Real Estate

Self-Directed IRAs

August 3, 2012

Last week, the Romney team visited the Villages, a sprawling community of over 100,000 residents over the age of 55, only about an hour from the NuView headquarters in Orlando. What does this group have in common? And why do politicians consider this a critical stop to deliver their stump speech? These residents have an obsession with protecting their social security, Medicare, and retirement plans. Politicians use this group as a surrogate to prove their policies are “senior-friendly”. I’m told that until you are retired, you cannot understand the helplessness of relying on personal savings, which have been ravaged by low interest rates and stock market uncertainty.

If only those of us who are still working had the same obsession about saving and investing wisely! Most workers continue to rely solely on the advice of money managers, or mutual fund managers to ensure their retirement is adequately invested. When the market takes a dip, participants in employer sponsored plans often scale back their contributions, due to a lack of confidence in their investments or their advisors. Most professional financial advisors see lower stock market prices as a golden opportunity to buy, while human nature moves investors to become more cautious and withdraw.

It’s time that we all woke up to the fact that no institution, money manager, or even financial advisor has more at stake than you do – in the health of your retirement funds. Despite the droning platitudes of the politicians, their ability to ensure a stress-free retirement for you is limited by huge budget deficits, tax stalemates, and the burgeoning growth in the number of taxpayers moving into their retirement years.

If you feel inadequate in making good investment decisions, find several friends, associates and professionals who can serve as your advisors – and avoid being influenced only by one source. Just as you wouldn’t subject yourself to a critical medical procedure without a second opinion, don’t move forward with important investment choices without consulting with several advisors.

As stated in the Wall Street Journal, over the next ten years, private investment choices are likely to outpace the public markets. Ensure that you understand all your options, including a self-directed individual retirement account that can access those private investment choices. You may find that understanding your options for investing in rental real estate, private lending, or buying precious metals through your IRA may be easier than reading a 100 page disclosure on the latest IPO. The best result is one that results in making your retirement political proof, providing a greater insulation against the potential damages of future policy decisions, and less reliant on the governments “dividends”.

 

The Basics of Self-Directed IRAs

July 27, 2012

Vice president of NuView IRA, Jason DeBono, explains the basics of self-directed IRAs.

Bad News? What Bad News!

July 2, 2012

What a great time! Banks are no longer lending, no one wants to buy, and people are not paying their taxes. The Washington crowd is in disarray, the Federal Reserve is practically out of tricks, and the prospects of another recession, we are told, is a statistical possibility.

Certainly those thrust out of work or those underemployed are bearing a very painful burden during these difficult times. We do need policies and leadership in all branches of government to make the tough choices to rebuild our economy to one of sustained and steady growth.

But, to investors, the timing may never be more fortunate. Let’s take a few examples, including a personal illustration, to clearly see the opportunities that are available for those that can risk capital.

In July of last year, together with a partner, my retirement plan purchased 50% interest in a two bedroom, one bath 1200 sq ft home in Lake County. In a better economy, we could not have purchased this home, with a dock on a canal leading to Lake Dora for $27,000. A renter has signed a lease for $500/month, providing a gross return after property taxes and insurance of over 11%, even after we spend another $8,000 for a new roof. As the investment is in my retirement plan, all gains will grow tax free.

Recently, I was invited by Fox 35 news to do a piece for their newscast on unique assets that can be purchased with an IRA. Needless to say, the market had just dropped by 600 points and people were in a panic. Keith Landry came by our office and produced a piece explaining how tax liens can be a great way for an individual investor to diversify. Sandra Edmonds of CFRI often provides workshops on how this can be done, and we have many IRA holders that self-direct their IRA funds into these investments. According to a local expert, Doug Gale, President of REO-America, returns of 6-8% are what one can expect, but can fluctuate, according to the market and those showing up to bid on the on-line auctions.

The best news of all, however, is that self-directed IRA holders can lend their money, backed by real estate. This opens the powerful option of real estate investors utilizing private individual’s retirement accounts to fund their purchases.

This type of lending, at rates determined between the borrower and the IRA owner/lender, can provide a great return to the borrower’s IRA while providing much needed capital to the real estate investor. At our self-directed IRA administration company in Orlando, we have clients lending money at rates from 8-16% – all directed by the IRA holder. There is no better time to ask your friends and neighbors about their IRA and their desire to invest in your project or purchase. All lending can be backed by a first or second mortgage on the property.

With a self-directed IRA from our Orlando retirement plan administration company, you will start to see your options in a much different light. Invest in anything the IRS doesn’t prohibit, unrestricted by the limited choices available from your current administrator. From start-ups to LLCs to foreign currency, all can be available to you tax deferred, or in the case of a Roth IRA, tax free.

Just think – if the economy was booming, real estate prices would be double to triple today’s prices, banks would be lending regardless of risk, and everyone would be paying their property taxes. If you have a self-directed IRA, thank goodness it isn’t!


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

Self-Directing: Unlocking your IRA

June 19, 2012

Did you know that you can invest in real estate, mortgages, leases, and other asset backed investments inside your retirement plan?

Indeed, since 1975 self-directed plans have been available, although relatively few IRA holders have taken the time to understand their options and take advantage of such retirement plans.


There are three things you should know when you self-direct your retirement plan:

  • Which retirement plans are best – Traditional IRA, Roth IRA, SEP, Simple or Individual(k)
  • What types of investments you want to make within the plan
  • Understand the IRS rules of self-dealing and prohibited transactions

The IRS rules regarding prohibited transactions are not too complex, yet one should consult a tax advisor for specific advice. Disqualified people include your immediate family (except siblings) employers (in a qualified plan), certain partners, fiduciaries and other categories spelled out in IRS code. IRA owners may not borrow money from their IRA, sell property to it, receive unreasonable compensation for managing it, or use it as security for a loan. There are also several named categories, such a collectables which also may not be held by your IRA.

The opportunities outside these prohibited transactions are significant. You may buy, sell or exchange investment property inside your self-directed retirement account. You can partner with friends, relatives and business associates to purchase property, and then lease it to anyone that is not a disqualified person. You can roll property from one retirement plan to another – or even take property from your plan as a distribution.

We have seen clients form investment groups, combining IRA and non-IRA funds to purchase and hold property, rehab and turn properties or simply lend out the funds in the form of notes and mortgages.

In addition to these ideas, an IRA may also invest in partnerships, LLCs, private stock offerings, loans (both secured and unsecured), tax lien certificates, purchase options, joint ventures and other investments.

So if you are confident in your abilities to make your own investment decisions, have the desire to reduce or eliminate the tax consequences on your gains, and have the resources to invest – self-direction may prove to be a wise choice for your retirement plan.


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

Profiting Through Partnering

May 22, 2012

As a season ticketholder of the Orlando Magic, this season has been a difficult one to watch. No matter how well the team performs, there is an overarching feeling of dread, as we may be losing our all-star center, Dwight Howard to free agency or a trade. Although the NBA has become a superstar focused league, what is often lost is that it is the rest of the team, and the coaching that creates long-term and long lasting success.

I have found that in watching our clients self-direct their IRA funds into real estate, the consistent performers are those that have surrounded themselves with teammates and coaches that share a common vision and passion for success. However, many still choose either to “go-it-alone”, or more often “follow-the-crowd”. Often partnering in your investments can be a phenomenal weapon in your arsenal to build wealth when investing outside the stock market.


As I see it, there are a myriad of positives derived from partnering– here are just ten:

Sharing in the Due Diligence: Our clients at Entrust invest in a wide variety of investments in their self-directed IRAs that require a different type of analysis than stock market choices. For example, when purchasing real estate through their IRA, they may need to assess market value, project rental income, determine cost of repairs, and review property liens. While this may be onerous for an individual, through splitting up these duties – and reviewing each others analysis, it can permit the team to look at many more deals and guide them to a much better decision.

Sharing in the Costs and Expenses: Partners may decide to form an LLC to make investments together, rather than individually go on title. They may also anticipate the benefits of structuring deals in a joint venture or even a taxable corporation. Getting solid legal and tax advice before making the investment is advisable, but can be a bit expensive for the individual investor. Through sharing the costs, partners are less likely to cut corners on legal, investment and other advice that could be critical to long-term success.

Sharing in the Ongoing Work: Partnerships are best formed through the open and honest discussion of what capital and efforts each party is bringing to the investment. In the case of real estate, one investor may be talented in the discovery of underpriced rental properties, while another may be well versed in mortgage sources or able to rehab distressed properties. Many real estate investors do so on a part time basis, and it is only through sharing responsibilities that they are able to balance their full-time work with their investment duties.

Learning from Others: NuView IRA in Orlando is a member of six investment clubs throughout Florida, and as such have seen many mentorship programs offered to first-time real-estate investors. These nascent investors will partner with seasoned, knowledgeable real-estate veterans trading ownership and equity for valuable know-how. By having a partner that directly benefits from the success of a joint venture, not only will the new investor gain critical knowledge, but they also participate in the financial rewards of the results.

Spreading the Risk: When I was much younger, my investments in the stock market were far more risk tolerant. I would move from one hot stock to another – and during the internet boom, many of my picks were right. Now I’m a bit older, and have seen some of those choices go to zero value – I desire the safer refuge of diversification. Partnership provides the ability to diversify – by spreading investment resources over a greater number of choices. Through a self-directed IRA, those choices can include almost any type of investment in real estate, as well as mortgages or other collateral backed lending.

Doing More Deals: As a bookend to diversification, partnering can also result in the ability to get involved in more transactions. If you are not certain whether lending money, backed by a mortgage, is better than investing in raw land, through partnering, you may be able to do both. By being actively involved in multiple deals, the opportunity for enhanced returns can be increased.

Building Strategic Relationships: As I mentioned, IRA investors are often part time – and may have other business interests. Through partnering, their primary businesses can be enhanced through the extension of their partner’s relationships. We have had CPAs who self-direct their IRA into loans that are marketed to local realtors. These realtors have become an unanticipated referral network to the CPA’s tax practice as a result of his lending relationships.

Broadening Contacts: Partnering can be such a good source of marketing to some clients that they factor in the value of their partner’s rolodex. We have several real estate rehabbers who lend their IRA to local hard money lenders – for them to re-loan their funds to individuals that want to buy distressed property. These purchasers of property often are referred to the rehabbers by the hard-money lenders in turn to repair the property. (note: due to IRS rules (section 4975), the rehabber cannot work on the same property that his IRA has lent money to acquire).

Increasing Liquidity Options: When property is purchased within any partnership, other partner(s) are a logical potential buyer. If they choose not to exercise an option to buy, due to their intimate involvement with the asset the remaining partner(s) are likely to be actively incented to find a new buyer to replace the departing partner.

Specialize in What You Know: A key characteristic shared by investors drawn to self-directed IRAs is their desire to put their skills to work in areas that they are learning or have mastered. This is only enhanced through partnering. My talents may lie in doing on-line research – and my partner’s in assessing property values through visual inspection. Together we make a powerful team as we buy tax lien certificates at our local courthouse. Of course, if I have the desire to learn how to assess property, I can extend my knowledge through observation of my partner.


Partnering is not the panacea for the weak hearted, the slothful, or the uninvolved investor. On the contrary, it is for the engaged, motivated, knowledgeable person who desires to multiply his/her strengths through the power of association of like-minded individuals. Harness the power of partnership in your investments, and you may unleash the full potential of your retirement future.


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