Using IRA Funds to Invest in Hard Money Loans

Filed under Investing by on April 26, 2012 at 5:07 pm {no comments}

Many of the loans that we put together are funded by individuals using IRA funds. Investing in hard money loans offers better returns than many other investments, and is also one way you can diversify your holdings.

Current hard money conditions present a unique opportunity to those investing in deeds of trust. The recent downturn in the real estate markets was one of the largest downturns we’ve seen. Values are still depressed. While this is not great for the average consumer, it does provide good conditions for trust deed investors.

With the markets down and the steep losses they left many with, hard money loans are not nearly as aggressive as they were five years ago. Typically speaking, most hard money loans are being written at 50-60% loan to value. This is a loan to value based on current value, not the value of five years ago. If you believe the real estate markets are at or near bottom, this leaves a nice cushion of protective equity to secure your investment.

In addition to lower loan to value ratios based on lower values, the people borrowing hard money these days are more credit worthy (generally speaking). It is not uncommon for people with excellent credit to still need hard money to finance their real estate projects. With better borrowers, lower loan to value ratios and a depressed real estate market within which to base a valuation on, you can still earn a double digit return on funds invested.

The average IRA custodian will not be set up to allow investments of this nature, but there are a number of self directed IRA companies that are set up in this manner. Investing in real estate trust deeds is not for most investors. Those who do choose to invest in this manner should seek legal council and have a good understanding of the process as there are strict rules to which you must adhere.

For those who are comfortable with investing in hard money loans, though, it can be a very rewarding experience. Investing locally, you can personally visit each property you choose to invest in personally. Finding local hard money lenders to work with is one way you can find transactions that may fit your investment strategy and goals. Regardless of the type of property or location you wish to invest in, chances are good that there is a transaction that will fit the bill.

Make Your Listing Stand Out When Investing in Rehab Properties

Filed under Investing by on March 26, 2012 at 10:59 am {no comments}

With the real estate markets in limbo right now and competition high among real estate investors, having a listing that will stand out when investing in rehab properties can be the make or break difference.

Matt Stookey brings a different spin to this. Instead of merely rehabbing, he suggests a very specific type of rehabbing that could help your listing stand out when it is time to sell:

The major point that I am trying to get across is that in order to not drown amongst the massive amount of competition that is out there in your market, do something a little different (Greenhabbing) and try to stand out as the local Green Real Estate Investing expert. You want to learn and implement these strategies before everyone else is.

Now that the energy labeling act will require homeowners to receive an energy rating on their homes before they sell, it is crucial to have a good rating to attract the most potential buyers for your newly completed rehab or investment property. If all of the other factors are comparable with other homes in the same neighborhood, except your green home saves the end user $100+/month in energy bills and in a healthier living and breathing environment, your home will be the one of choice for many buyers.

While the Supply is still low with green homes in America, this presents a great opportunity for those of us that see it. The key is to take massive action and stand out from your competition by offering these high quality green homes as investment properties and personal homes. You can see all of the advantages that a green home presents the end buyer, now it’s time to offer it to them and let them know you are the local green expert in your local real estate market. (read the rest of the story here)

This is a novel approach, and definitely has some merit as this ‘greenhabbing’ can target a very specific and growing niche of buyers. In addition, it will set your property apart from all the others on the market.

With the emphasis these days on the environment, this could be a great niche for those investing in rehab properties. We specialize in financing these types of transactions, for more information please visit our rehab loans page. You may also find our rehab profit calculator of use.

Investing in Real Estate With Your IRA

Filed under Investing by on March 23, 2012 at 11:01 am {no comments}

Most people have retirement accounts that look pretty similar. You have stocks, maybe some bonds, mutual funds, some ETF’s maybe. Would you rather be able to hold real estate in your retirement account? Well, investing in real estate with your IRA can make that possible.

There are a few ways you can use your IRA to invest in real estate. Now, let’s get this out of the way upfront, I’m not an attorney, am not giving legal advice, tax advice or any advice really. If you are going to invest in real estate with your IRA, please go get legal advice first. You don’t want to run into tax consequences for doing this improperly.

Ok, with that said, there are a few ways you can use your IRA to invest in real estate. One is to hold real estate for rental income and appreciation. Now realize that the rental income does not come in to you, but rather to the IRA. You must keep your IRA and your personal finances completely separate. This is also true of the sale of the property; proceeds go back to the IRA. Maintenance costs need to be paid by the IRA. It is basically a separate entity.

Another way you can use your self directed IRA to invest in real estate is through trust deed investing. This is where your IRA is lending money that is backed by real estate collateral. Instead of rental income, your IRA earns interest income, then when the borrower pays off the loan, the principal balance goes back to the IRA. Same concept, your IRA is a separate entity.

The third way many people are using their IRA to invest in real estate is for short term fix and flip rehabs. These people are typically either partnering or lending money short term to individuals who buy, fix and flip a property. Returns on this type of investment can range from flat interest or annual interest to participation.

For those looking for new avenues of investing their retirement funds, real estate investing is an option you may consider. Talk to your existing IRA custodian for more information. Not all custodians will allow this type of investing, so you may need to talk to multiple companies. Good luck!

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