How Many Have Considered This Source of Income?

By
Real Estate Broker/Owner with Jerry Becker and Associates



With the recent downturn
in real estate, how many of you are promoting the investment of real estate through IRAs?  For years, the IRS has allowed individuals to purchase real estate with the money in their IRAs and  401 (k)s.   Most individuals don't know about it because their investment advisers don't tell them about it.  That's because they don't understand them plus the fact they wouldn't make any management fees.  Well, I think there are plenty of us in the real estate business that don't understand them, either.  


It's a pretty easy concept but there are some important aspects to remember.  The buyers need to have their investment run by an authorized custodian.  They can't use if for any personal use, and that includes their families.  The also can't do any maintenance  or management of the property because that would be deemed an unauthorized contribution to the IRA.  They can invest in a group with other people, where the participants pool their IRAs.  They can also borrow to purchase, however, since these would be non-recourse loans, lenders have tightened up their requirements.  A couple of years ago you could finance 75% of the purchase price, now most lenders require at least 50% down.  Even that isn't so bad because the buyer is still using leverage.

With so many great buys out there, this may be a great time to pull money out of stocks and invest in real estate.  Don't even attempt this until you've educated yourself on this play.  I would recommend reading several books plus attending any workshops your Realtor association may offer.  Once you understand this, you could be opening yourself up to a whole income new stream.   

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Rainmaker
1,778,986
Gabe Sanders
Stuart Florida Real Estate
the BlueWater Realty team specializing in Martin County Residential Homes, Condos and Land Sales

Of course, you're assuming that we have money left in our 401K and retirement accounts!

December 15, 2008 04:55 PM
Rainmaker
222,486
Brian Brumpton
Boise Idaho Real Estate
Keller Williams Boise

I heard about this from a financial adviser when I first got my license.  I thought it sounded like it had a ton of potential and I think you're right it's probably even more relevant now.  I wouldn't mind studying up on this.  Are there any books you can suggest?

December 15, 2008 04:56 PM
Ambassador
287,596
Tim and Pam Cash
Real Estate Professionals - Clarksville TN
Crye-Leike (Sango)

A few months ago, I don't believe this would be a possibility, but with the recent events, many may consider such an idea as a safer investment.

December 15, 2008 06:59 PM
Rainmaker
639,898
Marchel Peterson
Spring TX Real Estate E-Pro
Results Realty

Jerry, I didn't realize this was a possibility but it does sound complicated.  Good to know though.

December 17, 2008 11:23 PM
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Rainer
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Jerry Becker

Littleton, Colorado
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