You would have to be living in a cave if you haven't seen or heard about the implosion of the real estate market over the last two years. Ever day in the news it is foreclosure this and a new regulation that. Not to mention although some 401k and IRA account have seen some recover from those late 2008 lows. Don't get your hand caught in the cookie jar the next time the market takes a dip. Now many investors have been waiting on the sidelines not sure what to do with their retirement accounts. While it is easy to reproach the mortgage brokers, the government regulators, and the infamous people on Wall St., focusing on who to blame on the recent financial crisis may cause you to miss one of the countless opportunities out there right now. 

Many people are unaware that they can use their IRA and 401k funds to purchase and invest in real estate. You can roll a portion of your 401k into a Self-Directed IRA and purchase investment properties to rehab and flip or just sit on and rent out. Some markets have been hit by more than 50% and some or even undervalued today by 40%. The best part about using your IRA funds is that you can now obtain and IRA Loan to help you acquire  or rehab your property. Some of the IRA lenders are now lending up to 65% of the value of the property you are looking to purchase. Here are some facts about IRA Lending: 

What is IRA Real Estate Lending?

IRA real estate lending is the process by which you can self-direct IRA or other qualified retirement funds to purchase real estate. This is accomplished by funding the down payment of the purchase price with a qualified account and then obtaining a non-recourse loan to finance the remaining balance of the property's purchase price. Self-directed accounts can even be used to purchase property or buildings in other countries. For more information on opening a self-directed IRA account, please contact  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

In today's market, mutual funds and other Wall Street investments that were deemed safe and fail proof have in recent years shown significant volatility and in most cases dramatic losses. Many people today are moving towards self-directed retirement accounts where they control more closely what their retirement account should invest in. Because IRA's are qualified accounts, they are classified in such a way in which they cannot be accessed without negative tax consequences until much later in life. This can be a problem if you want to purchase investment real estate but simply don't have any non-retirement funds available to do so.

In order for a self-direct IRA to fund a real estate investment, per IRS tax law, a qualified 3rd party administrator must facilitate the purchase of the property which ensures that the individual does not have personal possession or direct access to any qualified accounts. If this rule is not abided by, then the IRS classifies the money as an early withdraw which triggers not only a financial penalty, but also causes the proceeds to be subject to ordinary income tax rates. The 3rd party administrator facilitates the purchase of the asset and title is vested in the name of your IRA or designated account. A property can NOT be purchased in an individual name and afterwards transferred to your self-directed IRA. This is referred to as self-dealing and is strictly prohibited by law. If you purchase real estate within your self-directed IRA, you will not be able to live in the property or own it in your personal name. This also includes your family and anyone else who may be connected with the transaction that could stand to personally benefit from the transaction. Your IRA is only allowed to purchase assets solely for investment purposes and void of any personal gain or benefit prior to taking a distribution from the account.

Are there penalties for misusing IRA loans?

There are fines and penalties for violation of the terms of IRA lending. The 3rd party administrator can also assist you in confirming that a transaction is eligible. Another way to properly plan for correct use of this type of investment is to work with a knowledgeable CPA and financial planner. Prohibited transactions from IRA loans can also lead to complete disqualification of the IRA itself, so it is imperative to be very careful in this matter.

What is the process for setting up an IRA loan?

Once you have found a trusted 3rd party custodian, they will assist you with paperwork and compliance documentation necessary to transfer your qualified accounts to their trust account. Brooklyn Troy works closely with and recommends Pensco Trust Company or The Entrust Group for a 3rd party custodian.  First, a plan is decided upon and approved. Then the funds from your IRA are rolled over into the new self-directed IRA held by the administrator. If you are pooling a number of IRAs, as in perhaps you are joining your IRA with that of your spouse, all these funds will be rolled into a new self-directed IRA. Upon a property being selected to purchase, the custodian will then take appropriate steps in order to help you facilitate purchase that will be title in your IRA.

This subject is still a bit of a mystery to many people. Because it is an alternative investment as oppose to a mutual fund or more widely quantifiable investment, most stock brokers and investment advisors simply don't have experience offering advisement in this area. Self-direct IRA's are an ideal way to take advantage of the present real estate market. Many financial institutions deem this type of non-recourse loan a safe and lucrative because of the large down payment required (typically 35% or more) and the excess account reserves that ensures repayment of their loan.

Remember this is one investment tool to help you diversify your retirement investments. While no one can predict what all the markets will do over the next ten years one thing is for sure there will be ups and downs, and this time you dont want to have all of your eggs in one basket. The only free lunch in investing is with diversification.  

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*This is an article written by Pensco Trust CEO Tom Anderson that was featured in the August 2009 SJREI Journal.*

While today’s residential market is flooded with foreclosed properties, the resulting devaluations in many parts of the country are creating unique opportunities for long-term investment buyers. With many consumers increasingly concerned about liquidity as a result of the reeling economy, investors are turning to their retirement accounts to take advantage of an incredible buyer’s market. Since the credit market is effectively in neutral, investors are scooping up properties in some areas for less than 50% of appraised value, with all cash purchases with their self-directed IRAs.

For example, on July 6, I heard from a real estate broker in Florida that he was able to purchase a 2,800 square ft. home on a golf course in a gated community (and needing no repair) for $100,000. It was listed by the bank that foreclosed on it at its appraised value of $200,000, and it sold two years ago for $440,000!

Although we may not yet have reached the bottom of the market for residential real estate, and the window of opportunity will likely stay open until the third or fourth quarter of 2010, the opportunities today have the dual potential for significant appreciation in the five to 10 year time frame and the production of positive cash flow during the holding period at today’s prices.
Experienced real estate investors, brokers and realtors are taking action now, recognizing that more foreclosures will follow early next year as adjustable rate mortgages (ARM mortgages) sold in 2007 kick in with a vengeance in the first quarter of next year.

At PENSCO Trust, we have seen a 26% increase in IRA real estate purchases (to $26 million) between the first and second quarters of this year. Most of this increase was associated with foreclosures in the residential market, however, we have also seen quite a few real estate syndicators buying up unimproved land (undeveloped lots), with the idea of conditioning it through entitlement in time for the next upswing in the real estate development sector. In some cases, they are buying at 10 cents on the dollar. These deals are not for the faint of heart and may require a longer holding period, so they are not suitable for anyone with liquidity needs.

Another avenue self-directed IRA investors are pursuing is to provide credit to others for the purpose of buying real estate. With traditional credit markets almost nonexistent, borrowers are getting needed funds from IRA investors looking to increase their investment yield on their retirement accounts. Such investors may offer the down payment, first mortgage or second mortgage or even become a co-tenant on a purchase when the buyer does not have the necessary funds.

For example, one investor may locate a great investment property, but not have sufficient funds to buy the property. By combining forces and funds with an IRA investor, who may participate through an equity investment or an extension of credit, they can acquire the property.

It is important when investing in real estate with a self-directed IRA, that you choose a competent IRA custodian with a strong track record. Good custodians will help you to understand the rules and the process, easing your entry to self-direction.

In addition, it is very important that your custodian is geared to execute in a timely and accurate manner, as real estate transactions can close very quickly and earnest money deposits frequently have to be made from your IRA on the same day to secure the best opportunities. PENSCO Trust is proud of the fact that we generally get all real estate transactions funded on the same day they are authorized by our clients, and, in almost all cases, within 48 hours.

Certainly, investing today is more challenging than in a bull market, but some things are certain. Real estate values are down in most areas of the country, building has almost come to a screeching halt and demand will eventually catch up to supply, at which time prices will rise. How long that takes is anyone’s guess, but some like those odds better than investing in the stock market. Choose your own poison, but eventually you have to take action to keep your wealth growing.


*Pensco Trust is a passive custodian and in no way endorses nor gives any investment advice on particular investments* Original article can be found at www.selfdirectedira.com

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If you are amongst the thousands of other Americans who have lost their jobs, still have their 401k with their old employer and have no idea what to do next, you are not alone. This market has been rough on everyone and now more than ever your next moves could very well determine your retirement. With that in mind your should roll over your 401k over and unless you absolutely need the money to support your family or stay alive you shouldn't just withdraw you fund from your old 401k. The tax implications alone aren't worth  it and trust me you will probably regret it later. So what are your options? Roll you money into a self-directed IRA where your options are almost limitless. With a self-directed IRA you can purchase real estate, stocks, bonds, cattle, cow shit, and even invest in a start up. How can you get this done? First you need to utilize a custodian to facilitate the 401k rollover into a self-directed IRA, a couple examples of these are Pensco Trust Company and Entrust. They will then coordinate with your previous 401k account holder and facilitate the transfer. From their it is time to find your next investments.

What most people aren't aware of is that they don't need to just invest their 401k in stocks, bonds, and mutual funds. There are so many more investment options that many just aren't aware of. There is no doubt that everyone rich, poor, or jobless has felt the ill effects of this economy but now more than ever is when you need to be taking control of your retirement and setting your retirement up for a more lucrative future. One example of this occurred with one of our clients at Brooklyn Troy, recently Laura lost her job and really had no idea what to do with her 401k account at her previous employer. She was distraught confused and sat on here hands for about 4 months just not wanting to deal with anything. She then not only shook off the minor set back but she got behind the wheel and started to take control of her investments. With the use of a self-directed IRA she was able to now diversify and strategically utilize her 401k to purchase 2 investment homes below the cost to build them. She now has a positive cash flow of $375 coming in every month into her self-directed IRA.

With a Self-Directed IRA the world is your oyster, and I mean literally. Where else can you have horrible credit, no job and still obtain a loan to purchase investment properties, or invest in a start up? I am not saying press the abort button entirely on your stock portfolio but now is the time to really make sure your retirement is diversified and not just within different stocks but within different industries. A self-directed IRA doesn't need to dominate your portfolio but it should definitely have a significant presence. Don't get bogged down with the jolted economy and your suddenly leveled retirement account, and start to take control of your future.  

Remember no one cares more about your retirement more than you and now is the time to act like it. Take control, diversify your portfolio and set up a self-directed IRA, Call Brooklyn Troy Today! Remember our investment strategy is simple, diversify.  

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With the uncertainty within the financial industry these days it is no wonder investors don't know where to go with their money and investments. Over the past year we have seen such financial industry staples such as Lehman Brothers, and Bear Stearns go under, and even had a $50 billion Ponzi scheme by Bernard Madoff exposed. With all of the uncertainty in the market a great alternative can be Self Directed IRA's. With a self directed Ira investors have more control over their investments. Through the aid of a custodian such as Pensco Trust Company investors can roll over their 401k into anything from land, rental properties, tax liens, or even a pizza parlor. 

In fact many investors are now using their retirement accounts to diversify their investment strategy. With real estate prices at historic lows now may be best time to invest in real estate. Bob Wooderd, a 55 year old Florida business owner saw his retirement account lose about 30 % of its value last year and he is now actively searching for deeply discounted condos through out the Florida. ''There are condos now selling below the cost to build and provide a pretty handsome rental income. I have used the combination of my 401k and non-recourse loan to purchase 3 condos in the last 4 months and my IRA is receiving roughly $800 per month in positive income.'' says Mr Wooderd. Over at Brooklyn Troy we have been providing investment opportunities for our clients by rolling over their retirement accounts into self directed IRA's. The real estate market hasn't been this prime of a potential investment in years. Whether it is land, a rental condo in florida, or using your funds to start that dream business self directed IRA's provide a nice supplement to your existing retirement investments. 

PR: wait...  I: wait...  L: wait...  LD: wait...  I: wait... wait...  Rank: wait...  Traffic: wait...  Price: wait...  C: wait...

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