Did you know, that your IRA can borrow money for the purchase of property? Your self-directed IRA can purchase real estate, and by using financing it allows for diversification without tying up all of your IRA funds. The IRS requires that loans made to self-directed IRAs be "non-recourse." This is a type of loan that is secured by the property. If the borrower defaults, the issuer can seize the collateral, but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount. This is one instance where the borrower does not have personal liability for the loan. The more money a borrower has down on a loan, the more protected the lender is.
There are lenders that can make non-recourse loans to your IRA, so do your research and be prepared to submit your self-directed IRA statements, a credit application, and recent credit report. But first, you’ll need to open and fund your Entrust self-directed IRA. You can get started today by contacting Entrust IRA Services. Once your new account is established and funded, and you have located your property with approval on your non-recourse loan, Entrust will help walk you through the next steps to purchase the property through your self-directed IRA.
For more information on non-recourse lending and purchasing property with your self-directed IRA, contact us at (310) 899-3811 or mghosheh@theentrustgroup.com.
By Munzer Ghosheh, Business Development Manager mghosheh@theentrustgroup.com
The vast majority of IRA holders are unaware that they can use their retirement money to invest in non-traditional investment vehicles like real estate, which includes domestic or off-shore properties. Approximately 3% of the nation’s $3 trillion in IRA money is invested in real estate. Most IRA administrators perceive foreign real estate investments to be risky, and therefore are not compelled to offer it as an investment option.
If done properly, investing in foreign real estate is not any riskier than any other investment. As with any investment within your self-directed retirement plan, you need to do your homework and due diligence. For instance, it’s critical to gather information about that country’s economic and political climate, in addition to understanding its property laws. In some countries, foreigners cannot directly own properties and the title must be held in a trust. It’s also important to set up your self-directed IRA account with an administrator such as Entrust IRA Services, who allows you to purchase offshore real estate in your retirement plan.
Keep in mind that the same IRS limitations apply to foreign real estate when it’s purchased inside your IRA. For instance, you cannot use the property owned by your IRA in Mexico as a vacation home. You may however, at retirement age, elect an in-kind distribution of that property, assign the title to the property to yourself, and the use it as a vacation or second home.
Incorporating an offshore real estate investment into your self-directed retirement plan could turn out to be a wise and lucrative investment, if you do your homework. So why limit your investment options in your retirement plan? Take control of your financial future and expand the wealth-generating potential of your assets with a truly self-directed IRA.
Please consult your tax or legal advisor(s) for questions concerning your personal tax or financial situation.
By Munzer Ghosheh, Director of Business Development
(310) 899-3811
MGhosheh@theentrustgroup.com
The flood of foreclosures on single family homes has put stress on the U.S. financial system, but it has presented opportunities for nimble investors. Homes in Southern California frequently sell at foreclosure sales for a deep discount to market value. The new owners typically rehabilitate the property and sell it for a profit within several months.
Most investors do not have the time or skills to buy homes on the courthouse steps, or to manage teams of contractors. For more passive investors, a great way to participate in this opportunity is to make loans to the professionals who dominate this “fix-and-flip” market.
Here’s how it works: The active professional investor purchases the home with cash and gets the previous occupant out of the house, usually by offering a cash incentive to vacate, or “cash for keys.” After the home is vacant, the lender puts a loan on the property. The amount of the loan is capped at either 60% of the current as-is value of the property, or 80% of what the investor paid for the property, whichever is less. In case the borrower defaults, the investor has a recorded lien on the property and can recoup the investment, plus interest and costs, via a foreclosure.
If you prefer not to deal with the paperwork of re-investing each time a loan pays off, or if your IRA balance does not quite match up with the amount of a given loan, there are funds available that are set up specifically to keep your money working and make a quarterly distribution of the profits back to your IRA account.
If you are interested in learning more about residential bridge lending opportunities, you are invited to sign up for a free webinar on August 24 at
https://www1.gotomeeting.com/register/441519769 or to call me anytime.
By Jan B. Brzeski, Principal of Standard Capital, LLC
(310) 846-1754
jbrzeski@stndcap.com
DISCLAIMER: As an IRA administrator, Entrust Administration, Inc. does not affiliate itself or 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). Entrust Administration, Inc. is not responsible for and is not bound by any statements, representations, warranties or agreements made by any such person or entity and does not provide any recommendation on the quality profitability or reputability of any investment, individual or company.
With nearly three decades of experience in real estate and note IRAs and 401(k)s, Entrust has tools that can help you grow your business, and receive great tax advantages at the same time. We’ve put together a list of facts and fiction regarding real estate investing with your self-directed IRA. It will help you determine what can and can’t be done within a self-directed IRA, when investing in real estate such as:
- Real Property
- Residential
- Commercial
- Improved
- Unimproved
- Rehabs
- Foreclosures
- Options
- Tax Liens
- And more!
Facts vs. Fiction:
Fact: No one in the industry measures up to Entrust when it comes to knowledge, expertise, and support for real estate investors using tax-free and tax-deferred dollars.
Fiction: Real estate investments aren’t permitted in IRAs.
Fact: Real estate investments have been permitted in self-directed retirement plans since 1975.
Fiction: You can’t leverage real estate investments in an IRA.
Fact: You can leverage real estate investments in an IRA, but the debt can’t be recourse to you personally.
Fiction: You can’t roll over money from a 401(k) plan to an IRA.
Fact: You can roll over money from a 401(k) plan; you just can’t be working at the old employer anymore.
Fact: You can team up with other IRA owners, including friends, family, and partners IRAs, and even personal money for more purchasing power.
Fact: You can lend funds to anyone to make a purchase.
Fact: Income and profits from real estate investments come back to the IRA tax-deferred or tax-free.
Fact: By having funds immediately available in your account, you can close faster than when trying to acquire other conventional sources of financing.
Fact: You can use your IRA to combine with other investment opportunities.
Fact: All un-invested funds in your IRA are placed in FDIC insured accounts.
Fact: You, the IRA owner, direct how your IRA makes investments.
Fact: You, the IRA owner, can direct what bank your money is in.
By Munzer Ghosheh, Business Development Manager
If you envision big things for your financial future and retirement, get to know us. Munzer Ghosheh is the Director of Business Development for Entrust IRA Services, a premier provider of self-directed retirement plans. He can be reached at mghosheh@theentrustgroup.com or 310-899-3811.
Did you know that you can use your self-directed IRA or 401k to invest in an LLC? LLCs are becoming very popular investment vehicles for people who want more options and control over their alternative IRA investments. Investing in an LLC for the purpose of buying real estate or other entities is a rather simple process. It offers the investor checkbook control within the LLC, so they can direct funds without additional paperwork, when going directly through the IRA.
For example, if you are interested in forming or investing in an LLC to buy real estate or other assets, the IRA is an investor in the LLC and the assets are acquired in the name of the LLC. The IRA is just a member and is not involved in the affairs of the LLC once the initial funding is completed. An important thing to remember is that an IRA can’t invest in an LLC in which the IRA holder and/or disqualified persons already own more than 50%.
So, how do you get started? Talk to your l
Once your self-directed account is established and funded, and you know what kind of LLC you want to invest in, you’ll need to submit a Buy Direction Letter to Entrust. This will tell us how you want to direct your IRA funds. You must also include a copy of the subscription or operating agreement vested in the name of your IRA (ex: Entrust Administration Trust FBO Client Name, Entrust Account #). Sign “Read & Approved” with your signature and the date on page 1, to let us know you have read through the documents before we sign off on them on behalf of your IRA.
Submit the supporting documents* with any wire instructions, and applicable fees to cover funding. Your investment will then fund within 2-3 business days. It’s that
simple, so don’t waste any time. If you would like to take control of your financial future, set up a self-directed IRA or fund an LLC today and let us help you get started!
By: Munzer Ghosheh, Business Development Manager
mghosheh@theentrustgroup.com
(310) 899-3811
*If you are forming a new LLC for this same purpose, we’ll also need the Articles of Organization and the Operating agreement.
Many investors don’t know that you can use your IRA funds to create loans to other borrowers and earn solid returns in your IRA. With hard money private lending from your self-directed IRA, you can lend money to other individuals or entities, as long as they are not a disqualified person. While this means that you can not loan the money to yourself or anyone directly related to you, your self-directed IRA can loan the money to anyone else. You choose the borrower and the terms, and Entrust can help you do the rest.
The loan terms are whatever the lender (IRA) and the borrower mutually agree upon, within the legal limits. You will want to be familiar with the usury limits in your state, as they vary from state to state. These loans can be secured by real estate or equipment, or you can make an unsecured loan from your IRA.
No IRA is too small to make a hard money loan. Often, several family members combine their self-directed IRAs to make a hard money loan, with each IRA owning an “un-divided” interest in the loan. There are no banks involved, lower costs, no wait, no hassles, and often times, greater returns.
For more information on hard money private lending with your self-directed IRA, contact me at (310) 899-3811 or mghosheh@theentrustgroup.com.
By Munzer Ghosheh, Business Development Manager
April 15th is right around the corner. You may recognize this date as the deadline to file your tax return, but you’re only half right. April 15th is also the deadline to fund your individual retirement plan, so if you haven’t yet made contributions for 2009, there’s still time. If you insist on waiting until the last minute, keep in mind that although your tax returns can be postmarked April 15th, your contribution should be completed before your tax returns are filed in order to be reported correctly. Even if you plan to file an extension on your taxes, the deadline still applies to your IRA contributions.
Some people may dread the quickly-approaching deadline, but contributing to your self-directed IRA can produce the following benefits:
- Reducing your current taxable income.
- Building your nest egg for retirement.
- Compounding more dollars tax-deferred or tax-free
- Growing your retirement portfolio wealth by investing in alternative investments.
You may also fund 2010 contributions, not only to get a head start on next year’s contribution deadline, but to use the funds towards your alternative investments today. You can download a contribution deposit coupon on our website, or if you need assistance in making a contribution to your self-directed IRA account, call us at (310) 899-3811.
If you are interested in learning more about self-directing your retirement plan to purchase other alternatives to traditional investments, we offer a variety of ways to educate yourself about the possibilities. You are invited to attend one of our in-house presentations, self directed IRA investor events, download an educational Webinar
from the archives, or schedule a free consultation via appointment at our Los Angeles office.
Happy Tax Day!
By Munzer Ghosheh, Business Development Manager
mghosheh@theentrustgroup.com
An individual must have “earned income” in order to contribute to an Individual Retirement Arrangement. Actually, this statement is not entirely correct. A “Spousal IRA” is a special type of account that is funded with the working spouse’s income. IRS guidelines allow an employed spouse to contribute to their stay-at-home husband or wife’s IRA account. Technically, there is no such thing as a Spousal IRA. It is just a term used for IRA accounts that allow non-working spouse to rely on a working spouse’s income to make IRA contributions.
The following requirements must be met to contribute to such an account:
• You must be married
• You must file a joint income-tax return
• You must have earned income of at least the amount you contribute to both IRAs
Although the contribution limits for a Spousal IRA may be the same as an IRA, the contributions made by the working spouse if covered by a qualified plan, may or may not be tax deductible depending on the couple’s adjusted gross income. However, if the working spouse is not covered by a qualified retirement plan, the contributions will be deductible.
So for all of you stay-at-home spouses out there, you too can start saving for your retirement and take control of your financial future with a
Spousal IRA. And remember, you have until April 15th to fund your account.
Please consult your tax or legal advisor(s) for questions concerning your personal tax or financial situation.
By Munzer Ghosheh, Business Development Manager
(310)899-3811
MGhosheh@theentrustgroup.com
An REO (real estate–owned) is a property that has been repossessed by a bank after an unsuccessful sale at a foreclosure auction. The bank lists the property on their books as a nonperforming asset.
But what does that have to do with your IRA?
With more and more of these REO and foreclosure properties for sale, you have a great opportunity to diversify your retirement portfolio. As an individual, you might not have the amount of cash readily available in your personal finances to purchase such a property, but you might have enough in your retirement plan. If it does, you can establish a self-directed IRA and invest the funds in an REO or foreclosure as an income property.
By vesting the title in the name of your IRA, any incoming or outgoing funds must go through your IRA directly. Because some of the properties will require a little tender love and care to get them back in shape, consider all the costs and determine the amount of funds that you are comfortable investing by doing your due diligence and consulting with a tax professional.
Since you’ll inevitably need to make repairs on the acquired property but should not be using any personal funds to do so, the IRA check card is an easy option for paying for repairs and maintenance with funds directly from your IRA.
It’s important to be aware of the prohibited transactions and rules that apply to this kind of investment, but the opportunities are endless and exciting when you are educated and informed about how to put your IRA funds to work for you, even in this ever-changing market. And Entrust is there to help facilitate every step.
Contact us to get started on establishing a self-directed IRA.
Munzer Ghosheh, Business Development Manager
310-899-3811
MGhosheh@theentrustgroup.com
The law allows for your
self-directed retirement plan to own just about any kind of
real estate. As you probably already know, your IRA can invest directly in a single family or multi-unit home, apartment buildings, and improved or unimproved land. But were you aware that you can also own storage facilities?
Even though investing in storage facilities may not seem as lucrative or exciting as putting your money into a resort hotel, storage facilities can actually be very profitable with limited downside risk and lower maintenance costs than traditional types of real estate. In fact investing in storage facilities is really a passive “hands-off” investment which could be a key component of any retirement plan. The associated costs (e.g. utility , upkeep fees) other than the initial investment are fairly minimal. If you are looking to further diversify your retirement portfolio in this turbulent market and are seeking a stable investment with low operating recurring costs and minimal oversight with potentially large profit margins, why not consider deploying your IRA dollars to a storage facility?
Keep in mind however that just with any
investment inside your IRA, all profits go directly into the IRA and that all expenses come directly out of the IRA. Thus, it is critical that you make sure your IRA has enough cash reserves to pay for such expenses.
Consult with your professional advisor today and explore this option to help you make the most of your financial future and goals.
By
Munzer Ghosheh, Entrust IRA Services
mghosheh@theentrustgroup.com