Self Directed IRA - Real Estate

I’ve had a few discussions with people about self-directed IRAs and the possibility of investing your IRA in real estate, so I did some research and found some information about them and a group that specializes in them.

The answer is yes, you can tuck property into your retirement account.

Over the last few years, stocks have cratered. Despite their recent rebound, millions of retired and almost-retired have been forced to extend their working years just to maintain a minimum standard of living.

While your 401(k) plan may not offer real estate in any form, the fact is, you can own real estate in your retirement plans. Retirement plans are by nature long-term investments. You can't get much more long term than real estate. But you must keep in mind that you'll be able to invest only for income and appreciation. You can't deduct depreciation, as you can in a taxable investment.

You have to be very careful how you do it. A single bad move can create a major tax disaster.

An all-cash transaction is probably the easiest. If you don't have sufficient cash, your retirement plan can purchase a partial interest in a property. That's known as a tenant in common interest.

You can borrow the money to finance the property but will also need to pay the Unrelated Business Income Tax (UBIT). Depending on aggravation level, costs, tax rates and rates of return, the leverage may be worth the tax cost. Call for a recommended provider.

Clarifying Gold's Gym Location Challenge

If you wondered, like I did, why Gold’s Gym would move into a building that is difficult to access the answer will soon be evident. American Furniture Warehouse purchased all of the adjacent land and will now build an roadway with access of Highway 6&50 into the commercial development. A map of the proposed access is included on the second page of this newsletter.

American Furniture Warehouse has multiple locations in Colorado. You can check out their website at www.afwonline.com.

In case you missed the Sentinel article “American Furniture Warehouse owner Jake Jabs said he plans to open a 150,000-square-foot building on the property that will include a warehouse and a showroom. The store could open as soon as early 2011.

Jabs said the store will need about 150 staff members for sales, office, delivery and staging work. He said he wants to hire local contractors to construct the building.

Jabs said he opened an American Furniture Warehouse store in Grand Junction in 1984, but it closed the next year due to poor economic times in the area. A growing number of American Furniture Warehouse products being delivered to the Grand Valley prompted Jabs to return to the area.”

Anderson, E. (2009, Dec 31). The Daily Sentinel.

Motivation

What motivates a commercial broker? 1) They need loyalty and a promise that his or her time is going to be compensated for. 2) A driver which usually resides within a good broker and is closely tied to needs and incentives. 3) You will get more good work out of a broker if you are willing to offer an equal incentive for the amount of work that needs to be put into the task.

If you are a buyer or seller, in order to facilitate a successful exchange you will also have to be motivated. Ask yourself this question, "am I motivated, do I have a need, the drive and an incentive?" If the market value of your property is not motivating, are there other alternatives that would motivate you? If not then it may be a good reason not to sell until your motivation level increases.