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.
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
Coming on the heels of our recent expansion of services into Florida and Washington, Mountain West IRA is proud to announce the opening of our permanent office in Largo, FL. We are thrilled to better serve the needs of our clients with the opening of our new Florida office. This Southeast Region Grand Opening will be November 1st!
As one of the nation’s leading independent self-directed IRA and 401(k) administration companies, we are proud to expand our services to offer individual and small business owners more options for investing in alternative assets. While our office is growing you can still expect the same industry-leading customer service Mountain West IRA is known for. We remain passionate about helping our clients build wealth through their self-directed retirement plans and can’t wait to get started in Florida.
Our Success is your Gain: Mountain West IRA has more exciting news. For clients on our transaction-free value fee schedule, your account may see lower fees for account sizes of $100,000 and $750,000. There will be no changes under $100,000 or over $750,000. Our fixed asset fee schedule will remain the same. It’s time for you “To build the Ultimate Retirement Machine” and see lower fees.
Jon Galane will be traveling throughout Florida from October 14-November 15, 2013, visiting realtor organizations and meeting with clients. If you would like to schedule an appointment with Jon to set up your self-directed IRA or obtain more information about the benefits of having a self-directed IRA, contact the Mountain West IRA office by phone at 208-377-3311 or email.
Networking with other real estate investors can provide support and open up real estate investment opportunities you might not otherwise have known about. Networks like real estate investment associations or clubs allow investors to challenge and support each other–the shared knowledge and opportunities can play a crucial role in advancing your career.
If you’re interested in joining a local real estate investor club, you’re in luck! Tonight, Ron Phillips of Wealth Accelerator System invites you to join the local investor club meetings in Thanksgiving Point near Salt Lake City. A short drive to this great event gets you a delicious free dinner, a great opportunity to meet other investors, and valuable investing techniques to accelerate your growth exponentially.
View event details >>