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’’Our investment strategy is simple, diversify.’‘ IRA Roll Over Into Real Estate
Why Use Your IRA?
Maximizing Your IRA
Prohibited IRA Investments
Buying Up Real Estate
IRA Roll Over Into Real Estate
Did you know that you can purchase LAND in your IRA?
You can roll your IRA (traditional, SEP, Simple, or Roth) as well as some qualified 401(K), Solo 401(K) and 403(B), into carefully selected California land. California real estate is proven to be a particularly safe and rewarding long-term appreciation strategy.
How is the land selected for investment?
Brooklyn Troy & Co looks to purchase land in undeveloped areas with a large amount of growth capacity. Our company acquires land for several master plan developers and is able to predict which areas will be in the direct growth path of major metropolitan areas. California has a current population of approximately 37 million. More than one in five Americans lives in California. More importantly it continues to grow at a rate of 500,000 annually and is projected to reach 40 million by 2013. Historically, land has produced the best long-term appreciation among the alternatives available for retirement plans.
What's the No. 1 goal for investors?
Retirement, according to most polls. Yet not every investor has an individual retirement arrangement (or account, depending on whom you ask) -- better known as an IRA. This is a travesty -- a retirement-killing mistake. Every working American should have an IRA. Here are five reasons why.
How else will you retire?
If you don't contribute to an IRA, how do you plan on paying for your golden years? Social Security? Your company's traditional pension plan?
Unfortunately those sources probably won't completely replace your pre-retirement income. Social Security and defined-benefit plans weren't meant to subsidize this. On top of that, they both have their funding problems, depending on your age and whom you work for. So to enjoy the retirement you aspire to, you'll need personal savings.
Some people choose to save for retirement through an employer-sponsored plan (e.g., 401(k), 403(b), 457) instead of an IRA. If your boss matches your contributions to the plan, this may be the better choice. But if that's not the case, you would probably be better off in a Roth IRA (if you're eligible), at least for a portion of your savings. Read "Don't Max Out Your 401(k)" and "Why the Roth Rules" for the details, but generally, a Roth is much more flexible and might provide more after-tax retirement income. "After-tax" is the key, which brings us to number 2.
Lower taxes, lower taxes, and lower taxes.
Take your pick: Would you like to take a tax deduction now and defer the taxes on your interest and capital gains, or never pay taxes on the growth and income generated by your investments?
It's up to you -- and your adjusted gross income (AGI), which determines whether you're eligible for a deductible traditional IRA (which means lower taxes now and until you retire) or a Roth IRA (which means no deduction, but you never pay taxes on the investments in the account).
To see how powerful this tax savings can be, consider the following example: A 40-year-old who contributes $4,000 a year to an investment account and earns 8% annually on his investments could hypothetically have one of the following after-tax balances at age 65:
Taxable account: $224,403
Traditional IRA: $255,388
Roth IRA: $315,817
An IRA would provide approximately 15% to 40% more than a regular investment account.
If you don't put money in an IRA, you'll spend it.
Assuming you believe that saving money is good for you, then opening an IRA is very good for you. This is because contributing to an IRA moves money from the account with the gaping, leaky hole (otherwise known as your checking account) to one with reinforced walls.
The government discourages taking money from an IRA before retirement by imposing a 10% penalty on withdrawals before the owner turns 59 1/2. Also, earnings and deductible contributions will be taxed as income. Logistically, it's not easy to get your grubby little hands on IRA money. You can't stop at the nearest ATM and get $200 from your Roth to pay for your expensive dinner that evening. You can however, roll a portion of your 401k into the purchase of real estate and do so tax free. If you really need the money, it can be had -- but to the detriment of your nest egg. So consider an IRA an impediment to pre-retirement spending, which will do wonders for your post-retirement greens fees, cruise tickets, and grandchildren-spoiling.
You want more control over your investments.
If you're contributing to your retirement plan at work, your investment choices are probably limited. The majority of 401(k) investors cannot choose individual stocks or bonds but rather must pick from a few mutual funds. Then there are investors who have a large portion of their work-related retirement savings tied up in company stocks.
If you don't like what your retirement plan has to offer, an IRA is the place for your money. This is where opening a Self-directed IRA can expand your investment opportunities and potential. If you open an IRA with a discount broker, you can buy stocks, bonds, real estate investment trusts, certificates of deposit, Treasuries, exchange-traded funds, index funds, and thousands of other mutual funds.
Favorable treatment for parents, debtors, and mortals.
IRAs are treated differently from other accounts in many circumstances. For example, assets parents hold in a regular account can reduce the financial aid award their children receive for college. However, most financial aid formulas ignore retirement savings. Also, IRA assets can be shielded from creditors. And IRAs may also have estate-planning benefits, especially Roth IRAs.
Why Use Your IRA? The whole idea behind qualified retirement plans and IRAs is to give people incentive to save for retirement. Tax deferral is powerful benefit because it allows you to invest money that would otherwise have to be paid out in taxes each year, thus enabling you to build your retirement fund much faster.
An overwhelming majority of America’s millionaires and billionaires built their wealth in real estate. Brooklyn Capital & Co. has developed a proven formula that has helped thousands of people secure a better retirement using their IRA’s to acquire select California real estate. The first step to maximizing your IRA is to gain more control over it. If you don’t already have a Self-directed IRA you need to identify one and transfer your employer-sponsored plan into it. There are plan administrators that specialize in owning real estate in your IRA.
The rules for rolling over your IRA are not complicated, but there are lots of them, so professional advice is recommended. Some of the rules deal with how to do the rollover itself; some pertain to type of investments within the IRA; and some rules relate to how and when you can and must take distributions from your IRA.
Maximizing Your IRA
The investment returns earned by your IRA assets will determine the size of your nest egg at retirement. For example, if you roll over $25,000 when you’re 35 and invest it at a fixed rate of, say, 5% compounded annually, you would have close to $80,600 when you turn 60. But if you invest in a growth vehicle that averages 15%, you’d end up with nearly nine time as much, over $716,000, even if you never add another penny to the account.
And if the stakes are bigger the difference is even more dramatic. Brooklyn Troy & Co. has had multitudes of customer’s realize 20%, 30% and even over 40% annual returns. Now, these numbers are provided as an illustration only; your investment returns could be very different, and it must be remembered that required minimum distributions at age 70-1/2 would begin to diminish the IRA. The point is that you should pay close attention to how your IRA assets are invested because it could make a big difference in your comfort level in retirement.
Putting Together a Well-balanced Portfolio
If you have been personally managing your 401(K) account or other retirement plan, you are familiar with the concept of asset allocation and diversification. By investing retirement funds in several non-correlated asset classes, you have most of the bases covered. You don’t need to worry about choosing the ‘’right’’ asset class because you have a little money in each. If one asset class falls in value, the effect on your overall portfolio should be negligible because your money is spread among several different asset classes.
At the same time, it often makes sense to adjust portfolio holdings along with changes in the outlook for markets and the economy. This is called tactical asset allocation. Rather than sticking with the same allocations year in and year out regardless of what the markets are doing, investments get channeled where opportunities are more attractive. You’re still diversified across asset classes, but the weightings change based on the outlook.
However, tactical asset allocation requires a little more attention than Brooklyn Troy & Co.’s Land Banking long-term appreciation strategy which you can purchase-and-forget, buy-and-hold, and is not as active (or risky) as a market timing strategy. However, land is not a readily liquid asset and may consider time to sale or transfer.
Prohibited IRA Investments The IRA does not prohibit the acquisition of land as an IRA asset, but has defined a number of prohibited transactions which are simply not allowed in IRA accounts. If an IRA holder does engage in a prohibited transaction, the amount will be considered a distribution, subject to taxes and applicable penalties. Here are some of the items you cant invest in with your IRA.
Art
Rugs
Antiques
Metals
Gems
Jewelry
Stamps
Coins
Alcoholic beverages including wine
Certain other tangible personal property
One exception to the no-collectibles rule is that your IRA can invest in gold or silver coins minted by Treasury Department and in certain gold, silver, palladium, and platinum bullion.
In addition, the following are examples of prohibited transactions concerning your IRA:
Borrowing money from it
Selling property to it
Receiving unreasonable compensation for managing it
Using it as security for a loan
Buying property for personal use (present or future)
The whole idea behind prohibited transactions is to preserve the spirit of the IRA, which is to save for retirement and get a tax break for doing so. The IRS doesn’t want people using their IRA to escape taxes on personal and business transactions, which is just common sense. Beyond these few restrictions, however you are free to invest you IRA in a way that will help you’re your nest egg grow.
Buying Up Real Estate
Why buy real estate?
There are many reasons but the most important is security. Unlike stocks, real estate can never lose all of its value. As seen in the most recent stock market meltdown, stocks and companies can become non-existent or worthless over night. With real estate even if the building burns down or is struck by natural disaster the land that the building sits on still has value.
Another reason to by real estate with your IRA is income. There are many properties that can be purchased and rented for residual rental income. For example, say you buy an 8 unit apartment building for $100,000. After your down payment you have a loan for $50,000 with a mortgage of fill in the numbers here. With each unit renting for $600 per month you have a total income of $4800. If you subtract out your mortgage payment you are positive $ per month.
One more reason to by real estate is appreciation. Appreciation is the increase in the properties value from the time of purchase. Obviously over the past6 years there has been a huge surge in appreciation, over 25% in some areas, but as seen with the recent burst of the real estate bubble appreciation at these levels can not be sustained long term, nor should you expect them two. While appreciation levels in the 15%-25% range may not be expected over the long haul, they should be accounted for within your calculations of a particular property. When purchasing your real estate appreciation is something to always keep in mind but do so cautiously and with realistic expectations.
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