Many investors still are not aware that they can invest in alternative investments. Anything that does not fall within the definition of traditional stock and bonds can be loosely defined as alternative investments. These types of investments have many benefits related to them.
1. Mitigate Market Volatility
Alternative investments can cushion a portfolio from market volatility when the investments are in asset classes that feature low correlation to the markets.
“Do not put all of your eggs in one basket” has been saying for decades. Investing in alternative assets allows the investor to spread the risk out. With all of the alternative investment options available, investors have a wide range of choices. Please visit www.MountainWestIRA.com to view popular alternative investment options.
If investors are willing to risk a little more on certain alternative investments, they may be rewarded with higher returns. Other investments, such as real estate, can provide a relatively steady income stream for many years to come.
4. New Opportunities
Not every investor is comfortable in their knowledge of the stock market, which can make investing more difficult. However, by investing in alternative assets, it opens up new exposures and opportunities where they may have more interest and knowledge. Our clients have the opportunity to set the terms of their returns or dividends by choosing their investments.
5. Lower Transaction Costs
Short-term investments can require high amounts of turnover, which can lead to high transaction costs. While alternative investments may have a higher upfront fee compared to short-term traditional investments, they will not have as high of a turnover rate, keeping transaction costs lower. Depending on your expertise Mountain West IRA has 2 different fee schedules to keep costs as low as possible.
Talk to Mountain West IRA about the alternative investments available to investors. Some of the alternative investment options include real estate, precious metals, private placements, and more.
To diversify their portfolio, investors sometimes need to think outside the box. This means considering alternative investments such as mortgage notes. Investing in mortgage notes allows investors to get involved in the real estate investing world without flipping houses or vetting tenants for rentals.
When an investor uses their self-directed IRA to invest in a mortgage-backed note, the IRA acts like a bank by loaning money to the borrower. The IRA then receives a note and deed of trust. According to the terms of the mortgage, the borrower pays back the principal and/or interest to the IRA each month until the loan is satisfied. Once payments have been completed, the borrower owns the property outright.
The deed of trust provides protection for the investor in the event of default, putting a lien against the property so the mortgage holder can foreclose and take control of the property if necessary. If this happens, the IRA will own the property instead of the mortgage. The investor is then free to do with the property as they see fit.
To invest in a mortgage note, the investor needs to work with a title company or real estate broker. They will help to gather all of the necessary forms for the investor to sign and send to Mountain West IRA. As the custodian, Mountain West IRA will then review the paperwork before approving the investment to make sure everything is in order.
Mortgage notes do not require as much personal involvement as directly owning a piece of real estate, making them a favorable investment to many investors. For those interested in investing in mortgage notes with their self-directed IRA, visit the Mountain West IRA website to learn more.
Real estate is a tangible investment, which is one of the main reasons it has become a popular choice for IRA accounts. Unlike stocks and bonds, investors can actually visit their properties. Rental properties are a great way to diversify a portfolio and provide the ability to earn measurable income for the investor.
Here are some benefits to investing in a rental property with a self-directed IRA:
The main benefit of rental properties is the direct income from renters. However, this is only true if the property is occupied. With a house, this can be more difficult, because there is only one renter and the property may remain vacant during transitions between renters. Apartment complexes, duplexes and other multifamily properties have more than one renter and therefore generally provide a more balanced income stream.
- Income from Property Value Growth
Over time, property value traditionally increases, even with no changes made to the property itself. This depends heavily on the location of the rental property as some areas increase or decrease in value more quickly than others.
When a property is well maintained and upgraded when necessary, it will add additional value. This allows the owner to charge more for rent and sell if for a larger profit later, if they choose. Home improvement projects such as landscaping, repainting, and upgraded appliances can significantly increase the property value and attract potential renters.
For investors who do not want to personally manage the property, a property manager can be hired to take care of finding and evaluating renters and ongoing maintenance. Many investors find having a property manager relieves the stress and day-to-day activities from the owner.
For investors interested in investing in rental properties with an IRA, contact Mountain West IRA for more information. Real estate is just one of the many investment opportunities available to Mountain West IRA account holders.
Some investors do not realize it is legal to purchase non-traditional assets using an IRA. In 1974, the Employee Retirement Income Security Act passed the responsibility of retirement savings from the employer to the employee. The next year, IRAs were created. Self-Directed Individual Retirement Accounts provide investors the ability to direct where retirement funds are invested.
Under both ERISA and IRS Codes, only two types of investments are excluded. These are life insurance contracts and collectibles. Collectibles include works of art, jewelry, rugs, etc. Aside from these exclusions, retirement investment opportunities have a wide range. This allows all investors to find something that works for them.
Investors may not have known about Self-Directed IRAs because the retirement industry has long been dominated by custodians focused on a very narrow selection of investments such as stocks, CD’s, and mutual funds. Mountain West IRA, on the other hand, believes in offering investors the freedom to choose with self-directed retirement accounts.
With a Self-Directed Retirement Account through Mountain West IRA, investors can choose from the following non-traditional assets:
- Real estate
- Single family and multi-unit homes
- Apartment buildings
- Cash flow properties
- Tax deeds/liens
- Improved or unimproved raw land
- Notes and Mortgages
- Unsecured notes
- Secured notes
- Precious Metals
- Private Placements
- Partnerships and Joint Ventures
- Privately held stock
Even this lengthy list of options is not all inclusive. Many investors find other creative investment opportunities or choose to utilize multiple investment vehicles including traditional assets like stocks, bonds, and mutual funds. Visit Mountain West IRA’s website to learn more about self-direction and the non-traditional investments available to investors.
Self-directed retirement accounts have gained popularity over the years. This is mostly due to the fact that investors are wanting more freedom when choosing investments. One of the more popular investments with these retirement accounts is real estate.
Real estate can be a good long-term investment and generate high returns for investors. With a Mountain West IRA self-directed plan, investors can choose from many real estate options. These include single-family homes, multifamily-units, apartment buildings, condominiums, improved or unimproved land, commercial property and more.
When thinking about investing in real estate through a self-directed IRA, there are some things to consider:
It can be a process. Often, opening an account can take some time. A rollover might be necessary to start the account. Then, the real estate investment must be approved, which can also take a decent amount of time.
Funds aren’t for immediate use. When the investment yields funds, there are some restrictions on how they are used. There are also restrictions on who can occupy the real estate.
It can be taxing. When investing in real estate, it can be a good decision to hire a property management company. This takes a lot of the stress off the investor’s shoulders. All of the expenses for the property will also be taken from the IRA funds.
Although this may make it sound a little daunting to invest in real estate with an IRA, the professionals at Mountain West IRA can answer questions and guide investors through the process. Self-directed retirement accounts offer a wide variety of investment options and are a great tool for investors who want more control over their retirement.
Even in a sluggish economy, bed-and-breakfasts are a popular choice for tourists seeking lodging off the beaten path. They offer guests the opportunity to socialize with other travelers in a more intimate setting. Many countries offer a variation of the bed-and-breakfast, but most are small lodging establishments with fewer than 10 bedrooms available to rent out. For retirees who love to provide hospitality, they also offer post-retirement job opportunities. And with their rebounding popularity, bed-and-breakfasts may also be an excellent investment opportunity for your self-directed IRA.
While it generally requires significant legal guidance to invest your self-directed IRA in a business you’re personally going to run, investors who want to avoid self-dealing can do so by investing in a business owned by someone else; perhaps a trusted colleague with great business sense. This helps you avoid prohibited transactions.
If you are interested in building your retirement portfolio, think about investing your self-directed IRA in nontraditional assets, whether it’s a bed-and-breakfast or another investment you’re interested in. We won’t tell you what to invest in—the beauty of self-directed IRAs is the freedom they offer you as the investor. Give us a call so we can help you get started with investing today. Now’s the time!
While self-directed IRAs offer a wealth of investment possibilities, getting started with investing can be a daunting task for new investors. While we do not make any recommendations about investments, for six years Mountain West IRA has been showing individuals and small businesses why they should take advantage of self-directed retirement plans. Experienced investors have a wealth of investment information to offer, including these 7 tips:
- Quality over quantity—when new investors first begin investing, many of them go for every opportunity that comes their way, whether it is because of excitement or to meet a perceived target. Seasoned investors instead sit back and wait for solid investments to come along. While new investors may not have the resources to wait for deals, many experienced investors would recommend doing one quality deal rather than a multitude of average deals.
- Put your goals on paper—if you don’t develop a concrete goal for where you want to be in a year, it will be difficult to make any smart investments happen. Seasoned investment professionals often instruct neophytes to put together a plan before they even start investing. And while realistic goals are important to your investment success, it can be difficult to determine how to set those. Speaking with experienced investors in your field and asking them their honest opinions regarding profits per deal and average amount of time required to complete the deal can help you forge realistic goals. Real estate investment (REI) clubs are a good place to start for mentorship. Then, based on the information you learn and the amount of cash and credit you have on hand, create a framework for your long-term goals. Fill in short-term goals in between these long-term goals.
- Don’t limit your profits—just because you got a great deal doesn’t mean you have to pass along all of your savings to the buyer. While most investors wouldn’t recommend you gouging people, reaping profits is part of business. At some point, your profit margin may not be as large as expected, so taking advantage of large profits when they come can help secure your finances.
- Hang on to your full-time job—while it may be tempting for some investors to drop their day jobs and fully commit to investing, experienced investors recommend establishing oneself with banks and credit card companies before branching out on one’s own. Jobs provide a safety net while new investors learn the ropes of good investing.
- Start investing as early as possible—the longer investments have been established, the more growth can be obtained. So the sooner investors begin investing, the more wealth their investments build. Many experienced investors say they wish they’d gotten in the game sooner.
- Use investing partners wisely—there are plenty of eager investors out there, but smart investors choose an investing partner that complements them. This complement may be expertise, knowledge, connections, or money. However, seasoned investors would recommend against choosing a partner with little in common besides a dream or goal. If there is nothing complementary or beneficial about the partnership, it may be wise to steer clear. Again, this is business.
- Dare to dream—it’s difficult to achieve anything without dedication and perseverance. Willpower can overcome even difficult objective conditions like poor credit or little cash. If you have a dream, it’s time to enact it. Contact Mountain West IRA about setting up your self-directed IRA to achieve your dream.
Though we live in an increasingly mobile society, many Americans still haven’t adopted the desire to downsize their possessions to fit this transient lifestyle. That means storage space is at a premium, which opens up a potential investment opportunity for the savvy investor: storage units. Self-storage offers many of the same attractive investment qualities that rentals, office buildings, and other properties offer, including passive income, tax advantages, and appreciation. Investment in self-storage is also made more attractive for many reasons that include:
- Many retirees downsize their homes during retirement but aren’t yet willing to part with a lifetime of possessions. Instead, they seek out additional storage space that their smaller homes can’t offer.
- Some neighborhood housing associations and new housing communities do not allow storage of vehicles like boats, RVs, or even multiple cars on the street outside homes.
- College students use storage space during summer vacation
- Businesses that have downsized and are working out of smaller office space require additional storage space.
Small distributors, start-ups without office space, or home-based businesses use storage space from which to operate their business because operating and development costs of storage units are much more affordable than apartment or retail space. These lower costs also make break-even occupancy ranges lower than other real estate investments. Also, if a storage unit operates on a month-to-month lease, investors can adjust rental rates to compensate for demand. To add further stability to the investment, demand for self-storage is not dependent on the economy. When the economy is booming, people tend to buy more things and thus need more storage. When the economy is slow, people downsize and seek cheaper storage alternatives for the belongings they’re not ready to get rid of.
Self-storage has the lowest default rate of all property types, but like any investment, investors must take time and due diligence to make sure that the storage unit is worth the investment. Well-run, modern self-storage in a good location is desirable to investors and provides a very liquid investment, while old industrial storage units without surveillance don’t command as much demand. As it continues to rise in popularity, self-storage could provide a tangible investment opportunity for you to invest your self-directed IRA in. This is just one of many investment possibilities. That’s the beauty of a self-directed IRA. Since you self-direct your own IRA, you’re responsible for your own investments. We can’t tell you what to invest in or where to find available storage facilities. Self-direction is your choice, but we’re here to show you how to take advantage of self-directed retirement plans. Contact Mountain West to start investing with your self-directed IRA.
Over time, real estate investments have afforded many people the powerful combination of appreciation and income. The purchase of real estate through a self-directed IRA is a popular choice for this and other reasons. Concerned you don’t have enough funds in your IRA for the entire purchase? If your self-directed IRA doesn’t have enough money to pay for the entire purchase on its own, you may be able to finance or leverage the purchase of the income producing property. Keep in mind, if you don’t have enough money in your retirement account to purchase the real estate, the IRS forbids you from extending credit to your own IRA account. So, what are your options?
Real estate investment accounts can use borrowed money as long as the account holder’s credit history, income, or assets are not used to guarantee loan repayment to the creditor. In other words, there can be no personal guarantee given by you as the account holder and consequently, there can be no personal recourse against you since the property and the loan are held within the retirement plan. The loan your IRA would need to acquire is normally known as a non-recourse loan. Be aware that loans for property inside of IRAs may require the payment of Unrelated Business Income Tax (UBIT). It is the IRA holder’s responsibility to have the tax form (990T) prepared by a tax advisor and have the IRA administrator submit the appropriate forms for the property owned by the IRA. The staff at Mountain West IRA can maintain the appropriate records for your self-directed IRA real estate investment. Our goal is to assist you with your alternative asset purchases while paying little or no taxes. Contact Mountain West IRA for additional information.
3 Benefits of Leveraging Your Self-Directed IRA:
- Tax considerations—one of the great benefits of an IRA is tax-deferral. As an investor, you’re able to put more money into investing than you would with a taxable account. When your investment generates income that exceeds expenses, you will be subject to the UBIT. However, the taxes you pay when computing UBIT can be significantly lower than traditional income taxes.
- Benefit from growth—leverage allows an investor to purchase a larger, more valuable asset and profit from its growth, with only a smaller out-of-pocket expense.
- Diversification—instead of investing your entire self-directed IRA balance on one property, you can split the balance among several properties as a down payment and use leverage to finance the rest. By diversifying your investment portfolio, you generate revenue on several properties and minimize your financial risk.
Using a non-recourse loan in conjunction with your Mountain West self-directed IRA is a powerful tool to build your wealth. However, it’s one that needs to be carefully managed. For over six years, Mountain West IRA has been showing individuals and small businesses how to take advantage of self-directed retirement plans as one of the nation’s leading independent self-directed IRA and 401(k) administration companies. With a knowledgeable staff and our clients’ best interests in mind, we offer the outstanding customer service that only an independently owned and operated administrator can. If you’re ready to start your own self-directed IRA, contact Mountain West IRA today.
Mountain West will be hosting a workshop on “How to Buy Real Estate and Alternative Assets in IRAs and Qualified Plans” Tuesday, November 19.
CEO Jon Galane will be providing valuable CE credit covering the following topics:
- Buying real estate in IRAs and Qualified Plans
- Prohibited Transactions by Disqualified Persons
- Regulations regarding self-directed IRAs
- How to leverage IRAs and the benefits that can provide
$25 covers cost of lunch and all materials.
This class is good for 8 hours of continuing education credit through the Idaho Real Estate Commission.
Register here >>
Tuesday, November 19
10096 W. Fairview Ave.
Boise, ID 83704
9:00 am – 5:00 pm