InvestorLoft Real Estate Investing Blog

This is Part 1 of a two-part series on strategies for getting your investment property listings and other home listings noticed – check back on Thursday of this week for Part 2.

Many investors acquired their non-owner homes using yesterday’s rules with a focus towards shorter-term lending solutions. Perhaps you’re one of them. You planned on keeping the home for a few years and then selling it for a profit, right? And you were attracted to low introductory rate ARMs because they helped with cash flow until the home went up in value and you made the big profit on the other side. Remember that plan?

And then the rules changed…

Those shorter-term loans that you were so sure you’d be out of by now are starting to convert to long-term problems. Your ARM interest rates are skyrocketing or you can’t refinance into today’s great interest rates because you have too many properties. You realize you need to sell some of your investment properties before they put you in an awkward position. But selling for a reasonable price while competing against bank-owned foreclosures and short sales isn’t easy in today’s market.

I’d like to offer you some ideas for getting your investment properties sold as quickly as possible AND for the best price possible.

To start, it is important for you to know that whether real estate markets are good for sellers – with buyers everywhere – or real estate markets are unfavorable for sellers (like right now), there is one constant that you can count on:

The more potential buyers you can get to notice your listing, the greater your chances are of selling it sooner AND at a better price.

All selling strategies need to be filtered through that undeniable truth. If the strategy will help get the home noticed by more potential buyers, it is a good strategy. If it limits the number of potential buyers who might be interested in checking things out, it is a bad strategy.

Following are two strategies (to be followed by an additional two in Part 2 of tios blog) to help get your investment property noticed:

1. Listing Gimmicks and Give-Aways: At the time of this writing, real estate values are declining in many parts of the country, loan programs have become restricted preventing many potential buyers from obtaining the necessary financing to buy, and many buyers are afraid of the uncertainty presented by a shaky economy – so sellers are having to resort to unusual measures to get their listings noticed.

Freebies and incentives are increasing – in value and in creativity. “Buy this home and we’ll throw in a new Porsche!” “Free yard maintenance for a year!” “Tour our home and get a free bottle of fine wine!” These are just a few of the listing gimmicks you can find out there.

2. Home Improvements AFTER the Sale: Would the home sell better if it had a new roof? How about new floor coverings? New appliances and granite countertops? If so, then go ahead and offer the home for sale that way. Builders do this all the time – and so can you. If you have a favorite contractor, have him/her put together some bids for various improvements, use photos of the new appliances, leave carpet samples or countertop pieces out. “Price includes new…” Laws vary from state to state on how to pay for the repairs – but there is usually a way to work it out within the deal.

Tune in Thursday for part 2 of this entry!

Special thanks to Glenn Leach, author of this post. Learn more about Glenn at www.credittothewise.com.

The content in this blog is not affiliated with nor is it endorsed by InvestorLoft.com and contributors receive no compensation for submitted articles. All articles submitted to InvestorLoft are subject to editorial review. Please seek the advice of qualified real estate, tax and financial professionals before investing in any project or opportunity. InvestorLoft does not provide tax or legal advice and any and all content herein is provided for informational and educational purposes only.

Real Estate IRAs - Save Smarter!

The self-directed or real estate IRA is a powerful tool and growing in its popularity. However, as with any other way of investing your retirement funds, it’s not to be taken lightly.

Rental and other income property can be excellent vehicles that provide long-term appreciation potential and a steady flow of income as you work towards retirement. We spoke with Jenn Dizmang, a national speaker and former securities professional who teaches investors and real estate professionals how to properly use a real estate IRA for some advice on common mistakes that people make in the process.

Jenn shared with us that the following are the most common AND the most easily avoidable mistakes she sees people making with their real estate IRAs:

1. They either live in or vacation to the property that their IRA owns
2. They try to let family members use or live in property that the IRA owns
3. They don’t realize that when an IRA takes a loan, an additional tax may be due called UDFI (Unrelated Debt Finance Income Tax)
4. They try to lease the property back to themselves from the IRA
5. They try to do rehab work themselves on a property that is owned by the IRA. (You have to hire a contractor that is an unaffiliated party to perform the work!)

Where to look for the best real estate deals

Real estate investors – looking for the best markets for new deals? FORTUNE online just published a comprehensive pictorial tour of their “best markets” for retirement homes – and InvestorLoft is right in line with their estimations. There are subtantial values to be found in each of the named markets, earning each a place on this list of 12 key cities to consider for the retiree – AND the real estate investor in search of investment property for their portfolios.

The article names Miami, San Diego, Las Vegas, Tampa and Denver as the top markets for this article, citing lowered home prices, quality of living and local amenities for each.

In a separate article, they identify Phoenix as a key location for picking up a “deal in the desert.”

If you’d like to take a quick search through InvestorLoft’s available properties in each of the 6 markets listed in these two articles, just click on the links below and we’ll take you there in a jiffy:

Miami investment property

Tampa investment property

San Diego investment property

Las Vegas investment property

Denver investment property

Phoenix investment property

As a reminder, every property listed on InvestorLoft has been listed by a licensed real estate professional – no “fly by night” or under the table deals here. We make it simple to search for, identify and analyze investment property with just a few clicks of the mouse and firmly support the role of the real estate professional in every stage of the transaction.

U.S. News and World Report just named Fort Collins, Colorado in its story “Top Ten Housing Markets for the Next 10 Years.”

As a Colorado-based company, we have tons to say about this great state and definitely applaud Fort Collins’ inclusion on the list. Cities in Washington State, another recent addition to the InvestorLoft site, also made the list!

It seems timely to note that we just launched our state and city-specific search and information pages as well. Visit InvestorLoft’s Investment Property Portal and begin searching for real estate by state or in a specific city of your choosing. We have listings now in 18 states and 1,679 cities with new destinations being added each month!

Click here to review InvestorLoft’s available investment properties in Fort Collins, CO

Click here to review InvestorLoft’s available investment properties in Washington State (WA)

Good decisions outweigh bad markets with SDIRAs

All our lives we, as investors, have been told to put money away for those rainy days. Today, investors are on the seemingly neverending search for solid investment ideas that produce sound returns with balanced risk. Consequently, advisors are looking for council on a lesser-known and often misunderstood category:alternative assets.

Alternative assets include a wide-ranging group, such as partnerships and private equity. But the largest segment of alternative investments has been and continues to be real estate. In fact, almost 60 percent of alternative asset investments are in this category. Investors can invest in condos, rental properties, raw land, commercial buildings and other types of real estate from within a Self-Directed IRA (SDIRA).

Most Americans already have real estate investments, i.e., their home, and most (given the opportunity) may prefer to invest in asset-backed investments over paper-backed investments. Many investors are wondering if today’s retreating real estate market means that the good times are over for real estate, or whether new opportunities will emerge from the wreckage. I believe that it’s the latter. Real estate advisors, with whom my company works, suggest that falling real estate prices, combined with increasing inventory, may create new investment opportunities. As prices begin to fall back to earth, the pendulum may swing past center to create oversold conditions, providing opportunities to buy real estate at low prices. Some areas in the United States may already be starting to enter this situation. Consequently, many typical real estate investors are being squeezed out of the market due to the current credit crisis.

This has created a unique opportunity for cash-rich retirement plan investors who are in a position to purchase real estate outright. Who are these cash-rich investors? Baby boomers. 2007 marked the beginning of the wave of more than 78 million baby boomers that will begin to retire over the next two decades. This group controls more than $14 trillion in retirement plan assets, which will transition from employer-based plans to individual retirement accounts. Many baby boomers have already begun to shift away from traditional equity investments to those that generate income. When you add the factors noted above with the possibility of real estate appreciation, it is easy to see why retirement accounts that invest in real estate are growing in popularity.

Just because you can invest in real estate in your IRA does not automatically make it the best decision for all account holders. Opponents of using a self-directed IRA to invest in real estate suggest that there are specific tax implications foregone by choosing real estate as an investment. First, profits personally made in real estate, if long-term, are taxed at the capital gains rate of 15 percent. When a SDIRA sells a piece of real estate, there are no taxes due at the time of sale. However, depending on the type of SDIRA, when the owner takes a distribution from a retirement account, the proceeds will either be taxed at the person’s ordinary income rate (for a traditional SDIRA) or will, potentially, be tax-free under a Roth SDIRA.

This is an important issue because ordinary income tax rates are typically higher than long-term capital gains rates. SDIRA investors cannot depreciate property or write-off interest from their mortgage on their personal tax return.

In general, real estate investors experience increased return potential because of their use of leverage and its favorable tax treatment. Most real estate investment experts advocate the use of leverage to build wealth. Most SDIRAs do not use leverage to buy real estate, although it is permissible. Without the use of leverage, real estate begins to look more like income-producing bonds with equity upside. The lack of leverage may also reduce one component of risk for investors as well since the rental income is not being immediately used for debt service. If a property goes unrented the account holder owns the property outright and may not be subject to foreclosure proceedings, as with most current leveraged properties. Consequently, the methodology for buying real estate inside a tax-deferred retirement account may differ over time from real estate purchased outside the account.

Prohibited Transactions

Investing in real estate with an IRA requires that advisors and their clients be knowledgeable about prohibited transactions and what constitutes them. A prohibited transaction can jeopardize the tax-deferred status (and tax-free status if a ROTH) of the account, and can result in serious tax consequences. Another important issue for real estate concerns the access and use of property held inside the SDIRA. In such situations, neither the account holder nor their family members (ancestral & lineal) may have personal use of said property. To do so would result in an immediate prohibited transaction.

Partnerships

For an advisor who is seeking a niche, SDIRAs might be the answer. It takes time to develop expertise in this area and an advisor who invests time in understanding real estate investments with SDIRAs can create a competitive advantage.

Today, many advisors are partnering with those who have alternative products in which to invest, whether they are real estate-related or other private offerings. These partnerships provide the advisor with the ability to meet the changing demands of their clients. Advisors are learning to work more closely with clients who may have a property or real estate professional already in mind. As investors’ needs change, alternative assets and self-directed retirement accounts will become important tools for advisors to help clients diversify and grow their retirement wealth. Those advisors that are prepared for this change will be at the forefront of the financial services industry for years to come.

TJ Valenzuela is with TAS (Trust Administration Services), a leading personal management provider of self-directed IRA retirement accounts, retirement planning services, and custody accounts at www.trustlynk.com

The content in this blog is not affiliated with nor is it endorsed by InvestorLoft.com and contributors receive no compensation for submitted articles. All articles submitted to InvestorLoft are subject to editorial review. Please seek the advice of qualified real estate, tax and financial professionals before investing in any project or opportunity. InvestorLoft does not provide tax or legal advice and any and all content herein is provided for informational and educational purposes only.

Real estate is priced to move

What exciting times these are for real estate! In my opinion, this is one of the most opportune times in history for real estate investors and the Realtors who learn how to service them.

Real estate investors—go buy something! The illiquid lending market and foreclosure crisis have worked together to create an ideal market for real estate investment. Real estate is on sale, rental prices are at a premium and the market is flooded with quality renters.

It’s as simple as:

Low Prices + High Rents + Abundance of Renters = Cash Flow + Long-Term Appreciation Potential

Do you know what the number one reason is for missed opportunities and failure to meet financial goals? Procrastination! I used to teach a class on this in my investment advisory days. It is easy to find reasons to procrastinate, and below are three of the most common procrastination “crutches” I see used.

Is the market at the bottom? When investors try to wait for the market bottom, they usually miss out. Why? Because the best indicator that prices were at the bottom is that they are trending upward – and thus the bottom gets missed. If you buy with a long-term hold strategy, it’s less relevant if prices are at the bottom and more relevant that prices are lower than they are going to be at some point in the future (which I think, given today’s market, is a pretty safe bet).

How do I finance a property in this illiquid market? There are many innovative ways to finance investment property purchases and I’ll talk about a number of them in future posts. One of my favorite ways is to leverage the buying power of your IRA funds (and yes – it’s legitimate, legal and easier than you think). I would venture to guess that about 70% of Americans don’t even know this option exists, however, so I’ll be discussing this more in future posts.

What if I am not an “expert” real estate investor? The answer is simple: find credible, knowledgeable professionals to assist with your real estate investment transactions. While qualified, professional assistance is no substitute for performing your own due diligence, the team you assemble to help you can go miles towards helping you achieve your specific investment goals with opportunities that make sense for YOU. There are plenty of investment-savvy Realtors who can help you bridge the gap from novice to seasoned investor while you get a few deals under your belt. The sad reality is that most would-be real estate investors buy books, tapes, videos, and advice from self-proclaimed “gurus” but never get to the part where they actually buy a property.

I am adding an IRA FAQ section to InvestorLoft.com where our SDIRA experts will be happy to answer any questions you have related to SDIRA real estate purchases. Questions for me? Feel free to send them over to me directly at askwally@investorloft.com.