A recent “Personal Real Estate Investor” newsletter (August 26/10) addressed the latest bad housing data.  However, rather than bemoan the terrible data, PREI instead found a silver lining in the current housing slump.

They warn against reading too much into the dire forecasts and are supported by recent remarks by Dr. Bob Shiller, co-founder of the S&P/Case-Shiller Home Price Index who cautions against over reacting to recent news.

In fact, Personal Real Estate Investor goes so far as to say that “Most real investors have not seen markets like this in their lifetimes and will probably not see these again based on standard population and demand trends.”

They go on to suggest that rental investors “should be comfortable knowing that the value of the investment will improve, after it has paid for itself, generated positive cash flow, tax deductions and provided a hedge against inflation.

As Warren Buffett says “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”.

According to the U.S. Department of Labor, the average U.S. worker changes careers 3-5 times during their lifetime. Presumably, many times, they are also starting a new retirement plan after along with their new job. A big question for many of these people is what to do with the retirement plan that was started at their former position? According to the Wall Street Journal many of these plans are left behind. In fact, there are currently over 15 million such accounts in the U.S., and more on the way. Surprisingly many of these accounts are of significant value. In a study by human-resources consultants Hewitt Associates Inc. “only 3% of departing employees with accounts of less than $1,000 left their money in their former employers' plans, while nearly half of those with balances of $100,000 or more did so.” (Wall Street Journal 8/2/10).

There are many reasons to leave an account behind: sometimes it is just the best available option, however, even if it is not, figuring out how to move it can be time consuming and intimidating, as can determining where to invest it after it is moved. Often it is just easier and less stressful to leave it where it is. In some circumstances, this may be the best option. It is almost always a better option than cashing the account out before it is eligible for distribution as this leads to taxes and a 10% penalty. However, many times it is advantageous to move it to the new plan, or to an IRA.

In addition to convenience and the simplicity of having everything in one place, another consideration is the fees associated with the retirement account. Long term results can be quite dependent on how much the investor pays in fees. Even a seemingly small difference can add up over time. Depending on the balance of your account you will probably end up paying between .5% and 1.5%. Another important consideration is what do you want to invest in? You have the options of a managed mutual fund, individual stocks, fixed income products, or real estate.

Most people are somewhat familiar with most of these options; however real estate is often an overlooked or misunderstood investment option, even among retirement experts. When it is recommended or discussed it is usually with the caveat that IRA real estate purchases are restricted in use – the purchaser cannot occupy or directly benefit from the real estate. Although a common misperception, it is still non-the-less an inaccurate one.

At Lasaii (a division of Uranga & Associates), we specialize in using IRA and 401k rollover funds to purchase real estate that can be occupied and enjoyed as a primary residence, a vacation home, or commercial investment. For more information, please visit our website at http://www.urangafinancial.com or call a consultant at:

 Who can open an IRA?

An IRA, or Individual Retirement Account, is an investment vehicle for retirement savings. It is open to all taxpayers under the age of 70.5 years of age. The benefit of an IRA is that it allows your investment to grow tax free until it is withdrawn from the account. In addition, if you qualify, the investment itself is   

If you are already eligible to participate in a qualified retirement plan there are phase out limits based on income limits on the tax deductibility of the investment. In addition, if you surpass specified income levels you will not qualify for the tax deductible IRA, but can still participate in the taxable IRA and your investments will grow tax deferred.

How much can be invested in an IRA?

Annual contributions for 2009-2010 are limited to $5000 per year. If you are over 50 years of age, you are allowed an annual “catch-up” contribution of an additional $1000 per year.

How do you open an IRA?

An IRA can be opened through most banks or investment houses, including many of the discount brokers on the internet.

Investing your IRA?

Once your money is inside an IRA, you can direct the custodian to use the account to purchase most types of securities, mutual funds, CDs or real estate. Contrary to what many advisors will tell you, by using the Outside Method ® you can actually use your IRA money to invest in real estate that you intend to occupy and enjoy today (i.e. Primary Residence, Vacation home).

However, not all assets can be held in an IRA. Life Insurance and collectibles such as art, baseball cards, and rare coins cannot be held in an IRA.  

Withdrawing Money from your IRA?

IRA investments can generally be withdrawn without penalty starting at the age of 59.5. Distributions must start no later than April 1^st of the year after reaching age 70.5.

There are exceptions to 59.5 being the earliest that distributions can be taken penalty free:

• The portion of unreimbursed medical expenses that are more than 7.5% of adjusted gross income
• Distributions that are not more than the cost of medical insurance while unemployed
• Disability (defined as not being able to engage in any substantial gainful activity)
• Amounts distributed to beneficiaries of a deceased IRA owner
• Distributions in the form of an annuity
• Distributions that are not more than the qualified higher education expenses of the owner or their children or grandchildren
• Distributions to buy, build, or rebuild a first home. ($10,000 lifetime maximum)
• Distribution due to an IRS levy of the plan

It is never too early (or too late) to start saving for retirement. Please feel free to contact us if you have any IRA related questions.

The Dodd-Frank Wall Street Reform and Consumer Protection Act passed through the Senate by a vote of 60-39. It now goes to President Obama to be signed as early as next week.

Following is a brief summary of the Legislation:

1.       It creates a new and independent watchdog to ensure that American consumers have clear and accurate information when shopping for mortgages, credit cards and other financial products. In addition it will work to protect consumers from hidden fees, abusive terms, and deceptive practices.

·         Has the authority to examine and enforce regulations for banks and credit unions with assets of over $10 billion. It also extends these powers to all mortgage related businesses (lenders, servicers, and brokers), payday lenders, and student loan lenders, as well as debt collectors and consumer reporting agencies.

·         Creates a new Office of Financial Literacy, and a National Consumer complaint hotline.

2.       Ends “Too Big to Fail”: the legislation creates a safe way to liquidate failed financial firms, and imposes tough new capital and leverage requirement that will make it undesirable to get too big.

·         Volker Rule: requires regulators to implement regulations for banks, their affiliates and holding companies, to prohibit proprietary trading, investment in and sponsorship of hedge funds and private equity funds, and to limit relationships with hedge funds and private equity funds.

·         Requires large, complex financial companies to periodically submit plans for their rapid and orderly shutdown should the company go under. If they fail to submit acceptable plans, the company will suffer higher capital requirements and restrictions on growth and activity, as well as divestment.

·         Creates an orderly liquidation mechanism for FDIC to unwind failing companies.

·         Declares that taxpayers will bear no cost for liquidating large, interconnected financial companies in the future.

·         Allows the FDIC to guarantee debt of solvent insured bands to prevent bank runs.

3.       Reforms the Federal Reserve:

·         Limits the Feds emergency lending authority by prohibiting lending to an individual entity.

·         Provides for the Government Accountability Office to perform a onetime audit on the Federal Reserve lending that took place during the financial crisis. Details of lending will be published on the Federal Reserve website by December 1, 2010.

4.       Creates the Financial Stability Oversight Council. This council will be chaired by the Treasury Secretary and be made up of 10 federal financial regulators (from the Federal Reserve Board, the SEC, CFTC, OCC, FDIC, FHFA, NCUA and the new Consumer Financial Protection Bureau), an independent appointee with expertise in insurance, and 5 nonvoting members. It will be charged with identifying and responding to emerging risks throughout the financial system

5.       Creates a council to identify and address risks posed by large complex companies, creative financial products, or unwarranted activities before they threaten the stability of the economy.

·         Requires companies that sell products like mortgage-backed securities to retain at least 5% of the credit risk.

6.       Eliminates loopholes that allow risky and abusive behavior to go unregulated – including loopholes for over-the-counter derivatives, asset back securities, hedge funds, mortgage brokers and payday lenders.

7.       Requires central clearing and exchange trading for derivatives that can be cleared.

8.       Establishes an Office of Minority and Women Inclusion. This office will coordinate technical assistance to minority-owned and women-owned businesses and seek diversity in the workforce of regulators.

9.       Mortgage Reform:

·         Institutions must ensure that borrowers can repay the loans that they are sold.

·         Prohibits the financial incentives for subprime loans

·         Prohibits pre-payment penalties on loans

·         Lenders and mortgage brokers who don’t comply with the new standards will be held accountable by consumers for as much as three years of interest payments and damages, plus attorney’s fees.

·         Lenders must disclose the maximum a consumer could pay on a variable rate mortgage.

·         Establishes and Office of Housing Counseling within HUD to boost homeownership and rental housing counseling.

10.   Hedge Funds:

·         Requires Hedge funds and private equity advisors to register with the SEC as investment advisers. It also requires them to provide information about their trades and portfolios necessary to assess systemic risk.

·         Raises the assets threshold for federal regulation of investment advisers from $30 million to $100 million.

11.   Provides shareholders with a say on executive compensation and corporate governance.

·         Shareholders will have the right of a non-binding vote on executive pay and golden parachutes.

·         Standards for listing on an exchange will require that compensation committees include only independent directors and have authority to hire compensation consultants in order to strengthen their independence from the executives they are rewarding or punishing.

·         Requires public companies to set polices to take back executive compensation if it was based on inaccurate financial statements that don’t comply with accounting standards.

12.   Provides new rules for transparency and accountability for credit rating agencies.

·         Creates an Office of Credit Ratings at the SEC with the authority to find agencies.

·         Allows investors to bring private rights of action against ratings agencies for a knowing or reckless failure to conduct a reasonable investigation of the facts.

·         Gives the SEC the authority to deregister an agency for providing bad ratings over time.

·         Requires ratings analysts to pass qualifying exams and have continuing education.

·         The SEC will create a mechanism to prevent issuers of asset backed-securities from picking the agency that they think will give the highest rating for their product.

13.   Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefits special interests at the expense of American consumers and businesses.

·         Implements a strengthened version of the Volcker rule by not allowing a study of the issue to undermine the prohibition on proprietary trading and investing a banking entity’s own money in hedge funds

·         Adds credit exposure from derivative transactions to bank’s lending limits.

·         Creates the first ever office in the Federal government focused on insurance.

·         Requires the Federal Reserve to issue rules to ensure that fees charged to merchants by credit card companies debit card transactions are reasonable an proportional to the cost of processing those transactions.

·         Allows consumers free access to their credit score if their score negatively affects them in a financial transaction or hiring decision.

14.   SEC and Investor Protections

·         Gives SEC the authority to impose a fiduciary duty on brokers who give investment advice.

·         Encourages people to report securities violations with rewards of up to 30% of recovered funds.

·         Creates a committee of investors to advise the SEC on its regulatory priorities and practices.

·         Provides more funding to the SEC to carry out its new duties.

15.   Mortgage Crisis:

·         Provides $1 billion to States and cities to combat the falling property values and increased crime that impacted some neighborhoods as a result of the foreclosure crisis.

·         Provides $1 billion for bridge loans to qualified unemployed homeowners with reasonable prospects for reemployment to help cover mortgage payments while unemployed.

For full report see: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/conference_report_FINAL.pdf

"Thank you for making my retirement possible and a lot sooner than I thought.
The very best to you."

Doug Thomas
Columbia, TN

(NOTE: Photo is not a representation of client.)

“Alberto, I can’t thank you enough for introducing me to a new investment approach for my IRA account. To think that I could buy real estate with my funds was news to me, and a welcome alternative to investing in the stock market. It provided me with an opportunity that so far has quadrupled my original investment in value in only two years. It enabled me to invest in an asset in my own backyard – real estate in the Wood River Valley. How much better does it get? Thanks again.“

Melinda

(NOTE: Photo is not a representation of client.)

(NOTE: Photo is not a representation of client.)

To whom it may concern;

My entire career has been involved with finance, real estate finance, real estate
development and management.

During that time with the assistance of excellent professional advisers, I have been
able to accumulate a significant IRA account balance.

As time went on however, I became more and more concerned with what could be
constructively done with these hard earned assets. The more I investigated, the more
concerned I became that in fact, an IRA was something of a time bomb.

I was discussing my frustration with Brad DuFur, a partner at Sun Valley Real Estate of
Ketchum, Idaho, with whom our family has done numerous real estate transactions, and
he brought fresh light to my dilemma. Working with Alberto Uranga, also from
Ketchum, Idaho, an IRA and estate tax planning Consultant, he pointed out that he, has
been able to find a way to utilize clients otherwise unusable IRA assets to facilitate the
purchase of real estate of all classes, residential, commercial, and other investments
(agricultural, recreational, 1031 exchange, etc).

I was at first skeptical, due in part to my own expertise, and the fact that nothing like this
had ever been addressed by my professional advisors. After thorough checking and
analysis, I found that Mr. Uranga has creatively and legally solved the problem.
At this time, I have done or am in the process of doing, 5 real estate transactions
Making use of my “frozen unusable” IRA assets. In the process, I am doing business I
might not have otherwise done, and I am systematically defusing the time bomb character
of my IRA accounts.

I am extremely grateful for Brad DuFur and Alberto Uranga, and the help they have been
to me. I am happy to give them both my unqualified recommendation.

Sincerely,

Harold D McNee, Jr.

June 4, 2010

To Whom It May Concern:

This letter is to highly recommend Alberto Uranga, of Uranga and Associates. My husband and I started working with Alberto and his team after reading an advertisement in an airline onboard magazine in 2006. The advertisement talked about setting up a "safe harbor" which would allow you to use IRA money to legally pay for real estate investments. It sounded perfect, but could we trust that it wasn't some sort of scam? After doing our due diligence which entailed discussing it with our tax attorney/CPA, checking with the IRS and talking with other Uranga clients, we moved forward and set up an account with Aviva. In light of the dramatic changes in the stock market and real estate values, this strategy has proven to be prudent.

We have continued to utilize Alberto and his team for other investments and have always found him to be very customer focused and proactive, regardless of the size of the transaction.

Sincerely,

Kim Royster and Thomas Tucker
Central Oregon

Earlier this year Billionaire Warren Buffett wrote in his annual Berkshire Hathaway letter to shareholders that “Within a year or so, residential housing problems should largely be behind us.”

Many of us recognize Warran Buffett as the “Oracle of Omaha”, the value investor that bought a textile manufacturing company called Berkshire Hathaway in1962, eventually moving it into insurance, and later establishing it as a holding company for a wide variety of investments and companies. Berkshire’s stock under Buffett has gone from $7.60 per share to a high of over $150,000 per share in December of 2007.

This is not the first time that Buffett has discussed the real estate market with shareholders. In  May of 2005, he and Charles Munger referred to the growing possibility of a bubble in residential real estate during the annual Birshire Hathaway shareholders meeting. Later in 2007 he announced that “The housing market is sick and it’s going to stay sick for a couple of years.”

In addition to Buffett, you are still seeing low interest rates, a rising Case-Shiller Home Price Index, increased employment, and a volatile stock market. Is this the time to get into real estate? Where are you putting your investment capital right now?

“We found ourselves homeless and with nowhere to go because the trailer park we were living in for over twenty years was closed down. We went to Alberto for advice on what to do. He was able to incorporate equity from our IRA combined with our modest assets to enable us to purchase a beautiful new home for us to occupy. We didn’t think we could ever qualify to own a home. Alberto made our dream come true. “

J.G. ,Ketchum
September 2004

(NOTE: Photo is not a representation of client.)