthly income of $445.

Deal Three:

Instant Equity

They purchased a 3 bedroom/2 bathroom, 1200 square foot home up for bid. There was a lot of competition but they won the bid. They borrowed $56,000, incurred $2,000 in repair costs, and paid $56,000 for the home…this cost them cash out of pocket of $2,000 at the closing. The market value of the home was $90,000 which netted them $34,000 in instant equity upon closing ($90,000-$,56000).

Monthly Income

The monthly rental income was $1,000 and their monthly expense were $503 which left them a net monthly income of $497.

Deal Four:

Instant Equity

They purchased a 3 bedroom/2 bathroom, 1600 square foot home. The home had undesirable tenants and was showing poorly. These investors saw the value and got the deal! They borrowed $65,000, incurred $2,500 in repair costs, and paid $70,000 for the home…this cost them cash out of pocket of $7,500 at the closing. The market value of the home was $120,000 which netted them $55,000 in instant equity upon closing ($120,000-$65,000).

Monthly Income

The monthly rental income was $1,100 and their monthly expense were $702 which left them a net monthly income of $398.

Summary:

These investors netted an amazing monthly cash flow of $1,550 ($210+$445+$497+$398) and instant equity of $168,000 ($35,000+$44,000+$34,000+$55,000). Given that the Social Security Administration says the average monthly social security benefit for a retired worker is about $1,230 per month…it is easy to see that this investor is already ahead of the curve!

Jim Hitt concludes, “These clients did an amazing job. They kept their goal in mind and kept the deals flowing; after all, deal flow is the key to success in real estate.”

About:

American IRA, LLC was established in 2004 by James C. Hitt in Asheville, NC.

The mission of American IRA is to provide the highest level of customer service in the self-directed retirement industry. Mr. Hitt and his team have grown the company to over $250 million in assets under administration by educating the public that their self-directed IRA account can invest in a variety of assets such as real estate, private lending, limited liability companies, precious metals and much more!

As a self-directed IRA administrator they are a neutral third party. They do not make any recommendations to any person or entity associated with investments of any type (including financial representatives, investment promoters or companies, or employees, agents or representatives associated with these firms ). They are not responsible for and are not bound by any statements, representations, warranties or agreements made by any such person or entity and do not provide any recommendation on the quality profitability or reputability of any investment, individual or company. The term “they” refers to American IRA, located in Asheville, NC.

Sean McKay, Senior VP of American IRA, LLC-A National Self-Directed IRA Provider-Announces A New ‘Real Estate Markets: Memphis Tennessee’ Webinar on August 22nd

Sean McKay, Senior VP of American IRA, LLC-a national self-directed IRA provider-announces a new ‘Real Estate Markets: Memphis Tennessee‘ webinar on August 22nd.

Sean McKay says “Come join us for an educational webinar as we explore the Memphis real estate market and how you can invest in it using your retirement account.”

This webinar will educate individuals on the opportunity to “Self Direct” their retirement accounts. Attendees will quickly realize that self directed IRA’s and Solo 401(k)s are an increasingly popular concept for those that want to invest in assets such as single family homes, condo’s, townhouses, and so much more!

This is a joint webinar with the President of Memphis Cashflow, Hulet Gregory. Memphis Cashflow is a real estate investment firm that will educate attendees on the Memphis market conditions and real estate investment strategies.

This will be a great opportunity to learn about Self Directed IRA’s/401k’s as well as the Memphis real estate market. Look forward to seeing everyone there!

Jim Hitt, CEO of American IRA, LLC, A National Self-Directed IRA Provider, Shares Important Steps To Maximize Retirement Planning

Jim Hitt, CEO of American IRA, LLC, a national self-directed IRA provider, shares important steps to maximize retirement planning. Proper planning is key to enjoying those retirement years. Lack of planning is a great way to end up eating peanut butter sandwiches every meal (yes, everyone loves peanut butter sandwiches still eating them every meal is a bit much!) and soaking your feet in that $10 toddler swimming pool trying to keep cool!

Many people have difficulty planning for retirement because they are not sure where to begin.

The Time Element

The first thing that must be considered when planning for retirement is the “time element” in other words how old the person is now and how many years are left before they plan to retire. The longer the time between their current age and their retirement age, the more risk their portfolio can withstand. Though a point of caution to keep in mind is that the goal is to grow the retirement account; thus, risk should always be carefully weighed as a big loss in the retirement account even at an early age is still a loss that one should avoid if possible.

Expected Spending Habits

The second thing each person should consider is their expected spending habits during retirement. Keep in mind that lots of people underestimate this amount which leads to financial hardships in their retirement years. Be honest about this when forecasting those estimates. Realistically, most people ‘who have planned properly’ spend more each year during those retirement years than they spent each year they worked. The reason for this is pretty simple; retirees have more time to do the ‘fun things’ in life and thus tend to spend more money during their retirement years.

Pre-tax and After-tax Retirement Accounts

The third consideration for taxable retirement accounts is to be sure each person is forecasting their funds based on those after tax distributions. This may sound like the easiest step in planning…still it is difficult to know what the future tax rates will be…a good rule of thumb is to overestimate the tax burden and plan for that overestimated amount. Of course, those who have Roth IRA accounts will not have to worry about this as they paid their taxes on that account when they funded it and will not have to pay taxes on any of their distributions.

Diversification

The fourth important rule of thumb is to diversify their retirement portfolio. Diversification helps to protect the retirement fund from the ups and downs of economic times. At American IRA, LLC, people can use their self-directed retirement accounts to invest in real estate, private lending, limited liability companies, precious metals and much more!

The Power of Compounding

A final point that is often overlooked is the power of compounding interest. A person who participates in hard money lending within their IRA generally receives interest rates between 7% and 10%. Most banks are currently offering less than 1% interest on savings accounts and 3% or less on CDs. Here’s a comparison of how that interest compounds over time using $50,000:

$50,000 at 1% Compounded Once Annually for 30 years equals $67,392.45

$50,000 at 7% Compounded Once Annually for 30 years equals $380,612.75

It is easy to see the growth potential of investing with a retirement account versus letting funds sit in a savings account!

Jim Hitt concludes, “Careful planning is critical to the onset of a happy and full-filling retirement. Self-directed IRAs provide people with the largest amount of flexibility, choice, and control over what they invest in and how much risk they put their portfolio in. When people wonder what to invest in, it depends on what they are currently doing; what their area of expertise is; what their comfort level is with risk. If they are comfortable with real estate investing, then it makes sense for them to use their real estate expertise to grow their retirement funds. For example, they can buy a rental property within their retirement fund and allow that property to contribute rental income to the retirement fund. At the same time, they can keep some mutual funds and perhaps even some CDs in their retirement account. This mix would give them a nice safe yet diverse retirement portfolio.

Another important point that many people over look is their loved ones. I have seen many parents and grandparents who want to help their children and grandchildren with college tuition and thus sacrifice their retirement funds to do so. Coverdell Education Accounts are a great way of saving for your loved one’s tuition expenses. Another little known fact is that Roth IRAs can be used for tuition expenses. I urge everyone to think through not just your retirement plans, but also, what you may want to do for your loved ones during your retirement and what you want to leave your loved ones in your Will. Thinking this through early and building your retirement account to cover all those things will allow you the happiest retirement years.”

About:

American IRA, LLC was established in 2004 by James C. Hitt in Asheville, NC.

The mission of American IRA is to provide the highest level of customer service in the self-directed retirement industry. Mr. Hitt and his team have grown the company to over $250 million in assets under administration by educating the public that their self-directed IRA account can invest in a variety of assets such as real estate, private lending, limited liability companies, precious metals and much more!

To learn more about American IRA, LLC and self-directed IRAs/self-directed Solo 401(k)s, please contact our office at 1-866-7500-IRA(472).

As a self-directed IRA administrator they are a neutral third party. They do not make any recommendations to any person or entity associated withinvestments of any type (including financial representatives, investment promoters or companies, or employees, agents or representatives associated with these firms). They are not responsible for and are not bound by any statements, representations, warranties or agreements made by any such person or entity and do not provide any recommendation on the quality profitability or reputability of any investment, individual or company. The term “they” refers to American IRA, located in Asheville, NC.

Retirement at 23?!? Bain Capital offered their employees a chance to co-invest in take over deals averaging 50% to 80% returns in their self-directed retirement accounts.

Retirement at 23?!? According to a Wall Street Journal article, Bain Capital offered their employees a chance to co-invest in take over deals averaging 50% to 80% returns in their self-directed retirement accounts. American IRA, LLC CEO, Jim Hitt, says “This is one outstanding example of how tax-deferred and tax-free accounts can be used to build wealth.”

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Small Business Tax Credit for 401k Startup Costs

According to U.S. Department of Labor statistics, 64 percent of all employees in medium- and large-sized firms are covered by an employment-based retirement plan, compared with only 34 percent at small firms. One reason cited by small businesses for not offering retirement plans is the high costs associated with set-up and administration of a retirement plan.

Startup costs have always been a major hurdle to small businesses who what to start a 401k plan, but a provision of The Economic Growth and Tax Relief and Reconciliation Act (EGTRRA) now helps scale this barrier to employee saving opportunities. EGTRRA implemented a credit for employers to offset the startup cost and the cost of educating employees about the new plan.

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