Jim Hitt is the Chief Executive Officer of American IRA and he has been committed to all aspects of investing for more than 30 years, using self-directed IRAs for his own investments since 1982. Jim’s forte is the financing and acquisition of real estate, private offerings, mortgage lending, business’s, joint ventures, partnerships and limited liability companies using creative techniques.
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Real Estate IRAs - Special Considerations for Vacant Properties
By Jim Hitt on October 1, 2017
We are seeing more interest among real estate IRA enthusiasts in purchasing distressed and vacant properties. Many times, the real estate IRA investor can purchase a promising vacant property at a substantial discount to its intrinsic value, which make these properties attractive value investments – especially for those real estate IRA investors who have the capital to upgrade these properties and make them once again attractive to tenants at a reasonable rent.
But as long as a property is vacant, there are some special considerations that investors need to consider: Read More >>
Hiring Contractors for Your Real Estate IRA Property
By Jim Hitt on September 10, 2017
Real estate held within a real estate IRA is no different than real estate held elsewhere. Most of the same general principles that are applicable to any other real estate investment apply to real estate IRA properties, including contractor selection and hiring. This piece will deal primarily with the specific issues that apply to real estate IRAs (as well as real estate investments held within self-directed 401(k)s, SEPs, SIMPLE IRAs and other tax-advantaged accounts).
Observe prohibited transaction rules. When you own a real estate IRA, there are certain restrictions on whom you can bring on as a contractor to help fix, repair or renovate your real estate IRA properties. First of all, you cannot hire yourself. You cannot work for direct compensation or salary in any capacity in your real estate IRA. The IRS enforces very strict laws that prohibit you from using your real estate IRA to transact directly with yourself, your spouse, your children, grandchildren, parents or grandparents or those of your spouse, as well as any advisor who works with you on your real estate IRA in a fiduciary capacity. The same goes for any corporation or other business entity they control. Read More >>
Three Misconceptions About Building Wealth Through a Real Estate IRA
By Jim Hitt on August 7, 2017
Building wealth is a bit like dieting, in that everyone has different advice for you. “Cut up the credit cards,” personal finance gurus say, “and don’t buy that morning latte every morning.” Others say that stocks are the one true—and only—way to achieve prosperity. But is there any truth to these ideas, or is an option like a Real Estate IRA just as valid as any other path to wealth?
To figure it out, we’ll have to cut straight through the clutter. Let’s debunk three misconceptions about retirement investment in real estate right off the bat.
Misconception #1: The Real Estate IRA is Unpredictable
True: real estate is an investment that comes with risk. But if you know of any investments that don’t involve risk, please, tell the world—because we’d like to hear it. Read More >>
Four Critical Mistakes to Avoid with a Real Estate IRA
By Jim Hitt on July 10, 2017
A Real Estate IRA is a great opportunity. It’s freeing. It’s invigorating. It’s a thrilling way to potentially build up a major retirement nest egg so you can build wealth over the long term and enjoy the peace that comes with financial security. But that doesn’t mean it’s fool-proof, either. If you want to make the most out of a Self-Directed IRA in which you invest in real estate, you have to avoid some critical errors along the way. Here are four you need to be aware of:
Mistake #1: Not Hiring a Property Manager
Hiring a property manager is critical when you have a Real Estate IRA. Not only will it help take care of any problems with repairs, tenants, and other issues like that, but it will keep you from participating in a prohibited transaction since you are not allowed to provide services to your Real Estate IRA. Read More >>
Three Eviction Mistakes Real Estate IRA Owners Make
By Jim Hitt on June 4, 2017
If you invest in residential rental property in your real estate IRA for any significant length of time, sooner or later you will probably need to consider evicting a tenant.
There are several possible reasons you may need to evict someone: The most common, by far, is the non-payment of rent. Other common reasons include drug or other criminal activity or material violation of lease terms. Sometimes you can resolve these issues painlessly, by giving the tenant a little extra time, or by sending a notice to cure or quit the premises. But when these measures don’t work, a real estate IRA owner will have to ‘landlord up’ and begin eviction proceedings to get the tenant out.
Before you begin evicting a tenant from your real estate IRA-owned property, read this first. Read More >>
Homeunion Survey Identifies Most Promising Markets for a Real Estate IRA
By Jim Hitt on April 30, 2017
Looking for a great place to invest your Real Estate IRA dollars? Start right here in the Southeast. The 2017 Homeunion 2017 National Single Family Rental Research Report is out and Atlanta was named the #1 top city in its “Opportunity Ranking” metric for real estate investments in the single family home market. The number two city was Orlando, Florida.
The Opportunity Ranking indicates markets that provide a “strong balance of supply/demand fundamentals while offering favorable entry prices and limited threats,” said the study authors. The markets in this index were measured by a combination of cap rates and entry prices, as well as projected job growth in 2017.
Lots of construction activity counted against markets in this category because of the risk of overbuilding.
The remaining cities in the top ten for this metric were, in order, Seattle, Las Vegas, Chicago, San Diego, Oakland, Detroit, Dallas-Fort Worth and Memphis. Read More >>
7 Due Diligence Tips for Real Estate IRA Investors
By Jim Hitt on March 31, 2017
The difference between a successful real estate IRA investor and a not-so-successful one often comes down to due diligence. The investor who understands what goes into valuing a property, to include historic and expected cash flows coming in and out as well as risk – is able to make better decisions than a less skilled investor. If you’ve been blindsided by the unexpected as an investor – or if you believe you could be – here are some tips from experienced professionals to improve your due diligence and help you avoid getting caught unaware by the unexpected ever again.
Don’t rely on pro forma financial statements and projections that you get from the seller. This is a common rookie mistake. But most of the experienced and successful investors we speak to have never seen a case where the actual cash flows from a real estate investment were better than the pro forma. Any such information you get from the seller should be considered, at best, a wildly optimistic scenario. You want to pay a fair price for the property’s actual performance, not the best-case but highly-unlikely scenario. Read More >>
Decade after decade, it seems like real estate keeps coming through. While any asset class can have a down year – or even several down years in a row, as the real estate investment community saw between 2008 and 2010 – real estate remains a proven long term wealth generator year after year, decade after decade, and generation after generation.
That’s what makes real estate an ideal investment for your retirement portfolio – and even in a special kind of IRA, called a self-directed IRA.
Some people still believe the myth that IRAs don’t allow you to own real estate. This is because Wall Street companies that only sell stocks, bonds, funds, annuities and other kinds of paper assets. They aren’t compensated to sell real estate, and so they don’t pitch it, other than to sell real estate investment trusts, or REITs, which are still securities, rather than direct real estate assets themselves.
But it is very easy for you to own real estate assets of all kinds within a self-directed IRA – even direct ownership of rental properties. Read More >>
Real Estate IRA Corner – Investing In Properties With Fire Damage
By Jim Hitt on February 6, 2017
The recent series of wildfires here in our own Smokey Mountain region of North Carolina and Tennessee has been devastating. The fires around Gatlinburg, Tennessee late last month resulted in at least 2,460 structures that were damaged or destroyed, and the death toll has reached at least seven.
Lots of people have lost their homes and businesses – and surely many of them were uninsured for wildfire damage, or will find that they were woefully underinsured.
The real estate investment community, including real estate IRA owners, can and should be active in this environment. By offering a fair price for fire damaged properties that we have the capital to repair and resell or rent, investors will be vital players in helping a traumatized community get back on its feet and rebuild. Read More >>
Expected returns are hard to come by. Stocks are at elevated P/Es on a historical basis, and yields are near all time lows. With economic growth sluggish, at 2-3 percent per year, any major gains will have to come from multiple expansion – and who can count on that? Earnings multiples can fall as easily as rise. This is what caused many of us to gravitate to self-directed IRA strategies in the first place!
Bonds aren’t much better, in the publicly traded market. There’s some downside protection, in theory.
Fortunately, electing to use self-directed IRA strategies allows you to transcend the limited publicly-traded stock and bond world, and explore hidden opportunities that are invisible to most investors – but which still offer reasonable yields – at acceptable risk levels, or at least with some security.
One such opportunity for self-directed IRA investors: Discounted Owner-Financed Real Estate Notes.
Here’s how it works: Read More >>
Like all Americans, we were deeply saddened and distressed by the recent widespread flooding here in North Carolina and elsewhere in the Southeast. We know that beyond the property and investment losses, many people lost their homes, property and heirlooms that no insurance policy can replace.
But torrential rains and flooding is an ever-present risk here in the southeast, America’s Hot Corner when it comes to hurricane and tropical storm activity and a place that certainly gets its share of ordinary thunderstorm and tornado activity as well, even apart from the tropical cyclone risk.
But according to industry sources, less than 10 percent of South Carolina homeowners carry flood insurance. That’s well below the national average of 14 percent, which is still distressingly low. Read More >>
Maximizing the return you get out of your retirement investments is a question that’s on most peoples’ minds. So how can a Self-Directed IRA help?
One word: fees. Fees are important for any investor to pay attention to—keeping them at a minimum will allow you to have more cumulative growth over the years, and avoiding major fees will ensure that you cut your direct expenses as much as possible.
In the world of real estate investing, fees can be very difficult to deal with. Here are some steps to ensure that you can maximize the value of your account no matter how much money you currently invest with: Read More >>
Why Nervous Investors Can Benefit from Real Estate IRAs
By Jim Hitt on October 3, 2016
When stock markets are volatile, investors (rightly) get nervous. After all, many people have most of their wealth in the stock market. If the stock market goes down, then they see their wealth shrinking...and for people close to retirement, this is a scary prospect indeed. But it doesn’t have to be this way. With Real Estate IRAs, many people learn that retirement income doesn’t have to depend on the quality of the Dow Jones Industrial Average. Instead, retirement income can depend on your strength as an investor, and the wisdom it takes to know what true diversification really is.
And just what is that “diversification” we’re talking about? Some people will tell you that investing with diversification means having the right mix of stocks and bonds, of having stocks split up into small cap, medium cap, and large cap equities. But all that really means is that you’re invested in two different investment categories, all the while ignoring all of the very real possibilities for retirement income that are out there.
If you’re sick of feeling nervous every time that stock ticker heads into the red, then it’s time to broaden your horizons as a wise retirement investor and look into what diversification really means. Read More >>
Best Home Improvements for Real Estate IRA Properties
By Jim Hitt on September 6, 2016
If you own rental property or investment property within a real estate IRA, it’s important to be careful with the money you spend making improvements. While many people make improvements and upgrades to their own homes to increase their enjoyment of their homes, not every home improvement immediately adds to the dollar value of a home, net of costs.
But some do, depending on the property and the market. This is especially true if you are bringing a home up to the standard of the surrounding neighborhood.
Except in special circumstances, or when transforming an unlivable home to a livable one, most major renovations don’t add immediate resale value once you account for the costs of professional work, licensed contractors, etc.
However, there are a few projects that have proven themselves over time, when used in the right homes – chiefly things that improve the cosmetic appearances of a home and enhance curb appeal. Read More >>
The Self-Directed Real Estate IRA: Five Benefits You Didn’t Know
By Jim Hitt on July 30, 2016
You might have heard of a Real Estate IRA. You might have even looked into it as an option in the past as you considered the retirement options that make the most sense for you and your family. But if you’re not familiar with this kind of retirement account, you might be surprised at just what kinds of investment results you can have when using it properly.
Don’t believe us? Let’s take a closer look at the Self-Directed Real Estate IRA—and how it can uniquely benefit your retirement plans:
Benefit #1: Getting More Leverage with a Real Estate IRA
One of the most fascinating concepts in real estate investing is that of leverage. By using leverage, you can make purchases you otherwise wouldn’t be able to make with the cash in your bank account. In Real Estate IRAs, you’ll be expected to use non-recourse loans, but you’ll still be able to use this concept of leverage to your advantage. In other words, you can buy real estate that you otherwise would not be able to with plain, ordinary cash. Read More >>
Four Reasons Real Estate IRAs Might Be Right For You
By Jim Hitt on July 10, 2016
When you think about the acronym “IRA,” what do you think about? For most people, it’s a very common recipe: an IRA is something in which you put your mutual funds, your bonds, your stocks…and very little else. It’s the beaten path to retirement, and it works for a lot of people. But others wonder if there aren’t ways to supplement this type of investment and ensure a consistent level of income for your retirement years. These are the kinds of people who start to research Real Estate IRAs.
If that sounds too complicated for you, just remember: the IRS allows for lots of different types of investments through retirement accounts. A Real Estate IRA is simply a Self-Directed IRA in which you place a real estate investment. And considering just how common of an investment real estate is—especially for America’s seniors who want to ensure that they have consistent income for the future—then maybe it’s time that you consider real estate IRAs too.
Not convinced yet? Let’s take a look at some of the most common reasons people consider these IRAs: Read More >>
Real Estate IRA: What Every Retirement Investor Needs to Know
By Jim Hitt on June 5, 2016
You’re an investor who’s focused on the long-term: your ability to retire with a nest egg. You want to build over the long-term, and you know that there are many different vehicles for doing just that, including employer-based 401(k) plans and more. But what many investors overlook is the possibility of using a Real Estate IRA in their retirement portfolio.
Why do they overlook it? For one, the option is rarely presented to them. Many people don’t even know that you can invest in real estate with an IRA. Another reason: many people believe that investing in real estate is a “rich man’s” game. But investing in real estate is available to anyone with the drive and interest to make it happen. Let’s take a look at what every retirement investor needs to know about the Real Estate IRA in order to make it part of their portfolio. Read More >>
Tips and Strategies for Getting the Most Out of Your Real Estate IRA
By Jim Hitt on May 2, 2016
If you want to get the most out of your retirement, we have three words for you: knowledge is power. No, we’re not talking about any sort of “inside” knowledge when it comes to investing, or any sort of illegal tips and tricks. We’re talking about real investing knowledge: knowledge about the different types of accounts and investments you have available to you, and how to use those accounts and investments to the best of your ability. And one of the most important things for people to learn is how to use their Real Estate IRA in the best way possible.
Why a Real Estate IRA? Because self-directing this type of IRA allows you to utilize some amazing things that you simply can’t get when you invest in other types of accounts and asset classes. With real estate, you’ll be able to tap into your experience with this asset class…and possibly even get a lot of value out of it if this is your first foray into the world of real estate. How is that possible? Well, knowledge is power. Here are some tips and strategies for getting the most out of your Real Estate IRA. Read More >>
Our clients who focus on real estate IRAs are encountering a more mature point in the investment cycle. We’ve had a nice run up over the last several years. Indeed, if you had some cash to play with in 2009 and 2010 and a bit of patience, it was tough to go wrong with real estate IRA strategies. The real estate market was attracting a boatload of institutional money and all the real estate investor had to do was step in front of it.
Now there’s still institutional money coming in, but investors have to pick their spots a little more, and getting your valuations right is going to have increasing importance going forward.
Meanwhile, the permabulls at the National Association of REALTORS® has also released their 2016 trends piece. Naturally, they think it’s always time to buy, so take their advice with a grain of salt.
Here are the NAR’s predictions for 2016, plus a few thoughts from us on how they may play out for our clients and those considering a real estate strategy in their retirement accounts. Read More >>
Are You the Type of Investor Who Fits a Real Estate IRA?
By Jim Hitt on March 6, 2016
Most of us have the same financial goals. We want to take care of our families. We want to take care of ourselves. We want to work towards retirement with confidence that our decisions are the right ones, and we want to see our wealth grow. We want to retire with plenty of money left over for a comfortable lifestyle, happy and peaceful knowing that we’ve done enough to take care of ourselves should disaster strike. So what does this all have to do with a Real Estate IRA?
A Real Estate IRA is one tool you might have for getting to that goal. Although many of us share the same goals, the strategies which we employ to achieve those goals can vary. And for some people, a Self-Directed IRA invested in precious metals might be one way to get there. For other people, a Real Estate IRA might be more suited to their knowledge and experience.
How do you know if you’re the kind of person for whom a Real Estate IRA might work out? We thought you’d never ask. Read More >>