As real estate experts say, leverage allows you to make money off of other people’s money. In other words, leverage allows you to buy a much larger asset. A larger asset comes with increased investment potential and a greater investment opportunity than you would be able to if you paid 100% of the purchase price. This is because the less cash you invest, the higher your leverage and your return; in both appreciation and rental income.
Alex Hemani of Forbes Real Estate Council breaks it down for us with an example of how powerful leverage is:
“An investor has $50,000 to put towards single-family rental real estate. There are a number of options for how to use this capital, including:
• Option 1: Buy a $50,000 property for cash. This approach produces no leverage.
• Option 2: Put the $50,000 toward the purchase of a $100,000 property, using financing like a bank mortgage loan to cover the other $50,000. This produces 50% leverage.
• Option 3: Put the $50,000 toward the purchase of two $100,000 properties, again using financing to cover the remainder of the purchase price. This produces 75% leverage, and spreads your potential gains and risks over two properties.
If property values increase 6%, the investor achieves these gains based on appreciation alone:
• Option 1: $53,000 property value for a $3,000 gain on the cash invested
• Option 2: $106,000 property value for a $6,000 gain on the cash invested.
• Option 3: $212,000 property value for a $12,000 gain on the cash invested.”
*Again, the more leverage used, the higher the potential gain from asset appreciation.
Protect Yourself: It’s not all Sunshine and Daisy’s
Leverage sounds awesome and can be a powerful tool to increase your return on a real estate investment, but it’s important to use it wisely. Always practice due diligence in the area you are looking to buy beforehand. Do your research and get an inspection on the real estate to make sure it’s a sound investment.
Plan ahead! Make sure the payment is doable. If you are using the real estate as a rental and there is a decline in the rental market, you have to make sure you have the funds necessary to cover the cost if the property becomes vacant. If there’s a rough patch in the economy, again make sure you would be able to cover the mortgage payments.
But what if you could have the power of leverage and the peace of mind to sleep like a baby every night because you know that no matter what, your real estate is protected?
Good news! You absolutely can!
Lasaii’s Protected Leverage with the SAFE HARBOR®-Directed IRA™ (SHIRA™ )
With our IRA Real Estate to Occupy™ program-you can have both leverage and protection.
LEVERAGE: the SAFE HARBOR®-Directed IRA™ (SHIRA™ ) uses your IRA funds to help purchase and build real estate to occupy and/or create income. The SHIRA™ uses a mortgage loan to act as a fulcrum supporting the gradual transfer of IRA assets into the real estate investment. (Worried about qualifying for a real estate loan? The SHIRA™ has you covered and can qualify you for the loan. Learn more about how the SHIRA™ can beat DTI ratio here):
PROTECTION: The SHIRA™ is invested in a principal protected vehicle, safe from any possible downturn in the stock market with upside interest earning potential when the stock market performs well! So, if your rental property is vacant at any time, the SHIRA™ can cover the payments. If you’re experiencing rough times because of a poor economy or job loss, again the SHIRA™ can cover the payments.
Maybe you’re thinking, “yeah, but my taxes will be effected right?”
NOT WITH THE SHIRA™!
If you qualify, you will receive all tax write-offs associated with real estate ownership, minimizing or totally eliminating the tax liability of using funds from an IRA.
The Perfect Alternative Investment:
In today’s financial world, it’s smart to get creative and look to alternative investments. At Lasaii Benefits, we do just that. With the potential interest earnings from the SAFE-HARBOR®-Directed IRA™, possible appreciation of the real estate over time, rental income, if you wish, and the intrinsic value of occupancy, 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! In other words, the perfect alternative investment.
With Lasaii Benefit’s creative, innovative and life-changing estate planning, don’t miss out on the opportunity of maximizing your IRA funds and investing in real estate that you and your family can occupy.
We specialize in helping clients structure customized, tax effective IRA real estate investments that enhance their portfolios, lifestyles, market positions, and legacies.
Please share this with friends and family that could benefit from our proprietary IRA real estate structure!
Visit www.lasaiibenefits.com to sign up to receive our “Understanding the SAFE HARBOR®-Directed IRA™” Guide to learn more. You may also visit our website to see if you qualify for our program.