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Are investment trusts — a REIT for your Nest Egg?
By Buyincomeproperties..com
Sep 26, 2005, 10:55
Why are some sinking their retirement IRA’s into a land investments?
As long as the money borrowed for home loans from these IRA’s is returned within the grace period, there are NO PENALTIES!!!!!
With the latest crash of the stock market, a rising number have turned to using their savings in their IRAs for investment real estate purchases. Commercial buildings, single-family homes, and even raw LAND CAN ALL BE PURCHASED TO SAVE FOR RETIREMENT through Real Estate Investment Trusts, better known as REITs. . .
Because of the low mortgage rates today, the leverage of an IRA is like a womb that can nurture a deep tax savings upon sale of your property, even on income derived from mortgage loans. True, some labor pains may at first kick in, because the rules are complex. Like nine months of growing, you incur intermittent contractions; such as the fact that when owning an IRA’s property you cannot deduct mortgage interest or property taxes, and you cannot use depreciation. Also, unlike a Roth IRA, when you sell the property, your profits are considered ordinary income instead of capital gains, and thus are not tax-free. Plus, your IRA needs spare cash, like amniotic fluid, to pay property-related expenses; i.e.: maintenance costs and management fees. In the case of commercial space or an apartment building, you may want to hire yourself a property manager for rent collections and building maintenance. Your IRA custodian may even need to do coaching by paying transaction fees when you authorize checks; such as to your plumber or when paying your property taxes. And an immediate problem arises in that few banks will guarantee a secured loan to an IRA; as according to them, the profits on your investment real estate are based solely on your property's likely appreciation. You must decide for yourself if these complications are too much for you to handle.
Still, some are finding the Real Estate Investment Trust to be AN INTRIGUING INHERITANCE OPPORTUNITY. Some family members are tightening their drawstrings to establish for themselves a limited liability corporation and USING ITS MONEY IN SEPARATE IRAS TO PURCHASE LAND otherwise unaffordable.
SUCCESS STORIES ARE PLENTIFUL. You can find many by searching for "self-directed IRA" or "real estate IRA" on the Web. As long as the money borrowed for home loans from these IRA’s is returned within the grace period, there are no penalties!!!!!
Eddie Gant is a success story out of Houston. He shifted his $150k IRA to use $62k to acquire a dilapidated single-family home. After spending $16k to remodel the home, his home improvement leads acquired $98k after the house and sold. That baby netted him A $36,000.00 PROFIT. The home remodeling costs were drawn from the sack of Gant's IRA; his profits went back in. Since then, he has purchased three more houses with cash. Gant, 43, has one big advantage. He has worked as a professional remodeling home.
ANOTHER SUCCESS STORY sprouts out of BECOMING A LANDLORD
Hanneke Jacobs from Irvine, Calif., along with her husband, Peter, knew nothing about investing in commercial mortgage leads. But in unison approaching 50, they knew they had not saved enough funds to retire. They didn't want to live inside a trailer park. So on the recommendation of a commercial real estate brokerage, they used $100k from Peter's IRA to make a down payment on their new four-unit apartment building. Because of the mortgage investment complex, rental income pours into the IRA. In addition, the property itself has appreciated by around $200,000.00
If you have money parked in a conventional IRA, while you are worrying about becoming financially secure or debt free, consider forming your own Real Estate Investment Trust or limited liability corporation and USING ITS MONEY TO PURCHASE YOUR OWN CAPITAL ACCUMULATING REAL ESTATE INVESTMENT.
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