RE/MAX of Boulder Podcast: “Uncle IRA” Can Invest in Real Estate

Posted by Tyler Dock on Monday, July 27th, 2015 at 9:20am.

The RE/MAX of Boulder Podcast continues to keep the Boulder community and future home buyers and sellers updated with the latest information regarding the real estate market.

Here’s a link to the podcast:

RE/MAX of Boulder Podcast Host Duane Duggan (left) and New Directions IRA CEO Bill Humphrey

In 2003, Bill Humphrey and Catherine Wynne decided to combine Humphrey's two decades of experience as a Certified Public Accountant (CPA) and his expertise in retirement investment with Wynne's extensive personal success as a real estate investor and syndicator to establish New Direction IRA, Inc. RE/MAX of Boulder REALTOR® Duane Duggan, host of the RE/MAX of Boulder video podcast, sat down with Co-Founder and CEO of New Direction IRA, Inc. Bill Humphrey. 

According to Humphrey, an Individual Retirement Account (IRA) is the bucket owned by what he terms "Uncle IRA", which holds investments including stocks, bonds, mutual funds, and “other assets”. The podcast focuses on the “other assets” segment, specifically real estate. Bill uses the term "Uncle IRA" to underscore the idea that an IRA is separate from you personally and the money in the account will stay in the account and grow. The major benefit of an IRA is the substantial tax breaks that are awarded. That said, not everyone can take advantage of the tax breaks due to eligibility restrictions based on income or employment status.

New Direction is a self-directed IRA provider, which acts as the administrator and record keeper of a self-directed IRA. Self-directed means that the client is in charge of the IRA. New Direction assists in the transaction process, but they do not make any decisions regarding where to allocate investments. New Direction provides extensive, expert information on how and what Uncle IRA should fill the bucket with and then executes your decisions. This differs greatly from an IRA setup with a large securities corporation, which advises Uncle IRA to invest solely in the stocks and bonds they are selling, often perpetuating the misconception that an IRA cannot invest in real estate. Since the introduction of IRAs circa 1975, there are only two segments an IRA cannot invest in: collectables and life insurance. All IRAs including a Health and Savings IRA can invest in real estate.

The process of purchasing real estate either for direct or partial ownership using a self- directed IRA is actually very similar to a traditional purchase made by individuals. All of the offer sheets and contracts will contain Uncle IRA's name and signature. For New Direction accounts, the paperwork will be titled and signed "New Direction IRA for the benefit of John Smith's IRA". From there, funds for the closing come out of the IRA. The contracting process is essentially the same but there are restrictions on property that have been purchased by an IRA. Since the property was purchased as an investment asset, it must be used as an investment. The property must be rented and cannot be for individual use. Rent is placed into the IRA while property tax and maintenance fees come out of the IRA. The podcast dives deeper into the available real estate features an IRA can invest in including lending to an IRA. 

Humphrey laid out some of the difficulties of IRA investing in real estate. An investment in real estate is usually a long term investment. This requires thorough planning. Moreover, transaction costs increase with long term investments. The creation of UBIT, the Unrelated Business Income Tax, could levy potential tax implications on profits earned from IRA-owned real estate. 

Though speed-bumps are present, an IRA can provide timely funds that allow you to take advantage of beneficial market conditions. A real estate investment can inject cash flow into your IRA and or it can put your existing money in the IRA "to work" as the real estate appreciates. At the end of the day, you want Uncle IRA to have the most money possible and IRA investing in real estate is an avenue that can help maximize the potential of your IRA. 

Look for RE/MAX of Boulder's live stream and download our video podcasts for expert and timely information from the leaders in the real estate industry. We would love to hear your feedback! Connect with us on Twitter @REMAXofBoulder and like us on Facebook at RE/MAX of Boulder, Inc.


Tyler Dock

Twitter: @tsdock


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