Real Estate is Booming in Self Directed IRAs

I have seen an influx in the number of clients who are using their IRAs to purchase real estate.  Many of them are purchasing multiple properties.  While I certainly wish that our economic condition was in a better state, I have to say that I am glad to see that people are able to purchase properties at affordable prices.  I had a client purchase waterfront property for $40,000.00.  Another client purchased a house for $20,000.00.  People who once thought that they could never own a piece of paradise (yes, most people would say that SWFL is a paradise) are now able to do so.  I literally get several Buy Directions every day, all of which are real estate purchases with a Self-Directed IRA.  The popular opinion of our clients is that they can’t believe what a great deal they got, and that they were able to use their IRA to purchase it.  They, like so many other investors, have grown somewhat disheartened with the stock market.  Our clients were ready for a change, and they were ready to invest in what they knew best.  Any income that is generated from the property goes right into the IRA.  Any expenses come directly out of the IRA.  Not to mention, they love the amount of control that they have with how and where the funds are invested.    It is that simple.  Building wealth for retirement has never been so easy!  If you would like to know more about how you can use your IRA to purchase real estate, give us a call at (239)333-1031.  We would be more than happy to answer any questions that you might have.  For more information on our services, visit us at www.entrustfreedom.com.

Written by Theresa Knower, Theresa is the Real Estate Transaction Manager at Entrust Freedom with over 10 years experience.  Theresa is an expert at 1031 Exchanges, please feel free to contact her at theresa@entrustfreedom.com or 239-333-1031 x207.

How to introduce Self-Direction to your Clients

 There are numerous industries that would clearly benefit if only their clients knew about a Self-Directed IRA.  What Real Estate agent couldn’t use an addition commission check from an IRA purchasing investment property?  How about that futures or forex broker looking for additional clients and funds to trade? A self-directed IRA would be a tremendous resource for this type of broker.  Precious metals brokers, private placement/venture capital managers, private equity and fund managers are all examples of industries that could reap the benefits of Self-Directed IRA’s. 

 The biggest problem is knowledge.  The majority of American’s have NO idea their IRA can invest in anything other than stocks/mutual funds.  Less than 2% of retirement funds are in non-traditional investments.  The main reason?  99% of the IRA custodians sell a product.  They let you choose to invest in what you want, as long as it is one of their products.  They do not promote the fact that your IRA can invest in assets that they don’t earn commissions on.

 The best way for these industries to benefit from self-direction is to inform their clients that self-directed IRA’s exist.  Many of their clients are frustrated with the roller coaster Wall Street ride and would rather invest in alternatives.  They just don’t realize they can.  Our Entrust webinars are a great way to introduce your clients to self-direction.  We have many vendors that mail or email their clients information on self-direction along with a webinar schedule.  We are more than happy to provide literature on topics pertaining to your industry.  Just give us a call at 239-333-1031. 

 By Brandon Hall, CISP, MBA

Entrust Freedom Customer Service Second to None

          How many times have you called your financial advisor to execute a trade during this bearish market and lost a substantial amount of money because you cannot get through to him?  Are you tired of waiting for weeks at a time to receive a distribution check you requested?  Does the company your dealing with care about your money?

           At Entrust Freedom, L.L.C. we pride ourselves on our superior customer service.  Since we do not sell any products, we are available to execute your self-directed investments with a speed and efficiency that you would not normally expect from a custodian.  Whether it be a real estate investment or a futures/commodities account, we can process and fund your investment request within 24 hours.   Entrust 1031 Exchange is one of the oldest 1031 companies in Florida.

By Doug Robertson

          Once your Self-Directed IRA is established at Entrust Freedom, our customer service level never falters.  We process check requests on Tuesdays and Thursdays of every week, and we wire funds for real estate closings and other investments daily.  Whether it is a distribution request or a check for the landscaping of your IRA owned property, we will process these requests immediately and issue checks on the designated days.

          Our knowledgeable staff is always available by email or phone to answer any questions you may have.  If we need to research the answer to a question you may have, we will do so and contact you within 24 hours.  Our managing partners, Dave Owens C.P.A. and Brandon Hall C.I.S.P., are available to speak with you at your request.

          Contact Entrust Freedom today at (239) 333-1031 to learn more about Self-Directed IRAs and start investing in what you know best.

The Rule of 72 – What the Heck is it!

How do we make our financial decisions? Why do we invest the way we do and what is the benefit?  I think the current economy has put a cold dose of reality in every type of investor.  Many of us now realize that when our parents were harping on hard work and telling us what the world used to be like, they were not kidding. Oh my gosh, did I say my parents were right?

Building wealth is a long term process and it is a ton of work.  I think technology has helped us lose sight of how long it actually takes to build wealth.   The internet gives us instant access to so much information.  We can invest in stocks and watch them all day long, or have an email sent to us every hour telling us how the market is doing.  Today, I repositioned my portfolio only to look at it at lunch and find out it was down already.  Why did I look?

This is where an old Math formula could never be more important.   It is called the Rule of 72 and it should be one of the first things you learn when starting to invest.  The Rule of 72 is a math formula used to project how fast you can double your money based on a certain rate of return.

The formula is very easy and it is very useful to understand how powerful compound interest really is.  If we divide 72 by our projected rate of return, we find out how long it will take us to double our money.

Let’s go through a simple example.  Assume I want to buy a rental house and I determine that with rental cash flow and market appreciation, I will get a 6% rate of return.  I divided 72 by 6, and it tells me it will take 12 years to double my original investment (72 /6 = 12).

Now let’s assume you are in the highest tax bracket and Uncle Sam is going to tax 1/3 of your annual gain, so after you pay your taxes, your return is only 4% annually.  Now let us apply The Rule of 72; 72 divided by 4% return and the answer is 18 years.  Taxes or unexpected costs can quickly derail project profits or wealth. 

That is why it is important to understand investing and all the options available.  There are some great tax strategies available and they can be a great opportunity for everyone.  Some of the most popular strategies that help defer or eliminate taxes are 1031 Exchanges and Self-Directed IRAs.  By taking advantage of these strategies, your returns can be maximized by reducing taxes and helping the investor increase their returns sooner.  Self-Directed IRAs are a great opportunity for investors to use retirement funds to by real estate and other alternative assets.  The benefit is that no gains inside the IRA account are taxable until withdrawn.  This can lead to tremendous amount of wealth being accumulated in the retirement account.  The other option for real estate investors is a 1031 exchange.  1031 allows you to sell your investment real estate (please note this is non-IRA property) and pay no federal or state capital gain taxes on the transaction as long as you buy a new piece of investment real estate within the guidelines. Both strategies can be a huge benefit to savvy investors. Please consult your tax advisor for specific details regarding your situation and if you qualify.

The funny thing about the Rule of 72 is that the number we need to actually double our money is not 72, but 69.3.  The Rule of 72 is actually an estimate, and I think they thought no one would believe The Rule of 69.3, so somewhere along the line it was rounded up because it is so much easier to divide into 72.

If you want to know how long it will take you to triple your money, it is actually The Rule of 110.  For Example, 110 divided by an 11% rate of return, would mean it would take 10 years to triple your money. 

While none of us want to be math wizards, it is important to understand the basics or variables of wealth building.  In the long run it is will be well worth as grow your dreams.

Dave Owens, CPA, CES, is the managing member of Entrust Freedom, LLC.  If you have any questions about this article and would like more information please feel free to contact the author.  Dave can be contacted at owens@entrustfreedom.com or 239-333-1031.  Dave has been a practicing tax accountant for over 20 years. 

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