Other Investments

Investing in Growing Companies

September 4, 2014

Guest article by Evan Greenberg:

Over the past three decades, companies like Microsoft, Apple, Google, and Facebook have emerged, not to mention other powerhouses like Chipotle and Under Armour. They have replaced Chrysler, Woolworth’s, Data General, Digital Equipment, and many others in our dynamic economy. Many of these success stories are examples of why an alternative investment platform for accredited investors is important, as many of these companies were private investments before their IPOs, which came much later in their growth cycles. For example, one of my favorite concepts, Stratasys, a leader in 3D printing, has gone up 100-fold since 2002.

Typically, the primary way people were investing in growing companies was either through a direct investment or a venture capital fund, which could only be done inside of an IRA through an administrator like NuView. As defined by The Motley Fool, a hedge fund is described as “a pool of investment capital that a manager invests on shareholders’ behalf.” The crucial difference between a hedge fund and your run-of-the-mill mutual fund is the complete discretion it gives the fund manager to invest where and how he or she chooses. This allows hedge funds to hold any and all investment types, including alternative assets

Our economy has become more efficient, even in the last 15 years, by utilizing capital investors to quickly monetize and add value to emerging companies. Book value is no longer as important as balance sheet cash.

If I said to you that I expected mid-to-high single-digit returns for the next 10-15 years, then you would say that is a plausible idea. However, if I said that I expected the Dow Jones Industrial Average to hit 50,000 and the S&P 500 to hit 5,000 in the same time frame, you would probably call me crazy. Believe it or not, I forecast that both of those scenarios will occur before 2030.

While all good things come to an end, I’m still predicting this secular bull market will last for a long time. Dow 50,000 sounds like a spectacular number, but it is slightly above traditional market returns after 13 years of sideways action. This may not be a roaring bull to remember, but it won’t be one to forget, either.

 

Evan Greenberg is the Founder and Portfolio Manager for the LegendCap Opportunity Fund, which is an approved hedge fund on NuView’s platform that makes investments in emerging growth companies and allocates up to 20 percent of its assets to alternative investments such as private placements. Evan broadcasts a financial radio show in Phoenix and can be contacted at [email protected] or (516) 662-0303.

Is Venture Investing Right for You?

July 1, 2014

Guest article by Blaire Martin:

Investors around the world are allocating a percent of their assets into early-stage companies in order to access opportunities for exceptional returns. “Angel investing is a legitimate part of an alternative asset class investment portfolio,” says David S. Rose, founder and chairman emeritus of New York Angels, in his new book, Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups. “A rational person can be an investor and not a gambler.” In the book, Rose explains that more people can and should become angel investors and that a few big wins make up for all the losses.

study by Wiltbank and Boeker estimates that the average return on venture investing by sophisticated angel groups is 27% IRR or 2.6 times the investment in about 3.5 years. Research shows that investing in multiple seed and startup companies is a key angel strategy. Many sources agree that a portfolio of 10-12 angel deals is adequate diversification to assure a reasonable ROI and that 6 or less angel investments is too risky. Investors can create a portfolio of investments by picking deals in FAN’s pipeline or by venture investing into a cross-collateralized fund.

Joining a sophisticated angel group is very helpful for investors interested in breaking into angel investing. Benefits often include: access to quality deal flow, collaborating with diverse investors and subject-matter experts, and assistance with due diligence, investment paperwork, and post-investment monitoring and support. Angel groups also encourage venture investing best practices and promote angel education from sources like the Angel Capital Association and the Angel Resource Institute.

There are many reasons that accredited investors write checks for angel investments. The possibility of getting in early with a company like WhatsApp excites investors looking for higher returns than possible with more traditional investments. Many investors also want to be significant in the lives of entrepreneurs with high potential ventures; angel investing is a way to incite opportunities with mentorship, networking connections, and capital. It may feel like philanthropy, but when done systematically through a sophisticated channel, it is a valid way to invest while giving back in your community, with an added benefit of upside potential.

The Florida Angel Nexus (FAN) is a statewide initiative to unite Florida’s investment community. FAN’s mission is to offer a disciplined and rewarding investment approach for Florida’s accredited investors. Investors are joining existing and newly formed angel chapters and funds across the state. These investors are exposed to exciting new technologies and startups; they enjoy meeting to discuss these investment opportunities and evolving markets. Membership is very diverse, from realtors to serial entrepreneurs, doctors to accountants. All accredited investors are welcome.

The UCF Center for Innovation and Entrepreneurship provided the leadership and resources to research and launch FAN. Key supporters include: UCF, Florida High Tech Corridor, Florida Institute of Commercialization of Public Research, Gainesville Chamber of Commerce, Gray Robinson, and BioFlorida.

Blaire is the founder of Florida Angel Nexus. Interested parties can contact FAN for more information at www.FloridaAngelNexus.com or [email protected].

Funding Your Own Pension Plan

April 29, 2014

For those that closely follow political and financial news, one of the biggest issues to face local and state governments has been underfunded pension liabilities.

Simply stated, the employers made a promise to their employees to provide certain lifetime payments during their retirement years, yet did not adequately fund those obligations year after year. The result is a mad scramble for political cover, and necessary yet painful reductions in pension payments for many retirees.

Evidently, the pain of employer pension funding is not limited to governmental entities. A recent Orlando Sentinel article regarding Walt Disney World union negotiations said that Disney wants the union to give up pensions for new hires, who would instead be enrolled in a 401(k) investment plan. Similar negotiations and changes are becoming commonplace across all industries.

In today’s environment, the obligation to prepare oneself for retirement rests on the individual, rather than their employer. Through 401(k)s, 403(b)s, 457s, Thrift Savings Plans and other such alphabet soup, the heavy lifting of saving and investing is on the individual.  Employers often simply provide a small match, if anything at all.

How healthy is your pension plan?  You have the ability to rollover most any employer plan into a NuView self-directed IRA and fully self-direct, once you have left the company. Now you have the opportunity to invest in anything the IRS does not prohibit, an extremely short list at that, rather than just a handful of trustee-selected mutual funds.

It’s inspiring when NuView clients feel an 8% return in their self-directed IRA isn’t good enough, and that through their own hard work, they found investments that built their retirement much faster. A second-generation private lender recently shared that she lends out of both her IRA and her friend’s for 12-15%, plus points. Real estate rehabbers are taking advantage of the foreclosures and rising prices to profit their IRAs, while still others take advantage of what they feel are low prices on gold and silver.

Whatever your passion, your retirement may be closer than you think, and your ability to retire isn’t someone else’s responsibility – it’s yours.  So fund your retirement plan until it hurts, invest wisely, and stay involved. If you need help, give us a call. Through local investor clubs and the right education and research, you might exceed your goal yet.

Making Sense of Crowdfunding

April 18, 2014

Guest article by Mark Mohler:

You are already accustomed to enduring TV commercials for everything from noisy car salesmen to ambulance-chasing lawyers, but are you ready for a TV advertisement prompting you to invest in a new private startup? Well get ready, because it is only a matter of time before it happens. By now, you have probably heard terms like “crowdfunding,” “peer-to-peer lending” and maybe even “general solicitation.” As more and more rules are implemented allowing different groups to solicit your money in connection with funding their own private business, it is important to understand the changing landscape. “Crowdfunding” is defined by Wikipedia as “the collection of finance to sustain an initiative from a large pool of backers—the “crowd”—usually made online by means of a web platform.” Crowdfunding as a fundraising tool is already everywhere and, through recently enacted changes to US Securities laws, crowdfunding will likely be even bigger in the future.

In its earliest iterations, crowdfunding in the US was limited to non-investment offerings in order to avoid running afoul of state and federal securities laws. That meant that you could be asked to put up the money for a business or a project, but you could not own an interest in the success of that business or project. Accordingly, the vast amount of crowdfunding to date has been requests for donations or pre-purchases of a product to be created at a later time. Crowdfunding has been very successful and billions have been raised but imagine your chagrin if you were one of the 9,500 crowd backers that provided an aggregate of $250,000 in donations to startup Oculus VR only to see the company sold for $2 billion less than two years later. We can all understand why the providers of this early capital are a bit peeved to be receiving little more than a thank you note in return for funding the meteoric company. As it turns out, some backers now feel used or even scammed by the crowdfunding project. Sensing this unfairness, the JOBS Act enacted in 2012 sought to democratize private equity by allowing companies to use existing technology tools, such as the Internet, to solicit actual investments from everyday Americans. Two years later, the Securities and Exchange Commission has still not fully created the rules for how this can happen but, little by little, you may be noticing the changes.

Some of these changes relate only to Internet-based crowdfunding and apply to all Americans–regardless of net worth. Other changes apply to solicitations through any distribution channel–including Super Bowl commercials or billboard advertisements and are applicable only to investments by certain “accredited investors.” In these cases, everyone can be solicited, but only accredited investors may actually invest. All told, these changes reflect the most dramatic changes to US securities laws since investor protections were first implemented in the early 1930s. The changes are coming to your TV screen, email and direct mail and it is important to understand what you are being asked to do with your money and what to expect in return. If you are using these new rules to find investors for your own business, you need to understand the legal requirements.

For those of us who have been supporting the updating of US securities laws, it is an exciting time but one of frustration as regulatory rules are slow in coming and, at times, overburdensome. The promise is that many ordinary Americans will for the first time have the opportunity to directly invest in private companies in ways that were never before possible. Regular people may be the early investors in the next Facebook, Google or Oculus VR–rather than exclusively institutional investors such as venture capital firms. Even more exciting to some, these laws will permit opportunities for easy and direct “impact investments” such as local investment in small “Main Street” businesses like coffee shops, bookstores and restaurants and behind passionate causes like clean energy, “Made in the USA” manufacturing or natural/organic companies.

The potential bad news is that these changes will bring a whole new category of risk for investors that may not fully appreciate the inherent risks or the illiquidity of early stage investments and may open the doors to the type of fraud that caused lawmakers to heavily regulate the sales of securities in the first place. It probably goes without saying, but “let the crowdfunder beware.”

All told, I see these as positive changes reflective of a modern era where not only wealthy people understand the fundamentals of investing. After all, it should be much harder sell snake oil at a time when you can easily “google” not just technologies but the people who are promoting them. It has also never made sense to me that people of modest means are legally permitted to lose their entire retirement savings at a casino in Las Vegas but cannot invest a small percentage in a private tech company. Which is actually riskier?

 

Mark Mohler is a business, tax and estate planning lawyer and founding member of Corridor Legal Partners as well as a founder of Sprigster, an online crowdfunding portal for veterans and military spouses. You can contact Mark by phone at 321-473-3337, or you can visit his website at www.corridorlegal.net for more information.

How Do You Find Alternative Investments?

March 6, 2014

Finding and evaluating private placements, equity and bond hedge funds, and commodity based hedge funds and managed futures programs has always been a very ad hoc and inefficient process. The founding partners of FNEX faced the same challenges as every other investor in that they only saw a small number of deals from their brokers, investment advisors, and private bankers. Financial advisors from the large RIA and Broker Dealers can only recommend the offerings that have been through their internal research departments which limit them to a handful of the very largest funds. These are the same names that everyone recognizes because their CEOs are regular guests on CNBC.

It isn’t practical for an investment firm with thousands of advisors to review and approve private securities and hedge funds from mid-size and “emerging managers” because the size of the fund and the support staff managing the strategy aren’t large enough to handle the traffic those referrals would generate.

FNEX created a Private Securities Marketplace that is open to any accredited and institutional investor. On the FNEX platform, investors will find private placements being offered by a range of different sized investment banks. These are direct placements into companies raising growth capital in a wide variety of industries such as biotechnology, real estate, and clean energy, just to name a few. Fund managers with a broad array of different investment strategies in equities, bonds, forex, precious metals, stock indexes, agricultural, and energy commodities are also on the platform.

To assist in the evaluation of each offering, FNEX offers a variety of different diligence, valuation, and research partners that investors can engage on an as-needed basis. The FNEX Education Center is full of current research, white papers, and links to industry resources to help investors learn as much as possible prior to investing.

The FNEX Deal Room feature allows investors to view and download offering documents and subscription agreements as well as communicate directly with the investment banker or fund manager. As always, every self-directed investor should review the available materials with a trusted advisor or legal counselor prior to investing.

After an investor locates a deal and requests IRA funds from an administrator like NuView, the investor can upload all of the paperwork for processing and copies can be provided to the IRA administrator to make sure the documents are in good order before closing. Investors will also be able to complete a Buy Direct letter from the IRA administrator so the funds can be dispersed directly from a custodial account to the Bank or Fund Manager. It is important to note that FNEX is not a custodian and will never be in possession of funds at any part of the investment process.

Membership to FNEX is free and the registration process is very simple.  Because the offerings on the site are only available to accredited investors, investors must complete a brief investor questionnaire to ensure that the current SEC guidelines for investing in private offerings are met.  After investors complete the survey step, access to the site is granted. FNEX offers profiles to save personal investment criteria such as minimum investment amount, strategies, and risk profile.

FNEX offers a way to expand the alternative investment choices available to investors. If you would like more information, please visit FNEX at www.FNEX.com.

Please note, NuView IRA is also not a fiduciary and only provides services to self-directed accounts that are nondiscretionary and/or administrative in nature. The Account-holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account. NuView IRA has no responsibility or involvement in selecting or evaluating any investment. Nothing contained herein or on FNEX shall be construed as investment, legal, tax or financial advice or as a guarantee, endorsement, or certification of any investments or of  FNEX itself.

Pitbull Conference to Spur IRA Private Money Lending

February 26, 2014

Investing in real estate through a self-directed IRA might not be for everyone. For many, being a landlord is daunting – hassling with tenants, upkeep on maintenance, and all the other elements of owning rental property. Although IRA holders have the ability to hire third-party property managers, some do not prefer all the moving parts associated with owning investment real estate.

However, there are other investments that take advantage of the reemerging real estate market that don’t require the day-to-day involvement of property management. Last week in Ft. Lauderdale, we had the opportunity to address a packed room of eighty private money lenders at the Pitbull Conference, and from all reports, that business is booming.

The need for private money is significant, so much so that real estate-backed lending is one of the fastest growing self-directed choices in IRAs. The lenders, representing funds from $1-60 million, were eager to learn how IRAs could be put to use for financing buying, fixing up and flipping, and renting investment property. It just so happens that the time for their business couldn’t be better.

According to BankRate, current 5-year CD rates garner approximately 2%. At that rate, it would take about 36 years for an investment to double in value. It’s no wonder that people are looking for alternative ways to make their retirement funds work at a more efficient rate. Is the stock market better? It certainly has done well over the past two years, but how much higher can it go? And what type of gains can you make while you still hold the investment, or must you sell out to earn your gains?

When lending private money out of your IRA, the rate you charge is based on the outcome of your negotiation with the borrower. It can be a conventional 30-year mortgage, or a six-month loan to a rehabber. At NuView, IRA lending has had anywhere from 5 – 18% interest, depending on the client’s loan terms and collateral.

To seriously misquote Shakespeare’s Hamlet, “Either borrower or lender be.” An IRA can do both. Look through our site or give us a call to learn more. We will help you unlock your IRA and let you make all the decisions.

New Case Answers Important Questions About IRA LLCs

February 13, 2014

Guest article by Mat Sorensen:

Can my IRA own substantially all of the ownership of an LLC? Can my IRA/LLC pay a salary to me for serving as the manager of the IRA/LLC? The U.S. Tax Court issued an opinion in the case of Ellis v. Commissioner, T.C. Memo 2013-245 and answered both of these questions.

In Ellis, the Tax Court resolved two questions posed by the IRS. First, did Mr. Ellis engage in a prohibited transaction when his IRA acquired 98% of the membership interest in CST, LLC? And second, did Mr. Ellis engage in a prohibited transaction when CST, LLC (owned 98% by his IRA) paid him compensation for serving as the manager?

As to the first question, the Tax Court held that Mr. Ellis’ IRA did NOT engage in a prohibited transaction when it acquired 98% of the ownership of a newly established LLC. The other 2% was owned by an unrelated person who was not part of the case and whose ownership did not have an impact on the decision. The IRS contended that a prohibited transaction occurred when the IRA bought ownership of CST, LLC. The Court disagreed, however, and held that the IRA’s purchase of the initial membership interest of the LLC was NOT a prohibited transaction. The Court stated that the IRA’s purchase of membership interest in a new LLC is analogous to prior holdings of the Court whereby the Court held that an IRA does not engage in a prohibited transaction when it acquires the initial shares of a new corporation. Similarly, the court held that a new LLC is not a disqualified person to an IRA under the prohibited transaction rules and as a result an IRA may invest and own the ownership of the LLC. IRC § 4975(e)(2)(G), Swanson V. Commissioner, 106 T.C. 76, 88 (1996). Consequently, the Court’s ruling means that it is NOT a prohibited transaction for an IRA to acquire substantially all or all of the ownership of a new LLC.

As to the second question, the Tax Court held that it was a prohibited transaction for the LLC owned substantially by Mr. Ellis’ IRA to pay compensation to Mr. Ellis personally. The court reasoned that, “In causing CST [the IRA/LLC] to pay him [IRA owner] compensation, Mr. Ellis engaged in the transfer of plan income or assets for his own benefit in violation of section 4975 (c)(1)(d).” This type of prohibited transaction is often times referred to as a self dealing prohibited transaction and occurs when the IRA owner personally benefits from his IRA’s investments. The Court looked to the operating agreement of the LLC which authorized payment to Mr. Ellis for serving as the general manager and also the actual records of the LLC which showed the payments to Mr. Ellis. When using an IRA/LLC, one of the many important clauses in the operating agreement is one which restricts compensation to the IRA owner or any other disqualified person (e.g. IRA owner’s spouse or kids). Also, the actual payment and transaction records of the IRA/LLC will be analyzed so it is important that both the LLC documents and the actual payment records do not allow for or result in payment from the IRA/LLC to disqualified person (e.g. IRA owner).

It is also important to note that the Tax Court rejected Mr. Ellis’ argument that the payments were exempt from the prohibited transaction rules under section 4975 (d)(10). Section (d)(10) provides an exemption to the prohibited transaction rules for payments from an IRA to a disqualified person [e.g. IRA owner] for services rendered to manage the IRA. The Tax Court rejected this argument stating that the payments from the IRA/LLC were not for management of the IRA but for management of the IRA/LLC and its business activities. In this case, the IRA owner was actively involved as the general manager of the IRA/LLC which LLC bought and sold cars. As a result, the Court held that the payments were not exempt and constituted a prohibited transaction.

I was happy to read this case and find the Court’s conclusions because it matches the same opinion and advice we have been giving clients regarding IRA/LLCs for nearly ten years: that a newly established LLC owned by an IRA does not constitute a prohibited transaction but the IRA/LLC cannot pay the IRA owner (or any other disqualified person) compensation for managing the IRA/LLC.

Mat Sorensen is a lawyer and the author of The Self Directed IRA Handbook: An Authoritative Guide for Self Directed IRA Investors and Their Advisors. He is a partner with KKOS Lawyers in its Phoenix office and assists clients nationwide on self directed IRA matters. He can be reached at [email protected] or by phone at 602-761-9798. His website is www.sdirahandbook.com

A Difference of Opinions – JOBS Act Updates

August 7, 2013

In this edition of A Difference of Opinions, two attorneys sound off about the SEC adoption of a mandate in the JOBS Act of 2012 that permits general solicitation in private securities offerings. We reached out to two attorneys with different backgrounds just to get a better idea of what this update might hold for the future of promotional activities among investors and those wishing to raise money.

And You Thought Law Firm Advertising Was Bad?
By: Wayne Patton, Esq, an asset protection, business, finance and estate planning attorney. Wayne’s firm is based in Miami, Florida, and he can be contacted through his website.

In March of 2012 the Jumpstart Our Business Startups Act (the “JOBS Act”) became law. The purpose of the legislation simplifies the process of business fundraising. The law specifically touches investment firms like hedge funds and private equity funds, which have traditionally struggled to “get the word out” under the previous stifling rules that prohibit “general solicitation” under the Securities Act of 1933.

Though it took more than a year for the SEC to approve rules implementing the JOBS Act, we now officially have a framework on which to rely. There are a few things you should know before you start urging clients to advertise openly.

First, while general advertising and solicitation is permitted under the new rules, the “accredited investor” rules regarding unregistered security offerings are still in place.

Also, with the permission to generally solicit comes more responsibility. Specifically, the burden of proving “accredited investor” status has shifted. Under the new rules, investment firms need to ensure that investors are actually accredited.

The next logical question is “Just how inundated will we be with fund advertising?” You thought lawyers were bad. Just wait…

Adoption of New Rule 506(c): General Solicitation in Regulation D Offerings
By: Sara Hanks, co-founder and CEO of CrowdCheck, is an attorney with over 30 years of experience in the corporate and securities field.

On July 10 the SEC complied with a mandate in the JOBS Act of 2012 to permit “general solicitation” in private securities offerings. In doing so, the SEC created an entirely new type of securities offering not required to be registered under the Securities Act of 1933.

The SEC adopted amendments to Regulation D under the Securities Act to add new Rule 506(c). Rule 506(c) offerings are technically private placements, made only to “accredited” (rich) investors. In the past this has meant not just that accredited investors only could buy the securities, but also that the issuer could offer them to accredited investors only.

Under the new rule, small companies and private investment funds and their intermediaries will be able to use “general solicitation” to reach accredited investors, which means they may advertise or publicize an offering on television, in newspapers, and most importantly over the internet. They may talk about the offering on talk shows and webinars, and they may promote the offering on social media.

This is a big change. But companies planning to take advantage of the ability to make public solicitations (and their advisers) should bear in mind that something that hasn’t changed is the application of the securities anti-fraud laws to all statements made in connection with the sale of securities. And for that reason, this new type of offering might not be as game-changing as some think.

Proponents of the new rule believe that it will increase transparency, make it easier for small companies to raise capital and decrease companies’ administrative costs. Opponents worry that, in the words of SEC Commissioner Aguilar, removal of the prohibition on general solicitation would be “a boon to boiler room operators, Ponzi schemers, bucket shops, and garden variety fraudsters, by enabling them to cast a wider net, and making securities law enforcement much more difficult.”

Awareness of fraudulent promotional activities means that prospective issuers and their advisers will have to be very careful about the accuracy and completeness of any statements they make. Will the rule change mean that we see hedge funds advertising on late-night TV or Twitter campaigns for investments in startups? The impact of the new rule is likely to be more limited in that respect than some have predicted. Public registered mutual funds do advertise, but those advertisements tend to be staid and contain lots of “fine print” disclaimers prescribed by law; private funds will likely be just as constrained. Broker-dealers putting together Regulation D deals are already subject to FINRA rules with respect to their advertising and social media use, and these requirements have not changed. The anti-fraud laws discussed above should have a tempering effect on any overly-exuberant publicity attempts in either paid or social media.

And the SEC will be watching. The SEC has established a “Rule 506(c) Work Plan” involving staff from all across the SEC, who will monitor the new Rule 506(c) market for fraud and compliance and to coordinate with state regulators.

The effective date for the new rule is September 23, 2013. Rule 506(c) offerings will only be legal after that effective date.

Weighing Long-Term Capital Gains Against Ordinary Income

August 6, 2013

Article by Glen Mather:

Why would anyone want to trade a 15% capital gain tax rate for a 22% marginal income tax rate?

During a recent presentation to a group of CPAs, I was asked this rather obvious question. We were in the process of discussing the relative merits of investing an IRA into rental housing.

For the investor that purchases with after tax money outside an IRA, certain tax advantages accrue largely based on the income and tax situation of the individual. If passive losses are able to offset ordinary income, an additional benefit can arise. However, the assumed disadvantage of the IRA investment in a similar real estate asset may not be accurate, based on the individual facts of the case.

Important variables to consider:

  • The age of the investor
  • The anticipated number of years until the investment will start to be distributed
  • Estimated cash flow of earnings, if any
  • Estimated profits upon sale of the asset
  • How long each asset will be held
  • How the proceeds from the sale of the investment will be re-invested
  • The marginal tax rate of the investor at the time investment revenue is received
  • The estimated marginal tax rate of the individual when the funds are to be distributed

Unless investments are in a fixed-return instrument, predicting investment results is a difficult task, and certainly forecasting individual tax rates in future periods is next to impossible. For the real estate investor using non-IRA funds, a 1031 exchange process may be a great choice if the timing of the sale and purchase permits. It will ensure that all of the proceeds of a sale can be rolled into the basis of the new property while forestalling capital gains until the sale of the final property.

The capital gain rates for those with federal marginal tax rates of 35% and 39.6% have been raised to 18.8% and 23.8% due to 2013 tax law changes and the affordable health care surcharge. Avoiding or deferring these higher charges for those in the upper brackets are now more necessary than ever for those outside IRAs. Indeed, these new LTCG brackets tilt the advantages more heavily to the benefit of using IRA monies for investments.

With an IRA, as long as the real estate investment is not leveraged, all gains are deferred until distribution, and then it’s taxed as ordinary income. Should tax rates stay constant (which they never do), generally the majority of retirees will enjoy a lower rate due to diminished earnings.

Roth IRAs change the landscape considerably. Roths are attractive for those who believe their investment performance will be able to recoup the tax costs of conversion or contribution, and for those willing to bet that future tax rates will be equal or higher in retirement than their current rates.


Glen Mather is President of NuView IRA, Inc., a leading self-directed IRA administrator in Orlando, Florida. He can be contacted at 407-367-3472 or [email protected]

Do You Enjoy DIY Projects? Try a Self-Directed IRA

May 2, 2013

People are always looking for the gratification of successfully completing a do-it-yourself (DIY) project. Even if it’s something as simple as painting an old bookshelf to look new, building something on your own often creates a satisfying feeling. If you’re on Pinterest, one of the most popular ideas among users of this inspirational social media platform is do-it-yourself projects. Users pin DIY project ideas ranging from how to modernize your kitchen to designing your own flower arrangements at your wedding.

According to an article in Psychology Today, building something yourself also increases the item’s value. “The act of building something, putting your own blood and sweat into a physical object, seems to imbue it with additional value above and beyond its inherent quality,” said Travis J. Carter, Ph. D., author of the article. In fact, this is rumored to be one of the reasons why IKEA requires customers to assemble their purchased furniture.

So, how does this relate to IRAs and retirement planning? Banks, brokerages, and mutual fund companies are able to open an IRA for you and act as custodian of your retirement funds, helping you invest in the traditional bank, brokerage, and mutual fund products. However, for those who would like to put their own personal stamp on their IRA and customize their investment choices to ones they are most familiar with, there is a do-it-yourself IRA known as a self-directed IRA.

A self-directed IRA opens up a whole range of investment products that can be purchased inside an IRA beyond the stock market. Since many of us have specialized knowledge that could help us make niche investments in a self-directed IRA, this type of IRA becomes very appealing to the DIY investor. The benefits that accrue may be far more than just psychological.

Give our Florida self-directed IRA administrators a call today at 407-367-3472 to learn more about your IRA options including self-directed IRAs and real estate IRAs! As always, we wish you all the best in your investments!