Posts Tagged ‘real estate ira’

May Housing Starts And Self Directed IRA Considerations

Sunday, June 24th, 2012

Housing Starts are a key economic indicator as to how well the housing market is performing. It is a indicator of building an the level of building in relation to consumer demand for homes.

The May 2012 Housing Starts numbers remain 69% below the 2006 peak. The housing numbers clearly show that home starts, and sales are bouncing around some bottom. The overall changes from April to May are somewhat statistically insignificant in terms of tell us which direction housing might be headed. the overall change year to year in May 2012 is significant and shows a 28.5% increase, but again that is at the lowest level of activity since housing numbers started being tracking in 1945.

The last 42 months of housing activity really paints a picture of stagnation and not much in the way of forward progress.

Hosuing Starts

When you look at these numbers since 1945, its very clear that we have arrived in uncharted territory. Most likely, 1930s era territory or maybe worse.

However, the one bright spot about these numbers may be that we may actually be at the bottom. This may also mean that we are at the lowest prices for homes that we are going to see. This then begs the question of whether or not you should consider purchasing investment property with your self directed IRA.

We realize that most people are very apprehensive and concerned about what is happening in the economy and the world in general. But remember this basic truth – everyone has to have a place to live in. We’ve shown that renters are increasing. That apartment rental/absorption rates are at all time highs. We recognize that if you purchase a property with your self directed IRA that you may see little to no significant price appreciation for some time. However, with the low prices and distressed sellers, its much easier to find properties that will cash flow. Its not unreasonable to find 6-10% rates of return.

Given that we still see an economic winter brewing on the horizon, and that you are not likely to be able to earn reasonable returns with reasonable safety for the near term, real estate may actually be a very good choice. We firmly believe that if the economic future looks as stark as we have been saying, then hard assets such as metals and real estate are the only things of true value. Therefore, it only makes sense to start evaluating investment properties in your self directed IRA.

Disclaimer

The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.

Hyperinflation Around The Corner – Look At Your Self Directed IRA

Friday, June 22nd, 2012

We’ve recently seen the data that supports that the economy is not recovering, and in fact appears to be sinking back into recession. We’ve also seen that the Fed is going to continue to engage in operation twist, but as we’ve pointed out that’s likely to have little to no impact.

There is a confluence of factors that are coming into play that are pointing to potential hyperinflation in the near future. In fact that near future could be in the 2014 time frame. If this is the case, then you will want to re-evaluate all of your investments and look at how you should be best utilizing your self directed IRA in order to weather this coming storm.

The following are some of these factors or drivers that may be leading to hyperinflation:

Economic Deterioration – The economy is far weaker than the politician know or will tell you. The US economy has never recovered from the 2006/2007-to-2009 crashes.

Deterioration of the budget deficit – The US budget deficit is not getting better and in fact, the unfunded liabilities are clearing getting worse and the the government has not done one, single positive thing in three to four years to even stop the bleeding. The ObamaCare program could drive $10 Trillion in unfunded debt. That may not come about. That, plus consideration of accounting for Freddie Mac and Fannie Mae and otherwise normal annual transactions, could push the reporting of total  U.S. obligations from $80 trillion in 2011, into the $120 trillion range for 2012, which would be roughly eight-times the level of U.S. GDP.

Renewed printing and support of the financial system – Operation twist will continue. The real concern is that if the system continues teetering, the Fed will be forced to monetize more debt in order to prop up the banking system. This is more fuel for the fire, and this will have the effect of pushing people/countries away from the US dollar. This would lead to a much weaker dollar.

The loss of the US Dollar as the reserve currency for the world – Despite the recent influx of countries grabbing US Dollars, the long term movement has and is away from using the dollar as the worlds reserve currency. This will continue to erode the dollar over time and depending on other events that can come sooner rather than later.

The actions  taken by the Fed and the  government in 2007 and after, and the impact from the economic downturn, the movement away from dollar selling along dollar debasement have created the perfect storm. We were already facing inflation in the future, but our circumstances have likely moved timing for a U.S. hyperinflation to 2014 from 2018.

For those living in a U.S. dollar-denominated world, physical gold remains the primary hedge against the ultimate dollar crisis, along with physical silver and assets outside the U.S. dollar and in stronger major currencies such as the Swiss franc, Australian dollar and Canadian dollar.

With this in mind, you should consider reviewing your self directed IRA investments and making sure that you position yourself accordingly.

Disclaimer

The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.

What The Latest Consumer Finances Survey Means For Self Directed IRAs

Wednesday, June 20th, 2012

The Fed just published their survey for consumer finances which covers through the year 2010. This report provides an fairly good analysis of how the average American consumer is doing from a financial perspective. This report gives us insight in what the basic spending habits and patterns of Americans are or will be.

We wanted to point out some of the key findings in this report and give you a glimpse into how we think these demographics will impact self directed IRA investing and portfolio construction.

Median Income – Median income fell 7.7% from $49,600 to $45,800. Even though this is not huge you have to remember that 1/2 of the people are above and the other half are below.

Income Changes By Tier – What this data also shows is that the groups that lost the most in terms of income are those people in the middle. that make up about 70% of the income. Those families earning $50,000 to $80,000 dropped the most. Interestingly enough, the bottom 20%, the poorest, actually saw a slight increase in income. The middle income group saw a 10%+ decline in income over the 2001-2010 time frame. That’s the largest decline of any of the income groups.

Income Changes By Age – People 55+ did the best. They saw an overall increase in their wealth by 25%. Even people over 65 saw a 6%+ increase in income. Some of this seems to be contradictory to what AARP and the President would lead you to believe. People less than 45 or even less than 35 were hit the hardest with drops in incomes from 8 to 14%.

What do these changes mean to self directed IRAs.

There are some additional variables that we will write about in later articles, these changes in incomes tell us a story about consumption and spending. They tell us that older people are doing better than younger people. The poorest have maintained. The middle income people have suffered the most.

This all has to translate into important drivers for spending and specifically real estate. Spending will decline as the middle income and younger groups (<45) conserve and save. This will have an overall dampening effect on consumer spending and GDP. This will continue to make rental properties attractive to investors as these stressed groups will not be able to get into homes or they will need to maintain mobility in order to seek better job opportunities.

These trends also will mean that the government will continue to engage in spending and QE programs for these stressed groups. in fact these stressed groups have the potentiality to become more stressed because the government is of the belief that its these same people that will be able to pay more in taxes. This is likely to drive short term deflation, but longer term inflation as the excess dollars are pushed into the economy. Inflation would suggest that people maintain precious metals in their self directed IRA.

Disclaimer

The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.

The End Of Cheap Oil And The Self Directed IRA

Tuesday, June 19th, 2012

We’ve recently seen a significant decline in the price of oil. This has brought gas prices from north of $4 per gallon to the mid to high $3 per gallon range. This has people cheering as it saves them a few bucks each month. However, if you step back from the forest you will notice that oil (and gas for that matter) are 4 times more expensive than they were 10 years ago.

So, when you look at oil through this prism of  time, its not looking so cheap. The real crux of the issue is that all of the current, cheap oil has been found. Any oil that is going to be extracted from now on will come at a premium. A very good case in point is Shell Oil’s recent step forward to drill in the Arctic. Recent is a misstatement given that they started the process to secure rights back in 2002 (10 years ago).

Shell has gone through numerous regulatory approvals which by themselves took several years. Then they had to battle with lawsuits from environmental groups that wanted to prevent them from drilling. Then they had to file a suit against the environmental groups to prevent them from filing more suits. So, here were are 10 years later and not one single hole has been drilled.

Now Shell is confronted with several more years of testing and proving in very technically complex drilling environments. They expect to inucr $7 Billion in costs to bring production online. That is huge and unthinkable 10 years ago, but here we are in 2012 and it seems like a good investment.

This is just one case of what oil companies are doing to bring new resources online. Oil is now four times more expensive than 10 years ago. The regulatory environment is probably 10 time more tasking and complex. The access to resources is becoming more challenging from a logistical perspective not to mention the legal attacks.The point here is that the days of cheap oil are gone. It will only get more expensive. That being said, the opportunities for oil companies to make money are now better.

So, what does this mean for your self directed IRA? This appears to be an opportunity to invest in oil and gas exploration companies. The future for energy looks promising. We are going to see the worlds population expand. We are going to see the third world countries grow, develop and mature. That necessitates increases in energy consumption. We are a much more technologically based people and world which requires energy so support or technology habits. This means that there will be good, small, companies to invest in with your self directed IRA. These opportunities will come in the form of private placements or direct ownership in some of these companies. We recommend that you start researching and looking for these up and coming companies for self directed IRA investing.

Disclaimer

The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.

Gold, Hyperinflation And Your Self Directed IRA

Monday, June 18th, 2012

Will or would gold hold up under a hyperinflation scenario?

This may sound like some sort of scifi, Ayn Rand scenario, but that’s what the people of the Weimar Republic of post WWI Germany thought and yet lived through. The people of Germany had to withstand price increases that doubled every 28 hours or 20 billion times over where they started. Then you’ll say “well that was a long time ago and we are more modern and sophisticated than they were”. Well if we are soooo sophisticated and advanced, then how did we get into the WORST recession and economic environment since the Great Depression? The answer is that we have not learned our lessons and in some ways we’ve forgotten the lessons of our ancestors.

What is hyperinflation?

Hyperinflation is defined by a 50% or more price increase in a single month. Hyperinflation generally has one root cause – too much money (i.e. the money supply greatly increases). This scenario typically occurs when a government engages in too much spending, creating deficits to such unsustainable levels that investors lose confidence in the government. Sounds a little familiar.

There have been 29 incidences of hyperinflation since 1919 (Weimar) which is about once every three years. So, this fact countermands the statement that we’ve moved beyond this problem. We have not. What actually ends up happening in the US is anyone’s guess, but the obvious strategy is that people should be considering hard assets such as precious metals and real estate.

What you should be doing with your self directed IRA

Given the simple fact that our government continues to spend, create deficits, print money  (i.e. put more money into circulation), it only seems to make sense to hedge your portfolio with metals and real the estate. The real question is not if you should do this, but how much of these asset classes you should be holding in your self directed IRA.

Disclaimer

The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.