According to an article written by Rebecca Lake of US News entitled, “3 Reasons to Invest in Single-Family Rentals,” there is an increasing preference for alternative investments: including real estate. It really is a no brainer as to why people are looking to alternative investments as the stock market has had more drops and unexpected turns than a rollercoaster at Disney World. That’s fine for a rollercoaster and a fun, carefree day at Disney, but not so fine when it comes to your peace of mind and the safety of your IRA funds.
Lake cites three reasons as to why now is the perfect time to consider a property investment:
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The 2019 position is strong.
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Rental market reinforced by low employment.
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Renter profiles are changing.
Strong position
There is no direct correlation between the stock market and real estate. In other words, if you lose a big chunk of money in the stock market on Monday morning, you’re not going to also lose a large amount of value from any real estate that you own by Monday afternoon. Jason Haber, a real estate agent at Warburg Realty Partnership in New York, NY states, “Real estate investments provide for more stability, and many markets can outperform the DOW and S&P 500.” At the end of the day, the real estate that you own will more than likely appreciate in value over time.
The article also provides insight from Quinn Palomino, co-founder and principal at Virtua Partners in San Diego, “…rentals are positioned to outperform stocks in 2019, as the market reacts to a slowdown in economic growth and recession fears.” In reference to the time during the Great Recession, Palomino also states that, “…single-family rentals did not have a down year in occupancy or rental rates.”
This is awesome news if you are like our clients who favor flexibility, safety, and peace of mind, together with innovative and out of the box thinking of choosing our SAFE HARBOR®-Directed IRA™ (SHIRA™) to help with the process of buying, building, qualifying for the loan, and supporting real estate that they can occupy, rent, and/or do both. In tandem with the real estate, the SHIRA™ invests the owner’s funds in an account with upside earning potential and downside protection from the volatility of the stock market.
rental market reinforced by low unemployment
Low unemployment=healthy rental market. Who knew?
Haber says, “Generally speaking, a low unemployment environment translates into a stronger housing market. Right now, we have both low unemployment and low interest rates. This dynamic has kept the housing market healthy.”
rental profiles are changing
Enter millennials as the main driving force. Palomino states, “Millennials don’t have the same attachment to homeownership as preceding generations, are more transient and are overburdened with debt.” Therefore, the idea of home ownership to many millennials is unfathomable. Between lack of money for a downpayment, wanting flexibility as opposed to settling down, and those that don’t want to buy now because they’re not certain real estate values will increase, the rental market has a huge pool of potential tenants within this group.
Not to mention-baby boomers! A lot of boomers are moving out of their homes in hopes of down sizing to make their lives a little easier. Unfortunately, a lot of them are realizing that they might not have as much money as they thought they would and do not have the option to buy again. In short, more potential tenants.
scared of risks and problems of being a landlord?
This is where the SAFE HARBOR®-Directed IRA™ comes in and can, quite literally, save the day. In the article, Janine Yorio, CEO of Compound in New York warns, “An owner needs to be ready for prolonged periods of vacancy, capital improvement requirements, and dealing directly with problematic tenants.” During times of vacancy, the SHIRA™ can help fully or partially pay the mortgage, property taxes, and other costs associated with the investment property. Depending on your age, you have total control of stoping, increasing, and/or decreasing your withdrawals from the IRA whenever you want. So, when you find the perfect tenant again, you can stop the withdrawals and let your SHIRA™ accumulate funds from potential interest earnings.
With the SAFE HARBOR®-Directed IRA™, there are no prohibited transactions because the title of the real estate is in your name, not the IRA’s. Therefore, any rental income you receive goes directly to your pocket. If you need or want to do any labor or work to your investment property, you can do it first hand. You do not need to hire someone else to do it for you, as is the case with other IRA’s, such as Self-Directed and Checkbook Directed. You could even occupy the property, if you wished.
Keep in mind that the SAFE HARBOR®-Directed IRA™ is only one element of the artwork. With the potential interest earnings from the IRA, possible appreciation of the real estate overtime, rental income, and the intrinsic value of occupancy, if you wish, together with the tax write-offs (if you qualify), the actual total value and benefits of both the SHIRA™ and the real estate could be a double digit return for you! Your own-personal masterpiece, if you will.
For more information about our program, or to receive news, alerts and unique financial analysis, please visit our website at www.lasaiibenefits.com.
Source:
Lake, Rebecca. “3 Reasons to Invest in Single-Family Rentals.” Usnews.com. U.S. News & World Report L.P. 1 Feb 2019 <https://money.usnews.com/investing/real-estate-investments/articles/reasons-to-invest-in-single-family-rentals?src=usn_fb>