Did you know that you can purchase

Real Estate in your self-directed IRA?

Historically, real estate has been a valuable component of many successful investment portfolios. Real estate investments hold the potential to generate better than market rate returns through income production and capital appreciation while protecting against the loss of principal. Recently, the combination of real estate’s recognized contrarian value, and the currently low interest rates on liquid assets, has fueled historic growth in the number of people purchasing investment property within their IRA’s.

In addition to standard all-cash transactions, IRA funds may be used to purchase shares in corporate real estate projects or as down payments to leverage real estate purchases. When real estate investments are not financed, both income and capital gains flow back to IRAs tax-deferred (or tax-free, if it is a Roth IRA). You may also combine discretionary funds with IRA dollars to purchase real estate.

Real Estate purchase example: Sarah’s IRA purchases a single family home for $249,000 cash (her IRA holds the grant deed). Sarah leases the property for a few years, as the IRA grows through reinvestment of the rental income and appreciation of the property value. Eventually, the IRA sells the property to another party for $597,000 (20% annual gain/5 years) with a 15 year first mortgage that her IRA will hold in exchange for a 10% down payment. Sarah’s IRA now has a fixed income investment secured by the trust deed. Sarah’s total return on her investment outpaces the major stock indices over the same period.

Co-invest in those you know and trust:

Self-directed IRAs allow individuals to take control of their financial plans by investing in real estate they can see and private businesses they understand, often with people they know and trust. For many, the heightened tangibility of these investments is a welcome contrast to more abstract financial markets.

Since IRAs were first created in 1974, IRA owners have been able to self-direct investments in real estate, private equity (businesses), and mortgage notes (trust deeds) inste4ad of settling for the standard investments sold by broker-dealers and banks.

Self-Directed IRA investment choices include:

• Commercial, multi-family and vacation Real Estate;
• Foreclosures and other investment property;
• Business start-ups;
• Franchise opportunities;
• Tax liens, subleasing and options;
• Business loans, notes, and mortgages;
• Limited liability companies;
• Charitable investing;
• Thousands of other investments!

Benefits of alternative investing:

Additionally, IRA owners who diversify their retirement portfolio by choosing alternatives to stocks, bonds, or mutual funds also benefit from:

• - Investor Control: You decide where and how to invest your money;
• - True Diversification: Choose from an almost infinite number of investment options;
• - Leverage: Increase the capital returns of your retirement investments through the use of non-recourse financing.

Invest into privately-held enterprises:

From time to time, individuals are presented with opportunities to invest in a privately-held enterprise, such as an operating business, a real estate venture, or an investment partnership. Acquiring the free capital to fund a business you believe is set to “take off” can be a roadblock unless you understand how your IRA(s) used to fund private equity investments. A common success story can start with someone leaving a company with a great idea to develop a competitive venture. Raising capital to get started could be a high hurdle through traditional sources like banks, but a 401(k) rolled into a self-directed IRA can easily fund such a new venture. With careful planning you can use IRA dollars to invest in a closely-held enterprise with great potential. It is important that any transactions which might occur after the initial IRA investment is made (such as, how and when the IRA will ultimately dispose of its investment, or future capital needs) should be taken into account during the planning stages.

Getting started is easy!

There are several companies that provide administration and custody of self-directed IRA investments in real estate and private placements.

The information contained herein has been taken from Pensco Trust Company. Pensco Trust began in 1989 and holds over $1.6 billion in retirement assets for clients from all 50 states who have taken control with self-directed IRAs. For information on opening a new account, you can email them at takecontrol@pensco.com or call them at 866/818-4472.