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Flip to the Top: 3 Approaches to Flipping Real Estate

FLIP TΟΤHE ΤOΡ 3 Approaches to Flipping Real Estate in a Self-Directed IRA In many markets across the U.S., this is a time to consider flipping real estate. Thanks to the rebound in home prices, the economic recovery, and a shortage of new homes, there is good money to be made in the business of acquiring homes that are distressed in condition and/or financing, rehabbing those homes, and then reselling them to someone wanting to live in the property, or perhaps another investor looking for a cash-flowing rental. HERE'S HOW INVESTORS CAN LEVERAGE A SELF-DIRECTED IRA OR SOLO 401 (K) TO FLIP PROPERTY. WHY SHOULD I FLIP PROPERTY THROUGH A SELF-DIRECTED IRA? SAVINGS SOLD The opportunity to buy at a discount, improve the property and sell the finished home can be The gains are Flipping properties is a means to aggressively grow your retirement savings The timeframe of these investments can be tax-sheltered to the relatively short term, increasing account liquidity and options IRA account quite profitable FLIPPING RULES: PROHIBITED TRANSACTIONS Neither the IRA holder or a disqualified party (spouse, parents, children, etc.) may live in or use the property. You cannot work on the property yourself, for free or for pay. Any remodeling repair, improvement, and even maintenance must be performed by a paid third party company. Ø Your IRA cannot purchase a property from you or any disqualified person. Similarly, you (or a disqualified person) cannot sell the IRA's property to yourself. Neither you nor a disqualified person can guarantee a loan for an IRA property. TAX TIME: IMPLICATIONS OF FLIPPING PROPERTY THROUGH A SELF-DIRECTED IRA UNRELATED BUSINESS INCOME TAX (UBIT) DEFINED: A tax that applies to tax-exempt entities like an IRA when the tax exempt engages in a trade or business activity on a regular or repeated basis. Flipping houses is considered such a business activity. FLIP TIPS: THREE WAYS TO FLIP FOR BIG RETURNS OPTION 1: BUY FIX SELL FLIPPING WITH THE PLAN PROS: PROPERTY INVESTMENT: $150,000 into a project (includes acquisition, rehab, holding, & sales costs) + High rate of return CONS: SELL THE PROPERTY: $200,000 - Potentially subject to UBIT Y NET GAIN: $50,000 You must work with a partner or hired contractor ESTIMATED UBIT: $18,000 NET RETURN: $32,000 (21% ROI) IF YOU DID TWO SUCH TRANSACTIONS IN A YEAR, YOU WOULD PRODUCE $62,000, OR 41% ANNUALIZED ROI, ON THE INITIAL $150,000 INVESTED. OPTION 2: TRUST LEND Have the plan be a lender to investors and/or contractors who have BE THE BANK DEED expertise in flipping properties. PROS: PROPERTY INVESTMENT: $150,000 2 point loan + Passive investment that is not subject to UBIT + Lower risk investment + Less complicated E TERM: 6 MONTHS CONS: - Lower rate of return %V INTEREST: 12% LENDING IS A PASSIVE INVESTMENT NOT SUBJECT TO NET GAIN: $12,000 (8% ROI) UBIT. IF YOU DID TWO SUCH TRANSACTIONS IN A YEAR, YOU WOULD PRODUCE $24,000, OR 16% ANNUALIZED ROI, ON THE INITIAL $150,000 INVESTED. ΟΡΤIOΝ3: BUY FIX RENT SELL THE HYBRID FLIP PROS: Benefit from the equity reward & skip the tax implications.all it takes is a little patience. + Passive rental holding eliminates UBIT taxation + Rental income in addition to the added value of improving the property PROPERTY INVESTMENT: $150,000 PROPERTY MARKET VALUE: $200,000 CONS: MONTHLY RENT: $2,000 Transaction takes longer to complete - Need to be a landlord or hire a property manager NET RENTAL INCOME: $18,000 NET RETURN AFTER 1 YEAR: $68,000 (45% ROI) STEP BY STEP GUIDE TO ACQUIRE REAL ESTATE IN AN IRA OPEN your IRA with your Safeguard IRA Advisor. FUND FIND A PROPERTY the account with a rollover, transfer, and/or contribution. This may take several weeks; so, plan for that in your timetable. and make an offer – The offer needs to be made in the name of the IRA and earnest money needs to come from the IRA or a non-disqualified person. Do not use your personal funds to pay the earnest money. STEP1 - - - - STEP 2 STEP 3 START WORK with your Safeguard representative to assemble the necessary paperwork for the purchase flipping! STEP 5 STEP 4 www.IRA123.com SAFEGUARD Copyright © 2015 Safeguard IRA & 401k Advisors Infographic designed by Mad Fish Digital

Flip to the Top: 3 Approaches to Flipping Real Estate

shared by SafeguardIRA on Nov 22
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Flipping real estate through a self-directed ira can be a lucrative investment strategy if implemented and carried out correctly. Our latest infographic looks at three different options to flip proper...

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