Posts Tagged ‘Real Estate’

Using a Self-Directed IRA to Invest in Real Estate

Thursday, June 14th, 2018

Investing in real estate with any amount of money starting is not only possible, it is one of the best ways to build sustainable wealth over time. Many of the world’s greatest fortunes were built this way, and the financial markets now support many kinds of relatively safe and easily understood vehicles that provide investors with a variety of options.

Real Estate Investment Trusts

This kind of trust provides investors with the benefits of stable long-term real estate investment combined with the benefits of a mutual fund. Shares are relatively liquid, and the company that qualifies as a REIT or Real Estate Investment Trust manages income producing properties for the group that helps finance them.

REITs trade on exchanges in much the same way mutual funds and stocks do. They are often sought out for attractive tax benefits and are popular with investors interested in low risk, stable returns.


While these kinds of investments aren’t as transparent as REITs or more traditional vehicles like mutual funds or stocks, a partnership can be extraordinarily lucrative if the right people are in place. Very often, these groups are made of up a combination of property “finders” and others who bring in financing and set up the deals.

With enough experience, these groups can often take small amounts of capital from several investors and apply the same dynamics to every investment, creating swift returns and then repeating the process from property to property.

Mutual Funds

While it might seem that the traditional markets aren’t a great fit for real estate-minded investors, they are a great fit for a self-directed IRA, mainly because of the potential for reinvesting dividends and interest payments. The great thing about a mutual fund that invests in residential home builders, for example, is that the fund gets its money out early and doesn’t have to wait for the long and sometimes slow road to a sale.

It should be noted that some mutual funds take advantage of real estate investment trusts by either indexing them or by creating portfolios of some of the best performing REITs on the market. Because the market treats them like stocks with higher than average dividends, they have the potential to become popular with fund managers.


There is a reason so many television shows have become popular by featuring do-it-yourself individuals and couples who decide to take a distressed or abandoned property and fix it up until it is worth enough to sell at a profit. Every amateur mechanic has their dream car in mind. It stands to reason every amateur real estate investor believes they can find the dream home.

As a vehicle for retirement investment, this can be a lucrative journey, provided funds are secured by insurance and preferably if there is some easy and inexpensive access to the labor required to take a property from broken-down to a successful sale.

Real estate can be tricky for the inexperienced, but there are few areas of the market with a longer and more successful record of success for both IRA owners and the general investment community.

How to Find, Screen, and Select Quality Tenants

Tuesday, May 29th, 2018

By: Kasia Manolas at Avail

Finding tenants who pay rent on time and take care of your property is the key to making money on your rental. In this article, we’ll provide step-by-step advice to help you find, screen, and select quality tenants.  

Find Tenants

If you have an upcoming vacancy, then you’re likely worried about how to find tenants. Fortunately, there are free, easy tools to help you attract the right tenants. The best way to reach as many tenants as possible is to list your property online:

  • Most tenants search online for their rentals
  • With advanced search options, you’re more likely to be matched with a tenant who wants a property exactly like yours
  • You don’t have to sacrifice your first month’s rent or any fees — it’s completely free to list online

Screen Tenants

Tenants will reach out to you directly from your listing. You should follow up with a quick phone call to ask pre-screening questions:

  • Why are you moving?
  • What is your current living situation?
  • When are you looking to move in?
  • The security deposit is $X. Are you comfortable with that deposit amount?
  • Do you have pets?
  • Do you smoke?
  • Will you have roommates?

If all the answers sound good, the next step is to set up a property showing. We recommend scheduling individual showings with each prospective tenant. This helps you get to know each tenant in more depth and you’re more likely to remember details about them.

Assuming the showing goes well, the next step is to provide your rental application. We recommend requiring online rental applications. It’s easy for your applicants to fill out and you can request the application with all the reports you’ll need, including a:

  • Credit report to see how the tenant has treated creditors and their finances
  • Tenant background check to find out how they treat their neighbors
  • Eviction report to find out how they treated prior landlords

Select The Right Tenants

Once you’ve reviewed your prospective tenants’ applications and reports, the next step is deciding who you’d like to rent to.

Here are a few reasons a landlord should deny a tenant:

  • The tenant’s income isn’t at least 3x the rent price
  • The tenant has too many financial obligations and therefore cannot afford the rent price
  • The tenant has a credit score below 500
  • The tenant smokes or has a pet and this goes against the landlord’s rules
  • The tenant has a violent criminal history
  • The tenant has a prior eviction

If you find a tenant who can afford your rent price, can move in on your availability date, and who matches all of your other criteria, then you’re all set to send an acceptance letter. You can email your tenant to let them know the property is still available and you’d like to rent to them.

It’s helpful to provide some instructions for the tenant:

  1. The next step is signing the lease (be sure to provide a timeline for when you’ll send the lease over and when you expect him or her to sign)
  2. Confirm the move-in date
  3. Mention the agreed upon rent price and any deposits or fees

Next Steps

Congrats, you’ve found the right tenant for your property who can pay rent on time and will take care of your property. The next step is making it official. Similar to listing your property and screening tenants, we recommend signing a lease online which is easy with a tool like Avail. Learn more below.

About Avail

Until now, landlords with fewer than 10 units haven’t had access to online tools designed specifically for them. Avail is an intuitive app that helps you advertise vacant units, request rental applications and credit reports, sign leases, and collect rent — all online. Today, 70,000 landlords use Avail because it’s the only end-to-end platform that helps you scale from beginner to professional with tools, support, and education.

Rules and Limitations for Owning Real Estate Through an IRA

Monday, April 9th, 2018

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 a real estate IRA is all the rules and confusion that comes along with it. It can be a meticulous task, but well worth it.

Self-Directed Real Estate 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 the 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 a 50 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 IRA 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.

The Rules of Buying Property with your Real Estate IRA

Monday, February 12th, 2018

Real estate is one of the most sought-after and lucrative hard asset types that investors love. It’s popular because it’s not just single-family homes, but commercial real estate, farmland, business parks, apartment complexes, and more.
What most Americans don’t know is that you’re allowed to invest in these types of real estate with your self-directed IRA, and any gains made off of your investments go back into your retirement account.
As with any investment, there are rules that you have to follow to make sure that your IRA is compliant with IRS laws, so let’s go over a few rules.

Your personal use

When real estate is purchased as an investment property, it almost seems like second nature to want to inhabit that property. But when your IRA has purchased the home, your IRA is the technical owner, not you, unfortunately. Neither you or your family are allowed to use the property for personal use, either as rental tenants, overnight guests, or anything in between.


This rule seems like it should be fairly self-explanatory, and seems easy to avoid, but if you’re found violating these rules, your IRA could be disqualified. Self-dealing is when the IRA owner uses their IRA for personal gain or promotes their own self-interest. Say if you’re looking for a single-family home to buy with your real estate IRA, and your own home is for sale, so you think about buying your home with your IRA. That’s self-dealing. Because you directly benefit from your IRA buying your home, it’s not allowed.

Limited Liability Company

A Limited Liability Company is better known as an LLC, and an LLC paired with your real estate IRA isn’t a rule, but a perk. By opening an LLC, you will then have checkbook control, a physical checkbook that allows you to pay fees, services, any costs affiliated with the property your IRA owns.

Choosing The Right Asset Type for your First Investment

Tuesday, January 2nd, 2018

Investing can seem like a double-edged sword. Most people have heard about the importance of it, yet the options and risks sound impossibly intimidating. Too often, confusion and fear lead to doing nothing, because doing nothing at least feels safe from loss. However, as Money Under 30 explains, the apparent safety of doing nothing is deceptive because, once the power of time and compounding interest are considered, much more money is lost by not investing than by taking on investment risk. Once it’s accepted that loss cannot be avoided by staying on the sidelines, it becomes clearer that the safer choice is to choose the best baby steps forward.

Asset allocation

One of the keys to sound investing is to have the proper asset allocation. Among other things, this means that novice investors should not jump right into purchasing individual stocks when they almost certainly do not have the information they need to make good buying choices. Mutual funds consist of multiple securities (primarily stocks and bonds), and they are preferable due to the risks being diffused by diversification. Also, expenses are reduced by paying just one commission for each fund purchase.

Make it automatic

The other key to sound investing is to make it automatic. This prevents getting sidetracked by the emotions of the news cycle. Among the many options for doing this is an app called Acorns. Acorns allows investors to choose one of five diversified portfolios according to their goals and risk tolerance. Accounts can be funded with a one-time lump sum or regular recurring withdrawals from a checking account. A unique feature of Acorns is that it allows users to link to a credit or debit card, and it then rounds up purchases. Once the difference exceeds $5, it applies the amount to the chosen investment.

Tangible investing

Real estate is a popular investment that has value both for the long-term and for immediate cash flow. Of course, many people do not have the massive capital often required to buy their own properties outright. Fortunately, modern innovation has provided more flexible options. With crowdfunding, it is possible to buy shares of real estate like you would buy shares of mutual funds. RealtyShares, for example, allows investments of as little as $5,000 in various selections of residential and commercial real estate.

Individual retirement accounts

Selecting the right investment account is as important as choosing the right assets and portfolios to go in it. Certain retirement accounts provide tax benefits as long as established rules are followed. A traditional IRA allows savers to deduct the amount they invest from their taxable income. Taxes are paid when distributions are taken in retirement. In contrast, money invested in a Roth IRA is after-tax money, but the distributions are tax-free.

Money in these accounts is typically invested in fund options offered by brokers. However, a self-directed IRA allows the flexibility to choose from a broader range of investments such as real estate and lending notes. Assets in these accounts must still be held by a custodian or trustee.