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Do you have an IRA or 401(k) rollover account? If so, like most
Americans in your position, your money is probably invested in some
combination of fixed income and/or equity products. Also like many
people in today's economy, you may be re-considering your investment
strategies in light of the low rates of return currently being offered
on fixed assets, or the volatility and lack of predictability
associated with the stock markets. Have you considered Real Estate?
What if I told you that you could use your IRA or 401(k) rollover
money to take advantage of the depreciated values of real estate by
investing in a primary residence, a second home, a vacation rental or
investment property?

   If you qualify and have a balance of $100,000 or more in your IRA
or 401(k) rollover account, the OUTSIDE method developed by Lasaii (a
division of Uranga & Associates) allows you to move your retirement
funds into a SAFE HARBOR directed IRA account. Through this account,
structured by a Lasaii consultant, you can purchase and occupy the new
home, vacation getaway, or an investment property of your choice.
Don't wait until retirement to begin enjoying your retirement savings!
Visit Lasaii.com for more information.

Case outline:  When Mr. Murphy became a client of Uranga & Associates he was 66 years old and in the process of buying a second home which would ultimately become the retirement home for him and his wife.  Mr. Murphy had the necessary down payment for the second home of his choice, but in order to afford the monthly mortgage payments it would be necessary for him to draw from his retirement fund. Mr. Murphy enquired at a local bank to find out if they could assist him with structuring his IRA for the purchase.  The Bank informed him it was outside of their expertise to structure IRA real estate purchases and referred him to our company, Lasaii of Uranga & Associates. Mr. Murphy consequently contacted us to learn how his retirement monies could be utilized for his real estate purchase. The OUTSIDE® method allows for non IRA monies to be coordinated with IRA monies and also allows legal occupancy for the purchaser of the real estate. Additionally the OUTSIDE® method structures the retirement monies dedicated to supporting the real estate purchase to avoid any loss of principal through investment exposure.  This precaution is important at any stage in life, but particularly in one’s latter years, where a substantial loss in the principal value of a retirement account has a high probability of never recovering to its prior value within the lifetime of the owner. The Lasaii division of Uranga & Associates structured a plan for Mr. Murphy placing approximately $1,100,000 of his IRA in a SAFE HARBOR® IRA account to create the structural foundation for his IRA real estate plan. This SAFE HARBOR® IRA account, guaranteed to earn a minimum of 3% with a potential of 4% – 5% as a ten-year average , was structured to provide an income stream to be used toward paying Mr. Murphy’s monthly mortgage payments. Any tax liability generated by this income stream was calculated to be offset by allowable real estate tax deductions. 

Summary:  This structure was implemented four years ago in 2005.  In the past twelve months many retirement funds exposed to stock market fluctuations have lost as much as forty percent of their value.  Mr. Murphy’s SAFE HARBOR® account lost no principal value whatsoever.  Had Mr. Murphy’s retirement monies not been protected by the vigorous safeguards of the SAFE HARBOR® directed program, the monies he had planned to have support the mortgage for his retirement home would have been diminished to the point where they would have been exhausted long before his home mortgage was paid off. He would now be faced with the difficult prospect of having to sell his dream home in a poor market environment and at a capital loss or to continue to support the mortgage with his remaining retirement monies and face the consequences of the cash flow running out at an accelerated rate in just a few years. However, since Mr. Murphy chose to apply the SAFE HARBOR® strategies to his IRA real estate purchase, his home purchase plan has been unaffected by the recent upheaval in the investment markets and so he and his wife can continue to enjoy their retirement lifestyle in the resort community they chose to retire in.

Case outline: Mr. Bennett is 46 years old and married.  Mr. Bennett has a high level sales position with an international company which requires extensive travel.  However, when he is not on the road, he is able to work from home.  This allows him and his wife to live anywhere that is within reasonable distance of an airport.  Because Mr. Bennett is away from home much of the time, his wife wanted to move closer to family.  They found just the home they were looking for on small acreage just thirty minutes drive from Mrs. Bennett’s sister.  Mr. Bennett liked the idea of dedicating IRA monies to support the purchase of the new home so that the tax free capital gains from the sale of his existing home could be applied to other investments. 

The Lasaii division of Uranga & Associates assisted Mr. Bennett in placing approximately $380,000 of his IRA in a SAFE HARBOR® IRA account - the structural foundation to his IRA real estate plan.   This SAFE HARBOR® IRA account insures against loss of principal value due to investment exposure during the life time of the contract.  Mr. Bennett’s SAFE HARBOR® IRA account was then structured to provide an income stream to be used to pay interest and principal on the home mortgage for their new home.  Any tax liability generated by this income stream was calculated to be offset by allowable real estate tax deductions.  Mr. Bennett’s IRA will continue to make these mortgage payments for a minimum of 18 years, with a potential of up to 27 years depending upon the interest he receives in his SAFE HARBOR® IRA account.  

Summary: The IRA real estate plan enabled Mr. & Mrs. Bennett to purchase their new home without the necessity of selling their existing home first, thereby facilitating a seamless transition to their new home in a different State. By structuring Mr. Bennett’s IRA to support the purchase of his new home, Mr. Bennett was able to benefit from tax free capital gains on the sale of the old home without having to reinvest it back into real estate.  The Bennett’s IRA real estate plan has been structured over a 14 year period to be in compliance with Federal IRA regulations.  During this time, they are free to turn their property, but it will be to their advantage to continue to apply the income stream generated by Mr. Bennett’s IRA to a real estate purchase.  After the 14 year term, Mr. Bennett may choose to redirect his IRA investment, or he can continue to apply it to real estate until either the IRA is fully utilized or the real estate is paid in full.  Additionally there are Estate Planning benefits to this IRA real estate plan that are not covered in this brief synopsis.

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. 

Most would agree that a healthier lending environment is a positive step in stabilizing credit risk which in turn will boost real estate values.  This is the longer term objective - however, in the short term, sellers and buyers are experiencing a challenging transition period where, lenders – reeling from high foreclosure rates – have tightened lending qualifications to such an extent only the “perfect” applicant qualifies resulting in lost sales.

As unfair as it may be, it seems apparent that the borrower today is being penalized for the gluttonous appetites and unethical practices of the lending markets of yesterday.  Buyers and their realtors are frustrated by the much tougher lending criteria, which seemingly changes on a moment by moment basis.  Just when you think you have found a compatible loan you get that dreaded phone call informing you that loan to value ratios have been adjusted so you can’t finance as much of the purchase price as you had hoped.  Or the down payment percentage has been raised to 40% for a second home purchase, so now you have to come up with another $55,000 in cash.  Or your lender has decided to get out of the jumbo loan business and can no longer offer you the loan they had agreed to do for you just last week. Qualifying for a conforming loan in the first place is rigorous, with lenders demanding high standards from their clients.  Do you have perfect credit - plenty of assets? If so, you might think you would be a shoe-in with a competitive rate.  Not so if you happen to have recently made a career change to self employed status.  That will mean a higher interest rate, possibly even additional upfront fees.

Uranga & Associates clients have the benefit of added ammunition to fight for the best available rate.  Once our client’s IRA has been placed in a SAFE HARBOR® IRA account - the foundation for their IRA real estate plan - we can supply their lender with documentation verifying additional income for a substantial number of years.  This extra income assurance is looked upon favorably by lenders and in some cases can make the difference necessary in qualifying for the loan.

As is often the case for many discovered abuses, correction initially causes the pendulum to swing to the far extreme. There are some signs however, that things may settle back into moderation.  Fanny Mae just announced last week that they have reconsidered their earlier policy of requiring a 90% loan to value ratio in areas that had experienced the greatest loss of value and will now lend up to 95% of value to the qualified buyer.  Fannie Mae has also announced the introduction of their “Keys to Recovery” initiative.  They are working to reduce the cost to consumers of jumbo conforming loans (loans above $417,000, up to $729,750 in some areas) and make it easier for individuals and families to qualify for these loans. Additionally Fannie Mae will allow many borrowers to refinance Fannie Mae-owned mortgages, even where a home’s current value is significantly less than the existing mortgage, in an effort keep families in their homes and prevent foreclosures that are a disaster not only for the families but for whole communities.  Read more on Fanny Mae initiative: http://www.realtor.org/press_room/news_releases/2008/fannie_mae_initiative_recognized