S P E C I A L R E P O R T. How to Create your Own IRA Real Estate Bank BY CRAIG HASKELL

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1 Uncovering the Little Known Option of Investing in Real Estate with your Individual Retirement Account S P E C I A L R E P O R T BY CRAIG HASKELL

2 Publisher: Value Hound Academy N. 15 th Ave Suite 201 Phoenix, AZ This publication is intended to provide accurate and authoritative information with regard to the subject matter covered. It is offered with the understanding that neither the publisher nor the author is engaged in rendering legal, tax or other professional advice or services. If legal, tax or other expert assistance is needed, the services of a competent professional should be sought. This publication is intended for instructional purposes only. Readers are advised to proceed with the techniques described herein with caution. Neither the author nor publisher makes any warranties, expressed or implied, about the merchantability or fitness for any particular use of this product. Copyright 2012 by Craig Haskell All rights are reserved under State and Federal Copyright Law. No part of this publication may be reprinted, reproduced, paraphrased or quoted in whole or in part by means without the written permission of the publisher and the author

3 After seeing so much wealth disappear in the stock market over the last few years, many people are looking at real estate as an investment alternative to diversify their portfolios. A little unknown option for investing in real estate is to invest using one s Individual Retirement Account aka IRA. This report will reveal the secrets you must know about to grow and keep your IRA retirement money secure using real estate investments. You will learn a way to catch-up your retirement funds to get back on track for a comfortable retirement, a way to use IRA real estate investing strategies to help create retirement wealth, a way to take advantage of tax savings while growing your IRA, and to take control of your finances while backing some of your investments with the security of real estate. Has the stock market devastated your Retirement Funds? Are you earning more than 4% in your IRA? How much did your IRA grow last year? Who is in control of your IRA? Are you worrying about retirement? Do you have a plan for getting your Retirement Funds back on track? Are you going to have to work longer because your retirement funds are smaller? Many people are facing the prospect of working an additional 5 to 10 years because their Retirement Funds have been cut in half. Even if the stock market rebounded 10% per year, it would take most people 13 years or more to get back to where they were before March And worst of all, many retired people have seen their monthly income cut in half. Unfortunately, putting your money into CD s, T-Bills or money market accounts paying 3% interest is not the answer. At 3% it may take you 30 years or more to rebuild your portfolio, excluding a cost adjustment for inflation. The Baby Boomers will soon be cashing in their pensions, and it s those rapidly shrinking IRA s that are suppose to sustain them in their retirement years. Whether or not you re a Baby Boomer, you are probably asking certain questions. Will you be able to maintain your current standard of living during retirement? Is your pension safe in your employer s hands? As Alan Greenspan said recently, Will Social Security and Medicare be available and sufficient when the Baby Boomers retire? With corporate downsizing, pension fund raiding, stock market crashing, and rising costs, it s easy to be apprehensive about your financial security. As Patrick W. Rice said in his book, IRA Wealth, Too often, seniors who looked to a secure retirement find themselves waiting in the food stamp line instead of the cruise ship line

4 Today, there is over $3.5 trillion in IRA assets in the United States. An estimated 42 million U.S. households or 40% of the country s population own some type of Individual Retirement Account. Because the concept of investing IRA s is so misunderstood, less than 1% of IRA holders take advantage of the wide range of investment products available to them. Instead, many IRA owners have watched their IRA retirement money shrink by 50%. Take Nick the 48-year old sales consultant for example. During Nick s years of hard work, he has built a very successful business and, like most of us, he trusted a major investment brokerage company with the management of his Retirement Funds. After watching his Retirement Funds shrink by almost 50%, Nick had had enough. Today, Nick uses his self-direct IRA to invest in income properties and trust deeds that would not have been possible with his former investment brokerage IRA custodian. Many IRA owners have stood by helplessly as their IRA managers have traded away the secure future they worked so hard to build. But no more! IRA owner s have thrown down the gauntlet and have taken charge of their own destines by using this little known strategy that just 1% if IRA owner s are aware of. As Horace once said, Adversity reveals genius; prosperity conceals it. Why aren t more people using Self-Directed IRA S? If it s so easy and potentially lucrative, why aren t the vast majority of Americans and their financial planners aware of the use of self-direct IRA s that have been around for more than 25 years? The reason you haven t heard about the selfdirected IRA s is that there is little profit incentive for financial institutions, which primarily sell stocks and bonds to IRA account holders. Why would the institutions tell you about real estate, said Rice. That would mean the money would go out of their pots and they couldn t make any money on it anymore. As Michael Scott of PENSCO, a licensed self-directed IRA Administrator also said, The reason is due primarily to the lack of knowledge on the subject as there are, literally, only a handful of financial service firms in the nation willing and able to provide the required custodial and administrative services. Typically, institutions licensed to administer IRA accounts, such as banks, credit unions, trust companies or saving and loan institutions, are not willing to undertake the extensive paperwork, manual processing and IRS reporting required to administer non-traditional assets within IRA accounts. Others however, such as broker-dealers and mutual fund companies, have to be separately licensed by the IRS and restrict their IRA clients to a limited set of investments

5 Since most institutions don t allow their clients to diversify their IRA holdings, how can a potential IRA investor take advantage of the existing IRS regulations? It s simple, they must establish a truly self-directed IRA with a custodial institution that offers the IRA owner many investment choices without restrictions. A true self-directed IRA custodian allows clients to select from virtually any type of investment including such choices as: Real estate Partnerships Mortgages and Deeds of Trust Stock and index Options Limited Liability Companies Businesses There are many more types of investment choices available to an IRA owner other those mentioned above including the traditional investment choices such as stock, bonds, CD s and mutual funds. An unknown source said, We cannot direct the wind, but we can adjust the sails. With a self-directed IRA, IRA owners have the control to diversify their portfolios by adding nontraditional assets like real estate investments. Why Real Estate Investments There are many reasons to invest your self-directed IRA in real estate. Real estate is a very safe and secure long term investment. It s almost un-american to lose money in real estate. That s not to say some people don t lose money in real estate, or that some real estate doesn t drop in value. But overall, real estate generally goes up. In almost every case, no matter where you are in our country, if you look at any property and ask, What was it worth fifty years ago? the answer is astonishing. In many cases, properties have gone up over thirty times in value! The nature of real estate is to keep going up in price. In fact, our government supports our country s real estate. Our government is very much aware of the value of real estate. Indeed, even with the changes in the tax laws, the government encourages us to own real estate by endowing it with unique benefits that add to its attractiveness as an investment. The tax advantages of owning real estate are designed to encourage us to buy property and hold on to it instead of selling it quickly. Some of the neat benefits that the government gives property owners are depreciation, long-term capital gains, and tax-deferred exchanges. If you familiarize yourself with all the provisions in the tax code, you may never have to pay taxes until you get off the merry-go-round and sell your real estate. The federal government has arranged matters so that people keep owning real estate, and all of this supports the value of real estate and its tendency to rise over time

6 Benefits of Owning Real Estate 1. Safety. Well located, sound real estate is a very safe investment. It s not going to disappear as can the value of a dollar put into a savings account. The reason real estate holds its value and is not subject to value fluctuations, is that it is a scare commodity in limited supply. There will never be any more of it. Because of all the natural built-in safety factors into real estate, mortgage lenders will loan a higher percentage of value on real estate, usually 70 90%, than on most other investment securities. The federal government will even guarantee some types of loans. 2. Income. Income producing properties can generate a constant stream of rental income usually 6 10% per year that will help increase your IRA. The rental income received from the income property is similar to a stock paying a dividend. 3. Appreciation. Perhaps the best benefit of all to buy real estate with your IRA is that it can appreciate in value. This is the goal you should keep in mind as you choose your investments. If you learn to use real estate cycle analysis, then the opportunity for appreciation can be magnified. Just ask Bill a 59-year old business owner, and he will tell you that all IRA s are definitely not the same. As a result of using this one unknown IRA secret strategy, Bill has grown his IRA by $600,000 using his IRA to invest in commercial real estate. Bill took $200,000 out of his traditional IRA, opened up a self-directed IRA, and invested in commercial real estate. Today, his IRA investment is worth $800,000. Bill said, What amazes me is, I wish I would have known this ten or twelve years ago. I wouldn t have to work right now. Self-Directed IRA Knowing that you can make these self-directed transactions with your IRA is 50% of the battle. The other half is placing some or all of your IRA funds with a true self-directed custodian. There are many types of Retirement plans that can be turned into self-directed IRA s and they include the following: Traditional IRA Roth IRA Keogh plan 401(k) plan - 5 -

7 Spousal IRA SIMPLE IRA SEP IRA Conduit IRA A Profit Sharing plan A Qualified Corporate Plan In order to begin the process of investing your retirement plan into real estate you must transfer the funds of one or all of your present investment IRA custodian accounts and place the funds with an IRA administration company that specializes in working with self-direct IRA accounts. A few self-directed IRA administrators are as follows: 1. The Entrust Group Brain Davis 8880 Rio San Diego Drive Suite 800 San Diego, CA Equity Trust Company 225 Burns Road Elyria, Ohio Pensco, Inc. P.O. Box San Francisco, CA When you have time, go to all of the self-direct IRA custodial administrators web sites mentioned above so that you can get more detailed information on the selfdirected IRA s and to select a company you feel comfortable with. Don t be intimidated by making some changes in you life especially if it will affect your future. John Norley once said, All things are difficult before they are easy. Building your IRA Real Estate Bank After you have your self-directed IRA set-up, you now can begin investing your IRA money into real estate investments. There are virtually no limits to the types of real estate that you can invest in with your IRA funds so as long as they are not your personal residence or your place of business. Some of the most common types of properties include: - 6 -

8 Houses Apartments Offices Retail Industrial Hotels Mini-Storage Raw Land Trust Deeds Tax Lien Certificates Separate IRA accounts also can be pooled to form limited partnerships or limited liability corporations to increase buying power. The partnerships range from spouses who merge their separate IRA s to a group of unrelated people that want to purchase an interest with their IRA s in a large commercial property. Jim has been in the real estate business for 20 years and has been doing tax favored IRA real estate investing since Jim recently used some of his IRA nest egg to invest in a 5-acre tract of land that he s pretty confident will appreciate in value. When he sells the land, Jim can keep the proceeds in his IRA account without paying capital gains taxes, and he can again invest the proceeds in any other investment instrument he chooses. By diversifying your IRA portfolio into other investments such as real estate, you will be able to create your own IRA Real Estate Bank where you can grow your retirement funds to a point where you feel comfortable that you will be able to maintain you current lifestyle. Real estate has been a very solid investment that has grown in value over the long term. This growth in value over a long period of time will be your real estate bank that you can tap into when you retire. It s time to stop the downward spiral and start taking your financial future into your own hands. Ask yourself this: Whom do you want dictating your standard of living during your retirement years? Do you want a banker, an anonymous stock broker, or an over worked employer controlling your destiny? Or do you want to be in control? Remember that administrators work for a fee; you work for your retirement. Take control of your destiny NOW! - 7 -

9 ABOUT THE AUTHOR Craig Haskell is author of, The Inside Game to Real Estate Value Investing, and founder of Haskell Value Real Estate Investor, the only online publication dedicated exclusively to opportunistic and value minded real estate investors. Craig is also founder of Value Hound Academy, a leading training and coaching platform for new and experienced real estate where he teaches a value oriented approach to real estate investing so that his students can make more money capitalizing on today s undervalued real estate market. Craig s unique understanding of real estate value investing is reinventing the way value investors do business to achieve high risk adjusted returns. As an inspiring leader and indemand speaker, trainer and coach, Craig has helped hundreds of investors and organizations around the world to become more successful value real estate investors. Craig has interviewed some of today s leading and smartest value minded real estate investors such as Gary Sabin CEO of Excel Trust, Michael Brennan Co-Founder of Brennan Investment Group, Jerome Fink Co-Founder of The Bascom Group, Michael Schwartz CEO of Strategic Storage Trust, Ryan Krauch Principal of Mesa West Capital, and many more. Craig has devoted over 25 years to value real estate investing, and has owned and managed 7,200 units and 2.8 million square feet of commercial space and provided advisory services on over $2 billion in value. Craig is also author of How to Take an Apartment Building from Money Pit to Money Maker, Secrets of Successful Apartment Buildings and A Guide to Creating Successful Apartment Advertisements. As the creator of the Value Hound Blueprint, a value investing system for real estate investors, Craig is the nation s leading expert on the subject of real estate value investing. Meet Craig at