Is Owning without Landlording right for you?

Is Owning without Landlording right for you?

A strategy that’s shaking up the industry and providing clients the most exceptional level of customer service and care.

To often, investors stop short of adding real estate to their port- folios because the initial investment appears to be complex, and the long- term commitment labor-intensive. And rightly so: it can be difficult and costly to find appropriate properties and investors might not have the skills or resources to determine a property’s income-generating viability.

Appropriate and affordable financing can be difficult to find, with most non-recourse loans typically at rates of around 12 percent. Not to mention, the first thought to pop into an individual investor’s mind when he or she hears “income property” is a broken water heater in the middle of the night.

However, specialized real estate investment groups can offer comprehensive services to make both the initial and long-term investment in real estate simple and user-friendly for individual investors. These full-service firms handle everything from market analysis to building permits and cost of living index. Often, the firms buy or build properties in bulk at a discount achieved through research, relationships and years of expertise in the field. In addition to providing inventory, they enlist a proper maintenance and management team to avoid the late-night water heater scenario.

Be The Director of Your Retirement

While the economy has shown signs of sustained recovery, continued un- certainty and market volatility on Wall Street prompt many investors to search for non-traditional methods to diversify their retirement portfolios. Self-direct- ed IRAs (SDIRAs) have gained momentum as the go-to investor’s choice to safely and effectively accomplish this while planning for the future. One of the many advantages of a self-directed IRA is the opportunity to experience significant gains by investing in alter- native assets and receive a sizable tax incentive. Similar to a traditional IRA, a SDIRA is also a tax-deferred retirement account that provides additional earning power with rental properties which accumulate income inside of the IRA with no capital gains tax. When utilizing a SDIRA, it is important to remember that certain rules still apply. Each asset has a different set of restrictions and investors must be aware of prohibited transactions to avoid penal- ties from the IRS.

With real estate, for example, all income generated from a property must go directly into the SDIRA; neither the account holder, nor a relative can live in the property; the property cannot be previously owned by family members; non-recourse loans must be used if the property is being financed; expenses related to the property can- not be paid with personal funds; and SDIRA funds cannot be used to pay off a personal mortgage.

Owning Without Landlording

Real estate not only introduces a new asset class to a retirement plan for true diversification, it protects against market fluctuations and allows investors to hedge inflation. While many traditional portfolios consist of assets that are highly correlated and can rise and fall in value together, income-producing real estate offers investors four ways to generate returns:

Additionally, when utilizing a non-recourse loan to finance the property as opposed to traditional financing— an IRS requirement of SDIRAs— investors can leverage their entire account to increase buying power. For example, by using 50 percent leverage, an investor could buy a $100,000 property by putting down only $50,000 in principal out of the SDIRA, and utilize a non-recourse loan for the balance. The advantage of non-recourse loans is that they are based on the asset or property’s ability to pay off the remaining balance and the lender cannot seize the borrower’s other assets in the event of default.

Partnering With Experts

Specialized real estate investment groups can offer comprehensive services to make both the initial and long-term investment in real estate simple and user-friendly for self-directed investors. These firms handle everything from market analysis to building permits and future maintenance. Often times, the firms buy or build properties in bulk at a discount achieved through research, relationships and years of expertise in the field.

What is your Property Management Approach

The Wealth Manager portal provides clients 24/7/365 access to all their documents, financial data, and performance. With local boots on the ground, and an elite team at our Chicago HQ, investors get the best management, with one dedicated point of contact,” boasts Preston Despenas. “For individuals that don’t want to be looking back and kicking themselves for missing out, not just on profitable investment properties, but on smart tools like self-directed IRAs for rapid and compounding gains and non-recourse investor mortgage loans, it is worth investigating the SDIRA Wealth solution.”

No Vacancy, No Problem

The Rental Assurance Program is a pledge to recompense any losses due to tenant vacancy and empower investors to take advantage of real estate investment opportunities.

“While every SDIRA Wealth property comes renter-occupied, the Rental Assurance Program ensures that cash flow continues in the event of any vacancy or tenant default. The program is one more way we offer clients peace of mind, making it easy for them to invest in real estate and help them achieve their financial goals. We make land-lording simple and virtually hassle-free. Due to the quality tenants already placed within each unit sold, our turn-key properties produce cash-flow from day one and we can ensure that promise with our new Rental Assurance Program” – Preston Despenas

The Rental Assurance Program safeguards SDIRA Wealth clients for up to 12 months on newly purchased properties. The program ensures cash flow by paying the investor any lost rental income that resulted in tenant default or vacancy.

As part of the Wealth Solution a full suite of services including inventory, financing, and property management, the Rental Assurance Program is available immediately at no cost for individual investors who purchase income properties from SDIRA Wealth. All inventory has pre-approved non-recourse financing and comes with rental assurance protection, as well as Wealth Manager, a free online property management tool.

The Real Rate Threat

A frothy stock market, roller coaster oil prices, and higher taxes are just the tip of the iceberg when it comes to issues battering investors today. Still, none of these risks compares to the threat of rising rates, and is adamant that interest rates will go up.

Unfortunately, the vast majority of individuals continue to seriously underestimate the impact of higher interest rates on their investment portfolios, which in turn will very much affect their day-to-day lives. Whether it’s in 6 months or 18 months, Preston Despenas warns that, “rising rates will impact all businesses from mom and pop shops to large institutions, and Fortune 500 companies. In turn this will obviously hit the wallets of everyone. However, perhaps most significantly of all, it will be a blow to the yields and cash flow of investors who drag their feet in restructuring portfolios and locking in the most attractive spreads on income-producing real estate”.

Alleviating that risk is something that traditional investors constantly scratch their heads over or they simply accept the returns that they generate in the stock market without weighing the options. The simple fact is self-directing in alternative assets isn’t a strategy most individuals are aware of because banks and brokers neglect to tell them.

For Example

On $250,000 of leverage, if rates rise to 8% investors would lose almost $500 per month in cash flow, and would pay almost $200,000 more in interest alone over a 30 year loan compared to a 5% rate today. Multiply this by 5 properties, and factor in rising asset prices, and this is a million-dollar mistake that investors will be kicking themselves for years to come.

In Search of Better Investments

The need to switch portfolio holdings is clear, but many investors have allowed themselves to be held back by uncertainty and wanting to ensure they make the perfect investment, all while trying to find the time. Banks haven’t been kind either. According to many of the clients, which have reached out to SDIRA Wealth it no longer matters if you have been banking with the same institution for decades, or have been depositing mil- lions each year. Individuals are still suffering from poor customer service.

The big question is – where can investors find an efficient solution for investing in income producing real estate safely, and get access to attractive long term leverage that enables them to fully capitalize on the current market, and lock in the best spreads? Self-directed IRAs (SDIRAs) have become increasingly popular in recent years as individuals look to take charge of their retirement with alternative investments beyond stocks, bonds and mutual funds. Senior Partner, Preston Despenas, explains why SDIRA Wealth’s inventory gives the investor the best possible options for leverage and growing their wealth in their retirement.

Why should you be interested? If you are interested in expanding your investment options for retirement, adding income producing real estate to a self-directed IRA is a terrific option to diversify your traditional portfolio of stocks, bonds and mutual funds. While other alternatives are available, many hard assets come with increased risk and volatility. Unlike those alternatives, real estate has the potential to protect your portfolio against inflation. Like other IRAs, the SDIRA offers tax-deferred or tax-free growth of your earnings. This means, your return has the ability to compound more quickly, and again increases your return on investment.

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