Case outline: The Clarks are in their 40s and own two homes. One home, in a state they have recently moved from and planned to eventually sell, but were reluctant-at the time-to sell in a depressed market. The other home they purchased as their replacement primary residence upon moving. After living in their new state of residence for a short while, they discovered a building lot on a small island in the middle of a local river. They fell in love with the building site and determined this lot to be the location for their dream home. The Clarks went to their financial advisor to explore how they might afford to buy the building lot and their advisor, suggesting they look into the possibility of utilizing their IRAs, referred the Clarks to us to structure an IRA Real estate plan using our OUTSIDE™ Method.
The Clarks combined their IRAs to allocate a total of $285,000 to help purchase their dream building lot. The Clarks did not have enough non IRA cash for a down payment to qualify for a loan on bare land, so we assisted them in refinancing their current primary residence to cash out enough money to make the down payment. The Clarks plan to use proceeds from the eventual sale of the former primary residence to pay down the lot loan and then take out a construction loan to build their new primary residence. When they eventually move into their new primary residence, their current home will be kept as a residential rental investment property.
To establish the structural foundation of the IRA Real Estate Plan, we assisted the Clarks in transferring their allocated IRA monies to a SAFE HARBOR®-Directed IRA™ (SHIRA™) account. Their SHIRA™ account has protection of principal and potential interest earning when the stock market performs well. We then structured the Clark’s SHIRA™ account to provide a reliable monthly income stream to be used to cover the mortgage payments on the land. The tax liability generated by distributions from the IRA was calculated to be offset by allowable real estate tax deductions between the existing two residences.
Summary: The implementation of the OUTSIDE™ structure of IRA real estate allowed the Clarks to take advantage of a rare opportunity to purchase a unique building lot for their personal use within a secure financial framework. Ultimately, when the Clarks sell their former primary residence, move into their new dream home and convert their current primary residence into a rental property, they will still have an income stream from their IRA to apply to their new home mortgage. They will also benefit from rental income from the investment property that is now a part of their retirement portfolio. Additionally, there are estate planning benefits to this IRA Real Estate plan that are not covered in this brief synopsis.
We help people multiply their IRA funds by directing them to purchase real estate that they can personally use or create an additional income from, so that they can have more flexibility in their retirement, as well as create certainty and security for their families and leave a larger and more impactful legacy.
One last thing.
With the extreme volatility the market has been experiencing the last few months, not a single client of ours has incurred a loss of value to their SHIRA™.
In fact, according to a report from Zillow, real estate increased in value an average 5.46% in 2019 nationwide, along with the asset protection of their SHIRA™, possible rental income, tax benefits, and the intrinsic value of occupancy of the property, our clients enjoy confidence, peace of mind and growth with their SAFE HARBOR®-Directed IRA™ (SHIRA™) real estate investment and its bottom line.