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May 2009
Index of all
past
Affiliate Corner columns
Qualified retirement plans could be key to alternative investing
By Bert Hermelink, CLU, ChFC, RFC,
Strategic Advantage Financial
It looks like the real estate market is finally coming back. What a great time to start talking with existing and potential clients about a “new” way to invest.
Many people would love to be buying real estate at these fire sale prices, but where do they find the money? If you ask the right questions, you might find that your clients (or even you) might be hoarding money they don’t think they can get to, and that they think has been underperforming for them as well.
Qualified retirement plans, including IRAs, SEP IRAs, SIMPLE IRAs and individual and “left behind” 401(k)s, even though they might currently be at distressed valuations, are great sources for purchasing “alternative investments” including investment real estate. And even if the values of these retirement plans are down, so are the prices of the investments they would be buying. They (or you) could be looking at the opportunity of a lifetime.
Using qualified retirement plan money to purchase such alternative investments is more complicated than buying those investments directly. A Self-Directed IRA (or SEP, 401(k), etc.) must be held by a custodian, and the custodian must be flexible with great legal and administrative teams. Most custodians who tout their self-directed IRAs draw the line at allowing alternative investments, and especially at buying rental or investment properties. There are just too many rules, restrictions, and details that need to be attended to. Also, there are prohibited transactions, prohibited investments, and disqualified persons. A custodian must be willing to work through all the details with you and your client, but if all parties are willing to put in the effort the rewards can be well worth it. A few more transactions each year can make a big difference in your lifestyle.
An upcoming free class at AAR addresses self-directed retirement plans and other means of investing. The seminar, held June 3 from 2 p.m. – 5 p.m. (and repeated June 4, 2 p.m. – 5 p.m.) first features Frank Spady, CEO of Provident Group/Self-Directed Alliance, followed by Tony Thompson, CEO of Thompson National Properties.
Spady speaks about self-directed retirement plans and what his company, as a custodian, is doing that can work to your advantage. Thompson, who is the former chairman of Grubb and Ellis and regarded as one of the great real estate minds in the country, speaks on the state of the industry and touches on the use of various Section 1031 Exchange Options for your accredited investors (those with $1 million or more in net worth, or $200,000 individual/$300,000 joint incomes).
REALTORS®, lenders, title reps, qualified intermediaries, CPAs and real estate or tax attorneys will find these meetings educational and useful. Please set aside one of the two dates, and R.S.V.P. to Cheryl@aaor.org,
or by phone at (303)-369-5549.
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