The majority of Uranga & Associates clients purchase real estate for personal use. However, investment real estate accounted for 21% of real estate purchased by our clients in 2007. This year is shaping up to result in an even higher percentage of investment real estate. Our clients are telling us investment real estate values have fallen and rental demand is up resulting in a more attractive Return On Investment than has been seen in several years.
Cases featured in this section are actual case histories of IRA/real estate plans structured by Uranga & Associates. Names have been changed to protect the privacy of our client(s).
Case Outline: Mr. White responded to an advertisement he saw in an airline magazine while on a business trip. Having accepted a promotion, Mr. White was to be transferred to a different location within his home state which would necessitate a change of residence for him and his family. Finding themselves in a buyer’s market was beneficial to the White’s for their new purchase, but presented a challenge to them in selling their existing primary residence. Ideally the Whites preferred to be able to hold onto their existing primary residence, converting it to rental property. However, their income fell short of qualifying for a new home mortgage while still maintaining their current home mortgage, even when taking into account anticipated rental income. Applying part of their retirement monies to the new purchase could be the solution they had been looking for. The Whites scheduled a telephone appointment with an Uranga consultant to explore how the OUTSIDE™ structure could work for them.
Summary:A total IRA transfer of $200,000 established a SAFE HARBOR® IRA account as the foundation for the Whites IRA real estate plan. Uranga & Associates then structured the IRA to make contributing payments for the purchase of their new home, in coordination with a new primary home mortgage, using non IRA monies necessary for the down payment. The Whites would now benefit from all associated rental real estate tax offsets for the their former primary residence as well as all allowable tax offsets for their new primary residence which would more than offset the minimal tax liability they would incur from the gradual transfer of their IRA to their new home investment. The Whites believed the tax benefits from owning rental real estate as well as the potential of capital gain in their former primary residence over a five to ten year period made holding on to that property a smarter financial decision than to sell in a depressed real estate market environment.
Other estate planning benefits are derived from the OUTSIDE™ structure. Please visit our website for further information.
http://urangafinancial.com/IRA_401K_real_estate/benefits_heirs_more.php?topic=basis
Alberto Uranga, creator of the OUTSIDE™ method of IRA real estate is recently featured in his home town publication. Uranga was born and lived his childhood in the culturally rich Basque region of northern Spain. Having always aspired to more than his rural community could offer- Uranga, one of 4 children of a fisherman, left his beautiful home town of Mutriku at the age of 22 to seek opportunities in the United States. The article talks of Uranga’s successes in America and the business he has been growing for the last sixteen years - structuring IRA real estate plans for people who wish to utilize their IRA to purchase property they can use and enjoy.
"I am disappointed that my unique IRA situation makes it impossible for me to use your 'Outside' method for a real estate purchase. However, I truly appreciate the time you spent on the phone with me, and also the expert advice you gave me. I was telling you the truth when I said that you know more about the tax and penalty issues involved with IRA accounts than does either of the two CPAs I have worked with! Thanks again for your time and expertise!" Barbara - Parkland, FL
USA Today reports on Wall Street's free fall yesterday. Investors' earlier anticipation of a second-half rally are fading. http://www.usatoday.com/money/markets/2008-06-26-stocks-thursday_N.htm?csp=DailyBriefng The question is, will despondent stock investors move monies from Wall Street to today's attractively priced real estate market? Or will a reluctance to take a capital loss on their stock portfolio effectively freeze all investor movement like a deer in the headlights?
WASHINGTON, June 26, 2008 Existing-home sales increased in May with buyers responding to lower home prices, according to the National Association of Realtors®. Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 2.0 percent to a seasonally adjusted annual rate 1 of 4.99 million units in May from a level of 4.89 million in April, but are 15.9 percent below the 5.93 million-unit pace in May 2007. NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said buyers are seeing value in the current housing market. “Home buyers are starting to get off the fence and into the market, drawn by drops in home prices in many areas and armed with greater access to affordable mortgages,” he said. “Today’s buyer plans to stay in a home for 10 years, which is a good strategy for building long-term wealth.” Read More: www.realtor.org/
As news of the OUTSIDE™ method spreads across the World Wide Web, over simplified misrepresentations of the process is a growing concern. Like the old fashioned children’s game of Telephone - where a secret is whispered to one child who in turn whispers it to the next and so on until the secret has traveled full circle and comes back to the originator completely distorted from its original content - so it can be true of information traveling through hyperspace.
When real estate and investment professionals post interpreted hearsay details of a proprietary process on their websites for a complex financial structure they have no experience with and limited understanding of, one must be concerned of the danger to their clients and the compromise to their fiduciary responsibility.
It is great news for the consumer that the OUTSIDE™ method is becoming more widely promoted and accepted by the professional world, but "client beware" of the professional who has just enough knowledge to be dangerous, and not enough experience to fully protect your financial interests.
Protect your retirement assets - make sure you work with a professional who has sat down with IRS tax shelter inspectors to audit each detail of the proprietary process and check for compliance in procedural policy.
http://urangafinancial.com/due_diligence/due_diligence_more.php?topic=tax_matters
Many people are experiencing a cash flow crisis either because of increased mortgage payments due to an adjustable loan or because of a decline in income. In some cases the negative ratio of expenses to income is forcing individuals to make a hard choice. Raid the 401k or IRA to pay down debt and suffer penalties and taxes, or kiss goodbye their largest investment to free themselves of their biggest monthly debt – their home mortgage. NPR talks about this in a recent “Your Money” piece – "Tapping 401k Now May Cause Financial Pain Later".
http://www.npr.org/templates/story/story.php?storyId=90969220
There is a less painful alternative which could ultimately be an investment advantage – the OUTSIDE™ method of IRA real estate. *Temporary utilization of your IRA or 401k rollover today, can save the investment you have in your home, lighten your monthly cash flow burden and still preserve retirement monies for the future. This is a very real solution to a growing problem in todays economic environment. Check out our website for further information and call our office to schedule a time to speak with a consultant.
http://www.urangafinancial.com/IRA_401K_real_estate/reduce_payments.php
*Your age will partially be the determining factor to the extent of the temporary nature of the OUTSIDE™ structure.
Cases featured in this section are actual case histories of IRA/real estate plans structured by Uranga & Associates. Names have been changed to protect the privacy of our client(s).
Case Outline: Mr. & Mrs. Jones responded to an advertisement in Delta’s Sky Magazine. Their daughter would be attending college in the upcoming scholastic year and the Jones’ were weighing the pros and cons of purchasing a condo for their daughter to live in versus renting accommodation for her. After viewing Uranga & Associates advertisement the Jones’ were intrigued with the idea of using their IRA to purchase the condo which would clearly tip the buy vs. rent scenario in favor of purchasing. Attracted by the flexibility of the OUTSIDE™ method structure which offers the ability to have full control over any and all transactions concerning the real estate without any legally prohibited transactions associated with real estate ownership within the IRA, the Jones scheduled a telephone appointment with an Uranga consultant to explore how the OUTSIDE™ structure could work for them.
Summary:A total IRA transfer of $430,500 established a SAFE HARBOR® IRA account as the foundation for the Jones’ IRA real estate plan. Uranga & Associates then structured the IRA, in coordination with a second home mortgage, using non IRA monies necessary for the down payment. Although the Jones’ would be receiving rent from their daughter and a roommate, the rental income would be minimal and given the Jones’ overall financial situation the tax advantages to declaring the property as a second home were far greater.
The Jones, believed real estate in the college town could be expected to increase in value at historic norms over the next 5 to 10 years. When their daughter was finished with college the Jones’, both currently in their early 50’s, planned to either keep the condo as a rental or sell it with the intention of purchasing another second home in an area they would enjoy spending vacation time. Either way, the real estate purchased with their IRA monies would eventually provide capital or income for their retirement having provided the intrinsic value of occupancy and enjoyment for many years prior to their retirement.
Other estate planning benefits are derived from the OUTSIDE™ structure. Please visit our website for further information.
http://urangafinancial.com/IRA_401K_real_estate/benefits_heirs_more.php?topic=basis
The IRA - individual retirement account, is still an enigma to many people. Frequently set up at the suggestion of a CPA or financial advisor as a way to offset income tax in a given year, the retirement account is often hurriedly created in a stock market based fund and then forgotten. Left to grow – or diminish with little or no management on the part of the IRA owner, it is not unusual for the beneficiary to have no conception of the variety of investment options available to him. Once placed with a market oriented money manager, it is up to the IRA owner to discover investment options other than those Wall Street has to offer.
Here are five facts you probably don’t know about your IRA:
Despite what your CPA, financial advisor, tax attorney or trusted friend may say. You CAN use your IRA or 401k rollover to purchase real estate.
There are two different methods of applying your retirement funds to the purchase of real estate. Each method is structured and regulated under entirely different tax rules.
The INSIDE method does not allow the owner of the IRA to personally gain any benefit from the real estate investment. A list of prohibited transactions makes this method only suitable for a hands-off investment purchase, requiring the services of a trustee.
The OUTSIDE™ method allows for personal occupancy of the real estate. Making the purchase of a primary residence, vacation home, business office or self managed residential rental property an attractive opportunity for redirecting your IRA monies into real estate.
You don’t have to be 59 ½ before you can utilize monies in your IRA. Provided your use is structured to comply with IRS rules, access to your IRA funds can be without penalty.
Read more on the two methods:
