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What is a Self-Directed IRA?

A self-directed IRA is legally no different from any other IRA. The term “self-directed” simply indicates that you, the client, choose your IRA’s investments. Most brokerage houses and banks that offer “self-directed” IRAs limit clients to the scope of their own investment products. Non-Traditional Custodians do not need to impose the same restrictions. What this means for you is MORE CHOICES & MORE FLEXIBILITY for your retirement savings plan.

What can a Self-Directed IRA invest in?
The rules governing what an IRA CAN invest in are exclusive - not inclusive. That is, the rules only specify where you CANNOT invest. Therefore, there is a virtually unlimited array of possible investments that fall well within the permissible boundaries.

The IRS only defines the following assets as excluded (prohibited):
- Life insurance contracts (e.g., a life insurance policy on the life of the IRA owner);
- Collectibles (e.g., antique rugs, cars, stamps, furniture, etc.);
- Capital stock in an "S" corporation.

Examples of investments allowed (specialized assets) within self-directed IRAs
Self-directed IRAs offer you, the investor, tremendous flexibility in choosing investments for your retirement savings.

Investing in real estate through your self-directed IRA may be the key to turning those dreams into reality. While most self-directed custodians accommodate traditional investments such as mutual funds and stocks, specialized companies also allow clients to invest in all forms of real estate (e.g., raw land; rental properties; commercial properties; even real estate-related private entities, such as limited liability companies, that invest in real estate).
Additionally, investments called private placements, such as those associated with funding a startup company. Many people are shocked to learn that they can use the 401-k from a former employer to help start a new business.

Why hasn't the self-directed IRA business been publicized?
Because of their efficiency and profitability, traditional IRA providers control about 97% of the IRA industry. Their huge marketing budgets allow them to maintain a strong public presence, although recent guerilla marketing techniques through the national media are now giving much-needed exposure to the valuable self-directed service industry. The true self-directed industry has the remaining 3% - but rapidly growing - share of the IRA market.

Many feel that the cat has been let out of the bag for the IRA marketplace. The recent publicity surrounding possibilities within the self-directed industry has started a brush fire that will rapidly sweep across the U.S. A recent national publication suggested that all Americans should have 25% of their retirement savings in real estate. That would represent a growth of 1,150% over the current level of 2% of the $3.7 trillion in retirement savings that is currently in IRA assets. It is also estimated that overall, IRA assets will grow by as much as $2 trillion between 2004 and 2006 due to the retirement of the baby boomers. Clearly, the self-directed industry is on the rise. The time to join this growing movement is now.

For more information, please contact

Your Mortgage Planner - William Doom, CMPS.
www.MyEquityPro.com

New Mortgage Guidelines Put Limits On Residential Real Estate Investors

Before the Goverment aquired Fannie Mae it altered mortgage guidelines for real estate investors 9/05/2008. It was Fannie’s 22nd update this year.

The first part of the guideline change limits the number of properties owned by any one person.
Fannie Mae will now decline any mortgage application for a second home or investment property if the mortgage applicant already finances, or will finance, more than 4 properties in total.
The former guidelines allowed for 10.

There is a loophole, however. Fannie Mae will not count properties against the 4-property limit if they are held in the name of a corporation. This holds even if the real estate investor is the sole owner of said corporation.

Investors, therefore, should consider moving their properties into a corporate structure to avoid triggering Fannie Mae’s 4-property limit. Investors often take this step for liability and taxation reasons, but it’s now a good idea for mortgage approval reasons too.

The second part of the guideline change cannot be so easily avoided. Fannie Mae is assessing new, loan-to-value based loan fees on all investment property mortgages.

Loan-to-value less than 75 percent : 1.75% loan fee
Loan-to-value 75.01-80.00 percent : 3.00% loan fee
Loan-to-value 80.01-90.00 percent : 3.75% loan fee

These fees are mandatory and are in addition to any whatever other risk-based loan fees Fannie Mae may assess. Currently, those fees amount to a half-percent at minimum for real estate investors.

Since its Fannie/Freddie takeover, government officials have not addressed whether mortgage guidelines will be rolled back to “a looser time”. If they are, it would be a big deal for real estate investors because, as many are finding out, low rates don’t matter much if you can’t qualify for them.

If you’re currently in the market for an investment property (or two), consider that it may be cheaper and simpler to purchase over the near-term versus the long-term. And consider moving your existing properties into a corporate structure first.

If you are thinking of purchasing or refinancing an investment properties feel free to contact me William Doom, CMPS. For a FREE Mortgage Investment Analysis. Stay up to date on the Mortgage Market read my Blog http://www.yourmortgageplannersblog.com/