Archive for November, 2016

Why Real Estate is the Perfect Passive Investment That Millennials Love

Tuesday, November 22nd, 2016

passive real estate

Passive investing is a strategy that aims to maximize investment returns over the long run, by keeping the amount of buying, selling, and effort to a minimum. The idea is to avoid the fees and the drag on performance that potentially occur from frequent trading. Passive investing is not aimed at making quick gains or at getting rich with one great bet, but rather the key to building slow, steady wealth over time.

Despite some ups and downs in recent years, real estate continues to be a preferred choice for investors who want to generate long-term returns. Investing in a rental property, for example, is one way to produce a regular source of income. At the start, an investor may be required to put up a 20% down payment to buy the property, but that may not be a barrier for someone who’s already saving regularly. Once reliable tenants are installed, there’s very little left to do except wait for the rent checks to begin rolling in.

Real estate investment trusts (REITs) are another passive investment option for investors who aren’t interested in dealing with the day-to-day burden of managing a property. One of the main advantages of a REIT is that they pay out 90% of their taxable income as dividends to investors. There is a downside, however, since dividends are taxed as ordinary income. That may be problematic for an investor who’s in higher a tax bracket.

Real estate crowdfunding presents a middle-ground solution. Investors have their choice of equity or debt investments in both commercial and residential properties. Unlike a REIT, the investor gets the tax advantages of direct ownership, including the depreciation deduction without any of the added responsibilities that go along with owning a property.

Ask Yourself These Questions Before Retirement Comes

Monday, November 14th, 2016

retirement questions

Many prospective retirees are not prepared for retirement, so they need to get much more savvy about their financial lives, and quickly if they’re going to have some peace of mind and security during retirement. To make sure you are ready, we suggest that you answer these questions.

Have you explored downsizing your living expenses? Your living expenses in retirement will likely be between 80 to 100 percent of your pre-retirement living expenses. By gradually downsizing your spending, you can significantly cut your monthly expenses without feeling the shock of adjustment. Look closer at your monthly expenses and identify items you can do without. Eliminate a few at a time.

Do you have a clear end game? You may have a good general sense of how much money you need to retire, but you aren’t truly ready to retire until you understand what that means in day-to-day terms. Compare your “retirement number” to your anticipated monthly expenses and make adjustments as needed. You should have an up-to-date and comprehensive financial plan that gives you a clear picture of your financial situation and specific action steps to address any adjustments that need to be made prior to retirement.

Where are you on your debts? You should understand what you owe and how much longer you need to work to get your debts cleared up.

Have you “right sized” your mortgage? You don’t need to pay off your mortgage necessarily, but need to make sure your mortgage payments are at a level you can afford in retirement. Downsizing your home can also be a real opportunity in retirement to cut your living expenses considerably.

Have you considered the different types of income sources available to you in retirement? There are many different ways to patch together the right assets and investments to provide for your retirement. Even if your investment portfolio is not large enough to support your retirement needs, you may find that you have other assets (a business, or real estate) that can contribute.

How would continuing to work at your peak earning years impact your quality of life in retirement? Even one or two extra years of work during your peak earning years could have a significant effect on your quality of life in retirement.

Using a Self-Directed IRA to Fund your Startup

Tuesday, November 8th, 2016

fund startup

Owning your own business is the ultimate dream of many Americans, and those lucky enough are able to make that a reality. Unfortunately, it’s not drive or ability that gets in our way of making our dreams a reality, it’s very often money, and money alone.
Now, you definitely could make your way to the bank, apply for a loan, and possibly get denied, or you could seek out potential investors that could take months to solidify, or you could do it yourself. Fund your dreams with a self-directed IRA, or with an ESOP.

First, What’s an ESOP?

ESOP stands for Employee Stock Ownership Plan, which allows a company’s workforce to purchase stock ownership in the company, usually at no upfront cost to the employees. By giving plan participants an interest in seeing that the company’s stock performs well, these plans are believed to encourage participants to do what’s best for shareholders, since the participants themselves are shareholders. Employees are provided with such ownership often with no upfront costs. The provided shares may be held in a trust for safety and growth until the employee retires or resigns from the company. Once an employee retires or resigns, the shares are given back to the company for further redistribution or are completely voided.

Self-Directed IRAs

Most people don’t realize that IRAs aren’t just restricted to stocks, bonds, annuities, CDs and mutual funds. But when they think about the mechanics of it, it’s obvious that they can own a business in their IRA. After all, what is stock ownership but ownership of a fractional interest in a business? Owning a whole business in an IRA, then, is no different than owning all the stock of the business in the IRA. In fact, they can invest their IRA assets in nearly anything they can conceive, as long as it is not expressly prohibited by law, such as collectables, art, antiques, and so on.