By Daniel Ortega | Vantage IRA’s
The Phoenix housing market is showing signs of cooling down, but it isn’t leading to it being less competitive for real estate investors. In fact, many of the conversations I’m having with experienced and savvy real estate professionals continue to highlight that a slight decline in pricing combined with increasing interest rates is still creating challenges for investors seeking profitable deals. Even though houses are sitting on the market longer (i.e., 30+ days), sellers offering concessions (i.e., buying down rates), and inventory is up threefold resulting in more choices, the reality is that pricing isn’t quite yet low enough for the majority of investors focused on equity-based real estate strategies (i.e., buy and hold, fix and flip, etc.).
As investors, you’re only as successful as the capital you have to deploy into effective strategies. So, ultimately, it comes down to a capital issue. Many investors have simply been pushed out of the equity ownership side of the real estate market in various sectors and across many geographic regions. As more and more investors realize this, they are in an ever-increasing search for capital. With the traditional credit market tightening and getting more expensive, now is a great time for investors to explore becoming a private money lender instead of staying in the rat race of seeking which property to buy next. Instead of being on the equity side of real estate, you could consider being on the debt side. If you’ve got cash sitting idle inside of an IRA or old 401K or invested in the volatile stock market, now may be the best time to “become the bank” with your tax-favored retirement savings since you would be hard pressed to find someone who isn’t looking to borrow money and pay you handsomely for it. Private promissory notes secured by real estate (aka Trust Deeds) are fast becoming the most popular and enticing strategy for Self-Directed IRA investors.
Secured private notes give investors a safer and more secure tangible asset position in a real estate transaction that has much more value than the money being lent. Therefore, in the event of foreclosure, you’re receiving an asset worth more than that for which you paid. For example, imagine lending $100,000 from your IRA to a borrower who uses their $200,000 valued home as collateral. If the borrower defaults on the loan, your Self-Directed IRA gets to keep the $200,000 property.
Another benefit of becoming a private lender with a Self-Directed IRA is that you get to enjoy tax-favored interest payments. That’s right, the money being paid back to your IRA is tax-sheltered. No more worrying about if the market is properly growing your retirement dollars. No more stress about market disruptions, no more out-of-your-control reasons why your account balance is going in the wrong direction. If your Self-Directed IRA makes a loan with an 8% interest rate, then you’ll make your 8% for the entirety of the loan regardless of market conditions. If you are over the age of fifty-five and need to ensure your retirement portfolio has downside protection and is producing yields high enough to achieve your financial goals, pivoting from low-producing bonds into a private loan you control the terms of may just be the real estate strategy you’ve been hoping to find.
Happy Investing!
For more information about real estate investing with a Vantage Self-Directed IRA, please visit www.VantageIRAs.com.
