Running out of time?
Did you miss the bounce-back of the stock market in recent years?
It is now almost where it was 5 years ago. Whoopee!
What
are the odds of it continuing to go up in the face of 15 consecutive
interest rate hikes with more on the way? Remember the old bromide:
When rates are low, stocks will grow
When rates are high, stocks will die!
Can
you count on the mercurial market to deliver the kinds of consistent
gains you are going to need in the next 5-10 years to salvage the
retirement lifestyle you want?
Why not stuff your retirement account with tax free real estate profits!
You did not know you could do that?
Actually,
according to the IRS, there are only two things you cannot invest your
retirement funds in, collectibles and life insurance!
The trick
is to have your IRA or 401(k) transferred to a truly self directed IRA
custodian. Your broker may say theirs is self directed.
Ask him
how you go about buying a house with it and see what he says. I would
advise you to take a step or two back when you pose this question. He
may turn violent!
You may object that the bubble has burst for
real estate and fortunately, you would be right! Finally properties are
being sold for prices where they produce positive cash flow.
The
property market is going to head lower, we believe in the coming years.
With the cash available in your retirement account, you will be able to
drive some good bargains.
If you can get a couple of 2-4 family
properties in good locations, they will spew tax free cash right back
into your IRA like water hose.
It will not matter if they don?t
appreciate or even if the value goes down a bit, like prices did in the
late 80?s, early 90?s. They will come back and you will not get hurt if
you do not have to sell, and the market value has little to do with the
rents.
If you are knowledgeable about real estate, you can buy
run down or abandoned property, fix it up and resell it, stuffing the
tax free profits into your IRA.
If you are averse to dealing with
tenants, and are not into fixers, you can become the bank and finance
rehabbers or even retail buyers with first or second mortgages.
What if you do not have that much in your retirement account? You can still get into the real estate game.
You
can locate distressed owners of real estate of which there will soon be
a bumper crop, and buy their equity in the property at a big discount,
taking over their mortgage.
There are many, many sellers that
have little equity in their homes due to the spate of cash out
refinancings and purchases with little or no money down in recent years.
You can then sell the property for a quick profit.
If you want to keep the property as a rental, you can do so with the help of a land trust. (Ask your real estate broker)
Another, often overlooked real estate play for your IRA is to buy tax liens.
When
someone does not pay their real estate taxes, in some states the
counties place a lien against the property for the amount of the unpaid
taxes.
In other states, the counties foreclose on the property and sell it at auction.
Although
you could certainly bid at auction for the seized property with IRA
funds, buying the liens of the delinquent home owners is a passive way
to enjoy high profits with great security.
You buy the lien from
the government, it is secured by the property and it pays from 8-16%
interest. Your repayment with interest is assured by the police powers
of the government.
If the recalcitrant home owner does not pay
off the lien with interest in the requisite amount of time, the
government will allow you to seize the house; in effect buying it for
the amount of the back taxes! Between 95 and 98% of liens are paid off.
Tax liens are also a great way to amplify the anemic returns available to those already retired and living on fixed incomes.
So
if you are looking to catch the last train out to Happy
Retirementville, you need to get your retirement funds out of the
selfish, sweaty little hands of your stock broker and into some real
estate, fast!
Copyright,
2006 Bill Young. Bill is a former mortgage broker and licensed
financial planner. He writes and lectures on real estate investment,
land trusts, tax liens and using your IRA to invest in real estate. You
can learn more at: http://ARealEstateIRA.Com or at http://MotivatedSellersOnline.com
