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?

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. Anderson responded to an advertisement in Delta’s Sky Magazine.  The Andersons have been hit hard by the recent down turn in the economy.  Mr. Anderson who is in his late fifties had heard he was to be laid off from his executive level position in the technology industry and his wife’s hours in her retail position had already been cut back.  Faced with a dramatically reduced income and no immediate job prospect in site, the Andersons were concerned with being able to make their mortgage payment. After viewing Uranga & Associates advertisement the Andersons were intrigued with the idea of applying their IRA to save them from potential financial distress with their primary home mortgage so they scheduled a telephone appointment with an Uranga consultant to explore how the OUTSIDE® structure could help them out.

Structure:    A total IRA transfer of $320,000 established a SAFE HARBOR® IRA account as the foundation for the Andersons IRA real estate plan.  Uranga & Associates then structured the IRA to make regular monthly payments in the amount of $1,700 to be applied to the Anderson's home mortgage payment.  After five years, by which time, hopefully, the economy will be back on track and the Anderson's employment situation will have improved, they can choose to discontinue the cash flow stream from the IRA to allow it to revert to building equity for their future retirement. 

Summary: For the Andersons Uranga & Associates structured the SAFE HARBOR® directed IRA real estate plan to provide cash flow assistance as a short term solution to their financial needs.  The Anderson's customized plan allows the flexibility for them to discontinue the cash flow stream from the IRA after five years or continue it for as long as they choose.  If they do decide to discontinue the transfer of IRA money into their primary residence after 5 years, they can expect, with a worst case scenario, a minimum value of $259,000 to still remain in their SAFE HARBOR® IRA account even after $102,000 of its original value has been transferred into their primary residence. This financial plan gives the Andersons the security and peace of mind they need to weather the economic storm and come out of it unscathed.

Other estate planning benefits are derived from the OUTSIDE® structure.  Please visit our website for further information.