Posts Tagged ‘Real Estate’

Real Estate Markets That are Booming in 2016

Monday, March 28th, 2016

real estate

Investing in real estate is much like making strategic investments in the stock market: Markets must be chosen carefully in order to maximize the long-term value of this investment, taking advantage of short-term and long-term trends. In real estate, there are decidedly some “winners” and some “losers” among major cities and metropolitan areas across the United States. Before investing in real estate, it’s important to understand the markets that are ripe for the biggest growth in home values over the long-term, since this can result in a significant accrual of wealth for smart investors. While the economic recovery’s rising tide continues to lift all boats, these markets are rising quite a bit faster than average and represent the best choice for today’s investors.

1. Austin, TX

Austin TX

Austin has developed a reputation for being “weird,” but there’s more to this city than its cultural diversity. In fact, Texas’ capital city has quite a bit going for it. As the political center of one of the country’s most populous states, Austin has ample opportunities for public servants, lobbyists, and lawyers. As a tech and entertainment hub, Austin also shines in terms of its white-collar job growth. As the home of the University of Texas at Austin, the city is also a major draw for the “eds and meds” that will drive the 21st century economy.

What does this mean for real estate investors? A growing population, rising home values, and long-term growth projections that make for a sound investment. According to industry experts, the Texas city ranks first nationally for investment, second for home building, and fourth overall for real estate investment.

2. Denver, CO

Denver CO

Colorado has become the center of a new progressive political movement as well as high-tech and “green” jobs. The state, notorious most recently in the national press for legalizing marijuana, also has some of the best regulations on the books for tech startups and green businesses. As these two sectors continue to grow their overall representation in the American economy, Colorado’s largest city of Denver continues to grow both its resident population and its home prices. The city was named the second-best investment market to watch for 2016, and the most recent Case-Shiller Index report notes that local home prices are expected to increase by at least percent during the upcoming year. Homes in Denver also sell much faster than the national average, according to Realtor.com, making it an excellent market for sellers and investors alike.

3. Miami, FL

Miami FL

Miami continues to grow and evolve as a major gateway to the Caribbean and South America, giving it a reputation as an international center of finance and investment. The city, which is also a hub of vacation and retirement activity for Americans from all corners of North America, is also an excellent choice for buyers and investors looking to maximize their return on a mortgage or cash payment. The city’s homes are expected to appreciate in value by at least 18.7 percent through the end of 2016. Given Miami’s excellent, beachfront location and its ability to draw top talent from the United States and abroad, this diverse market is a perfect fit for buyers and investors who want a quick, almost guaranteed return on their initial investment.

4. San Jose, CA

San Jose CA

Some of California’s real estate markets have been through tough times in recent years, but that’s not the case in San Jose. This growing technology capital, located just a short distance from San Francisco, has recently been identified for high-tech campuses built by Apple and others. The city continues to grow its overall population, led by software and hardware engineers who are setting foot outside of the more traditional San Francisco tech scene. The city’s homes are expected to appreciate significantly in the year ahead, as well as over the long-term, as companies like Facebook, Apple, Tesla, and Google grow their office space and expand into entirely new communities close to their San Francisco headquarters.

Real estate markets are on the rebound, but some are faring far better than others. In states like California, Texas, and Florida, cities are growing because of their proximity to high-tech jobs, excellent weather, and recreational opportunities that maximize the value of each property bought and sold. These markets are the one to watch as 2016 gets underway and real estate investment season begins anew.

Rules and Limitations for Owning Real Estate Through an IRA

Monday, November 9th, 2015

real estate and IRA long

Buying real estate through your IRA is a lucrative and competitive business. It can substantially increase the return on your IRA’s investment, and make for a big, cushiony retirement nest egg. One of the biggest reasons that more people don’t take advantage of owning real estate through their IRA is all the rules and confusion that comes along with it. It can be a meticulous task, but well worth it.

Self-Directed IRA

Although IRS rules permit IRA funds to be invested in real estate, IRS rules do not require an IRA trustee to offer real estate as an investment option. Most trustees who offer traditional IRA investments, such as depository banks, do not allow an IRA owner to invest in real estate because of the extra administrative burden of real estate management. As a result, if you want to invest your IRA funds in real estate, you will most likely have to convert your traditional IRA to a self-directed IRA, which is an IRA that requires you to decide what investments to make, such as real estate.

Prohibited Transactions

IRS rules require IRA-owned real estate to be for investment purposes only. This requirement places several prohibitions on how the real estate can be purchased and used, the key to understanding the prohibitions is the term “disqualified persons”. This term is used in the IRS rules regarding IRA-owned real estate to refer to the IRA owner and related persons–that is, the IRA owner and spouse, ancestors (mother, father, grandparents) and descendants (children, grandchildren and their spouses). The term disqualified person also includes the IRAs investment advisers, including a trustee of the IRA funds, and any business in which a disqualified person has a5 0 percent or greater interest. IRS rules prohibit the use of IRA funds to purchase real estate from a disqualified person, the rules also prohibit a disqualified person from using any real estate purchased with IRA funds, either as a home or business. These rules even preclude you from purchasing a vacation home that is only partly for personal use and otherwise rented to others.

Tax Consequences

If you violate the IRS rules regarding prohibited transactions, the IRS will consider the IRA funds used in the transaction as a distribution of your IRA. You will be taxed on the funds from the first year in which the transaction occurred, with penalties and interest included. Depending on your age, you may also incur an additional penalty for taking an early distribution.

Author: Tanya

Is It Time For Rental Property In Your Self Directed IRA

Saturday, May 5th, 2012

The housing crisis and global economic shock has and will forever change the psyche of the average American for decades to come. No longer is the thought of renting seen as a shortcoming for not striving or attaining the American dream. Renting is now a necessity for many and a financial practicality.

Home ownership is down from 69% in 2006 (the peak for all history) to 65.4% today. Much of this is due to foreclosures. But, we also see that by late 2011, according to Moodys, it was cheaper to rent versus own in 72% of the American metro areas. Additionally, building starts for structures with 5 or more units were up 60% in 2011 versus single family starts of 16.7%.

Its simple math to see that for many people renting saves them money and prevents them from getting into financial trouble. Hence, you see a major migration towards renting versus owning. We should not forget the fact that some people just cannot get a loan no matter what these days.

We Need Renters. In order to be a more healthy economy, we need people who can rent. Renters obviously generate income for the property owners, but more importantly, renters are more mobile and flexible. If you are an unemployed construction worker in Las Vegas (12% unemployment), that rents, its much easier for you to pick up and go to North Dakota (3% unemployment), to get a job. This is good for the economy as renting allows the skills and needs to easily find each other in the market place.

So, what does this mean for your self directed IRA? This all adds up to an opportunity to hold real estate in your self directed IRA. The demand for rental property is up significantly. The mind set for the average American will be that renting is OK, and financially wise. Property prices are way down (I know, you still have to be careful). These are all positive signs that maybe its time to take the initiative and secure rental properties in your self directed IRA.

The Coming Fiscal Crisis And The Self Directed IRA

Saturday, May 5th, 2012

We’ve been watching the stock market for the last several weeks and the price of precious metals and we can’t help but be confused at the paradox.

First of all you have the markets continuing to go up as if there are no problems with Europe or within the U.S. It was just 5 or 6 months ago the European crisis looked scary, and yet nothing has changed in Europe other than people committing to print more money.

Here in the U.S. our unemployment situation is not improving. In fact the mainstream media is finally pointing out how dire the jobs situation appears to be. Also, we know that inflation is running much higher than they tell us, but we know its wrong every time we go the store. But, what is a more immediate threat to the markets and investments is the coming fiscal crisis.

At the end of this year, Dec. 31, 2012, Trillions of dollars in tax cuts will expire along with Trillions of tax hikes for Obamacare and Trillions in automatic spending cuts will begin. Yet, with these massive threats on the horizon, the stock market is at a 4 year high.

Let’s just take a simple example how these fiscal issues would impact a single stock. Assume that the stock is $100. Assume that the dividend yield is $10. So, the person or companies that invested in this stock would pay 15% tax on that or $1.50. That leaves a net yield of 8.5%.

Now if the government does not act, the capital gains rates will go to 43.4% (39.6 for the pre-Bush rates plus 3.8% for Obama punishment for being able to invest). So now that same $10 dividend with a 8.5% yield is now yielding 5.66%. That’s a big hit for anyone to take. Big enough that its likely to have investor sensitivity because the investors and the market have already established the fair market price for the stock in relation to the dividend and what the investor requires. We’re betting that the market will need to correct itself by pushing the price of the stock down to compensate for the out of balance conditions caused by the government’s policies.

If our logic is correct, then that means there will have to be some correction forthcoming to offset government inaction. Now there will be those eternal optimists that will claim that the government will not allow these tax hikes to kick in, but that’s a big stretch right now. To date this administration and congress have yet to show that they can come to terms over such large and significant issues.

Because of these fiscal issues, it only makes sense to hedge your investments with your self directed IRA. If you want to be safe, it would seem that everyone should be holding some non-traditional self directed IRA investments in precious metals, real estate or other non-public/market adverse investments.