Boomers-Bank The Investor's Guide to Commercial Real Estate and Retirement Planning How to Invest
In Commercial Real Estate Using Your IRA or 401(k)Maximize Your Profitand Save For Retirement
Boomers-Bank Introduction Why invest in real estate using your retirement plan? In this book, we're
going to discuss several concepts for buying real estate using IRAs and 401(k)s; the socalled
nontraditional investments. Let's start by asking what advantage is there to all of this? Why not
just let your IRAs and 401(k)s sit around and do whatever it is they've always done? Well, you can
secure tax-deferred or tax-free income for one thing. Anytime you have a profit or a gain, either
you are not paying taxes on the gains until you start using the money, or if it is in a ROTH IRA,
you aren't paying taxes at all. By having real estate in a retirement plan, you are also avoiding
what's known as capital gains every time you sell property. Your money is allowed to accumulate and
your interest will compound. Moreover, you can put all of the money back into your next deal.
However, you've got to bear in mind the current state of the economy. Money doesn't just sit around
these days. In most parts of the world, the dollar is losing value at a pretty alarming rate. The
United States is a country at the edge of a financial and economic precipice, owing trillions of
dollars to other countries and borrowing money against, well, the value of its existing borrowed
money (we'll talk about this later). The infrastructure of the United States is at present rather
unorganized. We aren't producing much and so we're importing more than we're exporting. It's basic
mathematics. Notice how the prices of food and gas have been rising recently. That should give you a
pretty clear idea of what's going on and what is likely to continue to happen (we'll also talk about
this a little later on). The main focus of this book, however, is to demonstrate the value of
nontraditional investment choices for 401Ks. Our goal is not only to introduce you to the reasons
why these choices are advantageous, but it is also to explain the particulars of the related
processes. For the sake of helping you confront your financial advisor or accountant, we'll discuss
the various strategies for undertaking this type of investment. We also plan to take you through the
processes for finding appropriate real estate to undertake the actual investment. Since the property
market can be a bit difficult to navigate, particularly if you're a beginner, we'll allow you to
benefit from our wealth of experience and wisdom on the subject.
We need to establish here why most people don't invest their 401K, despite the fact that it is a
very sound financial move. Firstly, what most average Americans do not understand is that you and
your IRA/401K are two separate entities. Repeat: you are not one and the same, nor are you in any
way, shape or form joined at the hip. You will need to absorb this fact so you can begin to
understand how to actually structure a deal with your IRA. If you don't take the time to learn the
difference between you and your retirement plan, you're going to spend a lot of time wondering, "is
it me, or is it this plan that owes this money and needs to pay this bill?". Let's avoid confusion.
Depending on the particulars of the loan you broker, the answer to this question, who owes the
money, will be quite different. The next concept you need to bear in mind is that you and your
IRA/401K, being two separate entities, have a third-party administrator for all of your deals. All
deals involving your IRA or 401K will thus have a third party acting as a recordkeeper,
administrator and a custodian or trustee. They will be the entity that is actually holding the money
as well as the person who must meet government guidelines and regulations to be able to hold your
retirement money. That said, let's move onto the specifics of IRAs and 401Ks. We're going to mention
these entities quite a bit throughout the book, so it pays to be clear now. An IRA is a place where
you can keep your assets for retirement, basically all the money that will see you through when you
are no longer working. What most people don't understand, however, is that you can pour into your
IRA whatever type of investments you want, while your assets can take any one of a number of forms.
It is important to note though that your IRA is not an investment in itself. Next, let's take a look
at non-traditional investments. Of course, retirement planning is a big issue for a lot of people.
Most people, when they think about it, consider themselves limited to stocks, bonds, mutual funds,
and the like. There's a general consensus that these are the types of things that we should be
investing our money in so that it will grow in the years that we're working, giving us something to
fall back on when the time comes. What a lot of people don't know, however, is that these investment
types are not necessarily the best option. They certainly aren't' the only option.
Non-traditional investments such as real estate, notes, foreclosure properties, rehab properties,
and other things along these lines, may actually be much more viable investments for the baby boomer
generation. In this book, we're going to explore the ways you can go about investing in real estate
for maximum efficiency and return. By law, there are only two things you cannot put in a retirement
plan: you can't use retirement money to buy life insurance and you can't put collectibles, such as
art work or antiques, into your plan, not that most of us have to worry about these types of things.
Long story short, the IRS gives you a pretty free rein. They let you be your own advisor and best
financial friend when it comes to retirement. Many people believe that they already have a
self-directed plan for their retirement, particularly if they are working with a brokerage firm.
There is some truth to this. While you select your own mutual funds and stocks in many cases, most
brokerage firms won't allow you to invest in real estate or notes. Thus, they usually have a
limiting plan for investment. Unless you take something of a do-it-yourself route, real estate
investment options using your 401k or IRAs are actually quite limited. To purchase such
nontraditional types of investments within your retirement plan, you need to be allowed to
self-direct. The person or entity holding your money, the custodian, must allow you to self-direct.
One of the perceived disadvantages to self-direction, of course, is that you are assuming
responsibility for how well your retirement plan actually does. You can, for example, pick the wrong
stocks and bonds and hence secure nothing but financial losses. Thus, you can end up jeopardizing
your future if you don't take the right approach. On the other hand - and let's now consider an
example - you can save yourself a lot of money by acting in a financially sensible and knowledgeable
way. Consider the case of Ms. X. Working as an investment advisor, Ms. X has been investing stocks
and bonds for many years in her retirement plan. Her plan, like most of her contemporaries, is
driven by traditional types of investments. During her working life, Ms. X has invested a good deal
of money in real estate. In fact, it's become something of a hobby to her. However, one of the
problems with such an approach is that she had to pay taxes on the profits she made from her real
estate investments. Using her retirement plan to make the investment, however, Ms. X discovered a
way of avoiding these issues, as a number of other savvy individuals have done before. Real estate
investing is nothing new as a means of acquiring wealth; it is a practice that has been popular
since the beginning of recorded history. Most of the wealthiest people in history have either
secured or built the bulk of their wealth using real estate. Land had always been the defining
possession of the nobility in the vast majority of early socio-economic systems. Even during times
of war and economic depression, land and property have tended to hold up as strong sources of
wealth. Hence, it is safe to say that things are unlikely to be much different these days. However,
despite the popularity of real estate and the many centuries of experienced buying and selling, even
some of the most savvy investors are still unaware that they can use their retirement plans to
invest and thereby save themselves from capital-gains' taxes and other such annoyances. Although
many people claim to feel 'trapped' by traditional investment options, the vast majority of them are
totally oblivious to the fact that real estate is available to serve as one rather convenient
nontraditional investment commodity for use in individual retirement plans (IRAs) and 401(k)s.
The dual advantages of real estate and IRA/401(k) investments are overlooked. The only requirement
of the IRS is that you have a custodian for your IRA or other retirement plan, which we will review.
Beyond that, you are free to use your IRA or other qualified retirement plan to invest in real
estate. You can also use your plan to keep your real estate investment, earning money and limiting
what you have to pay in taxes. Since 1975, one has been able to use Keogh plans, now known as
qualified plans, to purchase real estate as a tax-deferred investment option. With the increase to
allowable contributions, simple employee retirement plans have become popular as well. In 1997, Roth
IRAs further enhanced the popularity of tax-free investments. In 2006, the establishment of Roth
401(k)s made it possible for deferrals to be made regardless of salary amounts. At this point in
time, the long and the short of it is that investment options are phenomenal and as we shall explore
soon, the need for making sensible investments has never been greater. Whether you currently have
retirement funds or you're looking to set up funds for investment purposes, the time is right for
you to make an investment in real estate using your IRA or qualified retirement plan. This book will
show you how. The book will continue with he next post you can go to http://blog.IRA-401K-RealEstate.com and request the
entire ebook with all the charts pictures and examples. Its free if you request it only 10 copies
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