Whatever the markets are doing, it is always a good time to buy low and sell high. Although with a standard IRA or other retirement account it’s tough to achieve great returns without also exposing yourself to massive dangers.
The perfect situation should be to devote your very own precious retirement funds in a number of the rewarding, low risk investment possibilities that are so plentiful in today’s market. This way, you’d considerably add to your retirement nest egg.
Luckily, by moving your regular IRA or 401K account to a truly self-directed IRA or 401K account, then investing in underpriced real estate you can do simply that!
Achieving returns on your own investments that can be 4 to 6 average Joe feel like an intelligent investor. But the truth is it isn’t actually that complicated, nor uncommon.
Done properly, real estate investment offers greater versatility than other financial channels. Therefore, it can be modified and altered to evolving marketplace circumstances easier compared with the usual investment channels like stocks or securities.
Real estate investments can often be funded fully, or perhaps in part, utilizing other’s money through numerous financial partnership agreements. Few other investment vehicle provides the freedom to tailor your investments to your personal comfort levels quite like real estate does.
Using the right investment team, real estate investment is really fairly simple:
First, an underpriced property (versus ‘cheap’) must be located. What’s the difference between underpriced and cheap? An underpriced property is a house which could potentially be sold soon for a lot more than the current owner is either mindful of, or is able to take advantage of. Whilst a cheap property plainly costs less than it previously did.
The savviest real estate investors are aware that acquisition and remodeling costs drive profits in real estate investment. Therefore, the true secret to results happens to be being able to distinguish the difference between cheap homes and underpriced ones.
Second, the underpriced property will be purchased. And these purchases usually need all cash. When obtaining underpriced real estate, cash buyers are king as they do not have to wait around to gain approval for a mortgage loan or set up financing terms.
Furthermore, cash buyers can be able to acquire properties straight out from under other buyers who are even willing to pay more, but first need to wait to get financing on the property. To very motivated sellers, speed is everything.
Third, any important renovations are then completed as quickly as possible by specialists. Many real estate investment opportunities are simply available because the seller simply may not want or be able to take the time and/or money to put their property into a position where it is going to sell at or near full market value.
Fourth, the house is then rented and/or resold. Once again, your investment team is critical. Typically, rented homes are refinanced and the proceeds are employed to acquire more properties. Capital from the sale of properties are also used for new acquisitions.
Consequently having qualified, seasoned, and well connected real estate agents on your team is one of the main determinants of investment success.
The final and probably most essential step for every property investor…Repeat!
Now, naturally ‘simple’ doesn’t indicate ‘easy’. But, performed correctly with the appropriate team who have the proper connections to put in place all vital structures before any of your real estate offers are extended, the procedure is very doable and very profitable, especially over the long term.
A few critical aspects to this undertaking are:
1. The purchase or acquisition price of the real estate must be low in comparison to the ‘As Is’ market value (AIV), or to the ‘As Renovated’ market value (ARV). When investing in a depressed market, it’s better to buy low because all real estate is ‘cheap’. And when financial markets are overheated it’s easier to sell high due to the fact everyone believes prices will appreciate permanently. But all investment success requires both buying low and selling high. Thus, earnings are made by acquiring underpriced assets.
2. Holding and renovation costsneed to be minimized and controlled.
3. Time is critical, so you need to be able to move quickly through steps 1 through 5.
Again, done properly, buying real estate in your truly self directed IRA or 401K account can be profitable, safe, and involve very little risk.
This will make it a perfect strategy for your self-directed IRA because ultimately you’re realizing gains that are tax deferred or sometimes tax-free!
Most investors pay a large part of their gains to the IRS or jump through hoops in order to change one investment into another. In a self-directed retirement account your income is maintained to ensure that in your next investment endeavor, you’ve gotmore money to work with.
This article was contributed by Gene Sims of C & G Investors, Inc., an organization that has been helping investors make hundreds of millions of dollars in real estate for some 20 years.