Now is the Time to Invest in Real Estate with your Self-Directed IRA

Are you “in the know” about this extremely valuable investment tool – the self-directed IRA? Statistics show that there are approximately $4.2 trillion dollars in IRA’s in this country and fewer than 4% are self-directed IRA’s. Many people are simply not aware that a self-directed IRA can enable them to tap into an amazing potential for growing wealth for their retirement portfolio and future.
Chances are -- if you are like most people, your retirement money is locked into traditional and often unproductive investments, such as stocks, bonds and mutual funds. You might agree that the volatility of the stock market and resulting losses in the last several years is enough reason to take a look at other alternatives.

Up until now, you may not have realized that you can legally invest your IRA in “alternative” investments such as real estate (domestic and foreign), private placements, tax liens, precious metals and limited partnerships, to mention a few, increasing those retirement dollars exponentially.

Individual retirement accounts were introduced in 1974 with the enactment of the Employee Retirement Income Security Act (ERISA). The rules governing what an IRA can invest in have been in effect and not changed since IRAs were created. The rules only specify where someone cannot invest and there is an unlimited array of investments that fall well within the permissible boundaries. There are only three investments that are specifically not allowed within IRAs: collectibles, life insurance, and capital stock in an S corporation.

So, you may ask, what exactly is a “self-directed” IRA and how do I open one?

A Self-Directed IRA and Diversification

A self-directed IRA puts you, the investor, in the driver’s seat, allowing you to freely choose investments from a myriad of asset classes. This is in strong contrast to having a financial institution (bank, brokerage firm) making the decision for you and your future, as they likely have a biased interest in profiting from the limited investments (traditional stocks, bonds and mutual funds) that they offer to you.

A "truly" self-directed IRA is when YOU (with the advice of your chosen professionals) choose your IRA's assets, allowing you to invest in both "traditional" investments such as stocks, bonds and mutual funds, as well as the aforementioned non-traditional investments. Therefore, it need not be an “either or” proposition.

The fact is, if you so choose, you can still hold positions in the stock market with a self-directed IRA, yet branch out to include these non-traditional or alternative investments, diversifying your investment portfolio. It is common knowledge that “diversification” is paramount to any investment strategy!
It is actually quite easy to open a self-directed IRA, as it’s a simple matter of deciding on a reputable custodian such as Pensco Trust Company or Equity Trust Company, and filling out an online application. The fees are nominal and clearly disclosed on company websites. These custodians also offer excellent free educational tools and webinars to further enlighten you and get you started on the road to self-directed IRA investing.

After some thoughtful research on the various types of investments that you can now take advantage of, the next and most exciting step is to make your decision on how to proceed with expanding your retirement account! However, we do recommend that you discuss your investment approach with your chosen professionals (CPA, CFP, PA) for guidance as you would with any type of investing.

Real Estate Investing with a Self-Directed IRA

Since our forefathers, real estate investing has been the primary investing methodology that people have employed to successfully amass wealth. Long before the extreme example of the U.S. real estate “bubble” of the last few years, “tangible” real estate investments have brought financial security and wealth to investors for centuries. Yes, real estate investments are indeed tangible, where an investor can actually have a direct effect on appreciative value -- unlike stocks and bonds.

According to the National Association of Realtors (NAR), recent statistics show that the housing market has actually rebounded in the last three months. The report says that existing-home sales rose for the third consecutive month with inventory easing and home prices declining less sharply in June 2009.
NAR chief economist, Lawrence Yun, is hopeful about the gain. He said that “the increase in existing-home sales occurred in all major regions of the country. We expect a gradual uptrend in sales to continue due to tax credit incentives and historically high affordability conditions.”

Real estate investments in a self-directed IRA are both tax-deferred and tax free, depending on the specific investment vehicle. It is truly amazing that more people do not take advantage of these tax breaks, as statistics show that currently less than 2% of retirement accounts hold real estate as an investment.

It is important to know that you can purchase real estate in your IRA as long as it does not result in “self dealing,” which means that you cannot purchase property that you will reside in or do business in. There are also specific IRS prohibitions on purchasing or selling property in your IRA where certain family members may have a percentage of ownership. In learning more about observing IRS regulations, we again suggest guidance from chosen professionals, CPA or ERISA versed attorney to assist you in becoming a successful self-directed IRA investor.

The Benefits of Real Estate Investing in the State of Louisiana

Louisiana and its beautiful, historic city of New Orleans are also actively engaged in the process of rebounding and rebuilding after the catastrophic devastation of Hurricane Katrina in 2005. The real estate market in Louisiana is largely driven by the need to literally rebuild its cities (parishes) and because of an increased housing demand due to the influx of workers, workforce housing is a burgeoning necessity and building projects are rapidly proliferating.
Timing is “optimal” for real estate investors to get in on the unusually lucrative post-Katrina economic environment in the state of Louisiana. As spicy as New Orleans jambalaya, real estate investing is “kicked up” a couple notches in The Big Easy.

The good news for investors in Louisiana and New Orleans is not only due to the extreme market demand, there is the additional perk that investments are enhanced by federal tax credits enacted by what is known as the Gulf Zone Act of 2005, which gives investors hefty tax breaks. Larry Haines, CEO of Road Home Builders and Sunconomy Homes said “residential housing in Louisiana is strong, especially in areas supporting oil field services and offshore drilling. These investment properties are yielding state and federal solar tax credits, depreciation, and positive cash flow that investors aren't getting in most of the U.S. right now.”

Road Home Builders, a “green” contracting firm, headquartered in New Orleans, is currently involved in the development of several projects, building affordable, energy-efficient solar homes. These projects target first time home buyers and the need for workforce housing along the Louisiana Gulf Coast, offering significant investment opportunities for self-directed IRA and discretionary income investors.

Here are the six easy steps to start investing with a Self-Directed IRA:

1) Select a reputable custodian/administrator of self-directed IRA’s

2) Choose a plan type: traditional, ROTH, SEP, SOLO K and open your account online, by filling out application (print, sign and mail)

3) Research investment asset classes and decide upon investment(s)for diversification

4) Discuss investment strategies and review IRS regulations and tax laws with chosen professionals

5) Submit specific investments to custodian for approval (they make sure that the investment is sound and legal, however, they do NOT make the decision whether it is a good or bad investment, that is up to you)

6) Enjoy watching your retirement account grow, having peace of mind knowing that you are now responsible for the investment decisions about YOUR retirement money and YOUR future

The Golden Opportunity

Real estate investing using a self-directed IRA is a prime investment vehicle right now for both long term and short term investing. With real estate prices and interest rates at an all time low, it is time to “make hay while the sun shines.”

As investors, we may never see another golden investment opportunity like this in our lifetimes. NOW is the time to start investing in real estate, using the ultimate tool for your retirement portfolio, the self-directed IRA. Discover the freedom of taking control of your financial future!

Author's Bio: 

Patricia Reynard Hightower is a Managing Partner of Road Home Investments LLC ( and CEO of Bayou Equity, a conventional mortgage lender in New Orleans, Louisiana. She is a keynote speaker and educator on Self-Directed IRAs. Contact: 504-586-3655 or email