Top Market for 2010? Cleveland.

When is inflation a good thing? When you're talking about the value of a home. And HousingPredictor.com set out to find their top 25 inflating markets for 2010. The top 4 markets were in Ohio, with Cleveland taking the #1 spot. Check it out here.

Why Ohio and Cleveland? They chalk it up to an over-correction. Prices got so low that the only way to go is up. Cleveland is still a "relevant" city with a functional economy that is beginning to replace their 19th century industry with 21st century technology. There are solid neighborhoods, a nice downtown, sports and theater...all the things that a real, relevant city has to offer. The perception that most have has also set back their real estate and is another reason why prices became so depressed. Like HousingPredictor.com, I believe the Cleveland real estate market is ready for a nice rebound.

If you're looking for a market that is at or near it's bottom, Cleveland is a good place to start.

A Fantastic Testimonial!

This was a response to the question, "How's it going?" Can't wait to get it up on the website. Talk to you in February, Bob.



I'm setting here in Bahia De Navidad, Mexico having a Corona and looking at the ocean. We are going into our second month of a three month trip cruising the Mexico Pacific coast with my friends in their 43' sailboat. We will be back in Feb. next year.

All this is possible because of You and Freedom Growth which helped me achieve my retirement goals. CEP is going great, just as advertized, deposit each month into my IRA account and then into my checking account. None of my friends believe I'm getting 10.85% interest.

Thanks again for your help and direction. I check in with you when I return.

Bob

Which Regions are Moving in What Direction?

The latest S&P/Case-Schiller Home Price report was released last week. Case-Schiller measures the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. I was curious to see what regions were starting to reverse trends and move upwards.

Here are the top 20, listed in order of increase/decrease since January 09.

1. Dallas +7.20%
2. San Francisco +6.06%
3. Denver +5.94%
4. Cleveland +4.22%
5. Washington DC +3.84%
6. Boston +3.35%
7. San Diego +3.32%
8. Minneapolis +1.88%
9. Atlanta +1.57%
10. Los Angeles -0.01%
11. Charlotte -0.16%
12. Chicago -0.19%
13. TOP 20 Composite -0.24%
    
14. Portland -2.22%
15. Seattle -3.23%
16. New York -3.46%
17. Tampa -4.03%
18. Miami -6.80%
19. Phoenix -8.03%
20. Detroit -8.34%
21. Las Vegas -18.77%

Since January 09, the top 10 regions on the list above have either stabilized or have started to actually increase according to Case-Schiller. While this isn't the only data to analyze when determining if a market is worthy of investment, it's a good place to start. These top markets are starting to claw their way out of the 2008 hole and trend upwards.

Since it's impossible to correctly pinpoint the exact bottom of any market without hindsight or a good set of tarot cards, a good time to buy is when the market starts it's upswing. I'd say these top 10 markets are worthy of further consideration.

Cleveland No Longer "The Mistake By the Lake"

By now, you've probably heard that you can buy a house in some Midwest cities for $10,000. While inexpensive, does it make for a good investment? We've been working to answer that question for the last few months and my research culminated with a visit to Cleveland last week. My findings? $10K houses cost a lot more than $10k, but they can make great investments....especially in Cleveland.

What Does a $10K House Look Like?
Pretty beat up as you would imagine. While the bones of the place may be sound, the vital organs and skin are badly diseased. These types of investment properties require major renovations to make them livable...and rentable. But while these renovations need to be complete, you don't need to go over-board with granite counter tops and brushed nickel hardware. You need a contractor that can maximize a smart renovation budget to make the house clean and comfortable. Another $15K-$25K in proper renovations are usually needed.

Why Cleveland?
The market I was most interested in exploring was Cleveland. Cleveland is a market that has faced extreme contraction over the last 50 years. As its heavy manufacturing economy became unstable, Cleveland began searching for alternative industries. Over the last 10 years, they have been diversifying their economy with strong development of service industries (most notably insurance and medical), biomedical and fuel cell research. Case Western University is a huge employer and at the center of the next generation of Cleveland's history. Cleveland, via Case Western, is among the top recipients of investment for bio-tech start-ups and research. Case Western Reserve, the Cleveland Clinic (another huge employer), and University Hospitals have recently announced plans to build a large biotechnology research center and incubator on the site of the former Mt. Sinai Medical Center, creating a research campus to stimulate bio-tech start-up companies that can be spun off from research conducted in the city. Unlike many of its mid-west counterparts (see Detroit,) Cleveland is beginning to replace last centuries economy with this centuries technologies. Here is a great article about the future of Cleveland.

Cleveland's Housing Market
Please don't misunderstand, Cleveland has problems. Every city does. But what I like is what's being done about them. This Forbes article describes some of the problems Cleveland is facing, but also some of the solutions. One of the neighborhoods listed in the article, Slavic Village, is an area that I like because of the quality of the existing citizens and the non-blighted properties. The residents are forming clubs, planting gardens, patrolling the streets...taking back their neighborhood. Cleveland is also issuing $50MM in bonds to buy and demolish derelict homes, phase one in their redevelopment plan. I saw 2 in the process of deconstruction while I was there. How are these efforts impacting housing prices? I did an analysis of Case-Shiller's index from Jan 09 - August 09 (the most recent data.) When you look at the largest movement in the numbers among Case's top 20 markets for the year, Cleveland is in 2nd place (+9%), trailing only San Francisco (+9.12%). Average for the top 20 markets is +1.98%. Worst market? Las Vegas is down -14.45% for the year. From what I've seen, this market is moving in the right direction and will continue to attract a range of investment dollars.

A Trusted Partner
To squeeze the most out of your real estate investment, you need quality property management. Besides enforcing timely rent collection and tenant selection, you need someone doing periodic checks on the property and taking care of small problems before they become big issues. In Cleveland Property Management Group (CPMG), I found a tenured, trusted company to help manage any property put into their service. Here's what I like about CPMG:

• One Stop Shop: With their sister company Cleveland Restoration Group (CRG) these guys are involved in the deal from acquisition, to renovation, to management through liquidation. Besides having one contact through the whole process, CRG/CPMG also "touch" the deal...or make money...all along the way. That allows them to keep specific fees low and reasonable.
• Positive Reputation: CPMG is primarily a property management company. The properties they manage are newly renovated, so tenants like renting from them. So when vacancies arise, they have the ability to fill a property very quickly.
• In for a penny, in for a pound: Once they find a specific street in a specific neighborhood that they like, they buy up as much as they can in that area. We were on a street in the Slavic Village looking at a property that is for sale and there were 3 other properties on the street that were their deals. That type of involvement is good for them, the investors, the tenants and the neighborhood. I love win-win situations.
  
• They Invest Their Money: If they find a deal they like, but don't have an investor lined up, they purchase it themselves. Trust me, if they're risking their own capital, you can bet it's a pretty strong deal.
• Quality Construction: CRG is responsible for the renovations and they do it wisely. They focus on major systems: electrical, plumbing, heating/cooling, roofs and windows. These properties will not be selected for Better Homes and Gardens. But they are solid rental properties that shouldn't require major renovations in the next 3-5 years.
  

Buying in Bulk
Everyone knows that you can get better deals by buying in bulk. Real estate is no exception, but certainly requires more capital. Since Freedom Growth has a few investors lined up, I was able to negotiate concessions that can affect the overall return on the investment. So even if an investor could only buy one property, they can get it at a bulk rate by placing it through us.

Getting Started
All of these properties are priced in the mid $40k range AND come with a tenant and lease already in place. Rents are in the $650 - $700 price range, so the return on the investment from the monthly cash flow is strong. Any appreciation you earn on the deal is gravy. These properties work equally well either inside or outside an IRA, so if you've gotten this far and are interested in seeing specifics on an actual deal, please let me know.

Great article in the SF Chronicle

The SF Gate ran a great piece on real estate investing through self-directed IRAs. Check it out here. But the article did overlook a critical player in the self-directed space...that of the adviser or consultant. Here's the follow-up email I sent to the reporter.

Carolyn, this is a great article. Feels like the PR machines for Entrust, Equity Trust and Pensco helped to provide info on this piece. Your article does a great job of highlighting the benefits of investing in real estate through self-directed IRAs, as well as pointing out some of the potholes to avoid. But it overlooks another player in the space that is helping to make this type of investing the fastest growing segment of the IRA market....the self-directed adviser or consultant.

For most, investing in real estate through self-directed IRAs is a first on two levels. They've never invested through a self-directed IRA, nor have they ever made a real estate investment. That is a daunting challenge, but one that is easy to overcome. More and more real estate professionals are specializing in self-directed IRA investing. But some, like our firm www.FreedomGrowth.com, are also specializing in the creation of the self-directed account. What type of self-directed IRA you choose, as well as which custodian you select, can impact the bottom line of your investment. And once you own the property, a good adviser will continue to provide advice on what you can, and more importantly can't do, to keep your IRA in the good graces of the IRS.

The custodians are allowed to tell you what is and isn't legal within your self-directed IRA, but they are prevented by law from telling you whether a particular investment makes sense. That's why a professional that specializes in a certain type of investment is a necessary partner for most investors. With real estate, being advised as to whether a particular property...or tax lien, trust deed, real estate note, etc....makes sense is critical information that most ordinary investors find extremely valuable.

So for those new to this type of investing, and to those reporting on it, make sure you know that quality help is out there. The cost to have an adviser on your team is minimal, even free to most real estate investors. Why wouldn't you help to stack the deck in your favor?

Again, great article. Thanks for helping to spread the word.

Social Security is in the Red

Are you sure you really want to count on social security? For the first time in it's history, social security is paying out more than it's taking in. No need to immediately panic. There's still a $1.2 trillion reserve to pay retirees, but how long will that last? The Fed is projecting a $19 Billion deficit over the next 2 years. Check out the gritty details in this MSN article.

Historically, most Americans have supplemented their Wall Street based IRA/401(k)/Pension savings with social security checks. The long term viability of that strategy is in jeopardy, even if it hasn't infiltrated "conventional" wisdom. Alternative strategies exists and individuals are rebuilding their retirement portfolios right now using a wide range of "non-traditional" investments.

If you think you don't have time to look at alternative strategies, you're mistaken. Find a professional that specializes in self-directed investing and let them do the heavy lifting. It's a small investment in time that will pay huge dividends when you retire...and do have time.

A Revitalized Retirement Plan Can Reduce Business Costs AND Improve Participation

Here’s a dilemma every small business owner is facing these days. How do you reduce current costs without sacrificing your growth potential? Here’s one QuickBooks line item to consider…your retirement plan. A revitalized retirement plan can help reduce your administration costs while improving employee attraction, retention and participation.

Most small business owners establish their 401(k) early in their life cycle. Because of the small size, the broker establishing the new plan modifies an existing “off-the-shelf” plan for the business owner. These plans are usually chocked with unnecessary fees to help offset the relatively small amount to be invested. And the investment choices are usually limited to a few staid mutual funds. While the plan provides all with some nice tax deductions, it’s overpriced and not helping participants save for their retirement.

But now that the business, and its plan, has grown, it's a great time look at other options. While it will require a small investment in time, a revitalized plan will save money, help increase participation levels and provide you with a competitive advantage when attracting, retaining and MOTIVATING key employees.

With trust in Wall Street waning, the fastest growing segment of the retirement market is self-direction. The law allows retirement investments beyond stocks and mutual funds. Investments in real estate, commodities and private placements are just as viable as buying stock in Google. Your inability to purchase gold or rental properties with your 401(k) is not due to IRS regulations, but the rules of you current, overpriced plan. Modifying your plan to include a broader range of investment choices will allow for portfolio diversification that will help increase participation, including that of the business owner!

To get started, find a consultant that either specializes in self-directed plans or isn’t beholden to one particular Wall Street custodian. With a little information, they can prepare options for your review that will dramatically improve your retirement plan and lower your monthly administrative costs. No small feat in today’s challenging business environment.

Three Different Real Estate Markets

The current California real estate market is really three different markets...and all are performing differently based on lending dynamics. In the under $500,000, the market is white hot, between $500,000 and $1,000,000, the market is warm, and above $1,000,000, the market is still stalled.

Financing is affecting the three markets because of our good friends Fannie Mae and Freddie Mac. Conforming loan amounts have been increased from $417,000 to $729,750 in populous CA counties, but interest rates are higher, and qualifying is more difficult for loans between $417,700 and $729,750. Just ask anyone trying to get a loan right now in this price point. The qualifying is even more strict and rates are even higher for jumbo loans above $729,750. Don't bother asking these borrowers since their reaction will probably be negative.

Fannie Mae and Freddie Mac only buy conforming loans; therefore, less money is being made available for jumbo loans. And since there is no buyer on the secondary market for these loans, banks are VERY hesitant to loan on these properties. It is not clear, however, why conforming loans between $417,000 and $729,750 pay higher interest rates and have tougher qualifying guidelines than loans made below the $417,000 amount.

In the past, all conforming loans had the same interest rates and qualifying guidelines. Unless Fannie Mae and Freddie Mac start treating all conforming loans equally, and the government intervenes on jumbo loans, as it has with conforming loans, we may continue to experience the tale of three markets. If these changes do not occur, then the upper-end market will likely see
prices depreciate even more before this market strengthens.

Before even thinking of buying a primary residence or investment property, make sure you have a solid mortgage professional on your side. Opportunities exist, but you'll need someone working hard for you to expose all that is possible.

The Seven Habits

One of my old advertising bosses materialized a few weeks ago. He's living in Orlando and got a little uppity after the Magic won A game in the NBA championships against my Lakers. He emailed to see how I was doing and to strike up a little competitive banter. Perhaps a wager or two was placed on the series.

Besides being thankful for his generous donation to the Coe college fund, I was reminded of a piece of paper that he gave me when I first started working for him in Atlanta. It's titled "The Seven Habits" and is a summary of the seven habits of highly effective people, a book written by Stephen Covey. I still have that same piece of paper, yellowed and ripped, taped to my desk today.

Here are the 7 habits:

1) Be pro-active. You are responsible for your life. Decide what you should do and get on with it.
2) Begin with the end in mind. Think of how you want to be remembered at your funeral. Use this as a basis for your everyday behavior.
3) Put first things first. Devote more time to what's important but not necessarily urgent.
4) Think win-win. Have an abundance mentality. Seek solutions that benefit all parties.
5) Seek first to understand, then to be understood. Don't dive into a conversation. Listen until you truly understand the other person.
6) Synergize. Find ways to cooperate with everyone. Value the differences between people.
7. Sharpen the saw. Continually exercise and renew four elements of your self: physical, mental, emotional-social and spiritual.

Thanks Jack for sharing these habits with me and for all of the other lessons I learned from you. To everyone else, go back and re-read these 7 tips again. I hope they have an impact on both your professional and personal life.

The Next 18 Months Could Make Your Retirement

For those with serious plans to retire self-sufficiently, retire early or, dare I say, both, a very unique investment strategy is possible in the next 18 months. There are two provisions in the IRS tax code that if implemented strategically will allow you to drastically improve your retirement outlook. But you need to take action before December 31, 2010.

The Gulf Opportunity Zone Act of 2005, or "Go Zone" is a provision in the tax code created to encourage private investment into the regions devastated by Hurricanes Katrina, Rita and Wilma. The most useful section of the code allows for a single, one-time write-off of 50% of the depreciable basis of the property. For example, if you purchase a property in the Go Zone area of Mississippi for $150,000 and the depreciable portion is $120,000, you could receive a tax deduction of $60,000 in the year the property is put into service. Obtaining this deduction is part one of the strategy.

Part two involves the Tax Increase Prevention and Reconciliation Act (TIRPA) passed on May 17, 2006. TIRPA allows for an individual to convert a traditional IRA to a Roth IRA in 2010 regardless of your income level. For those who have always wondered, traditional IRA contributions are not taxed in the year the contribution is made but are taxed when the funds are withdrawn during retirement. Roth IRA contributions are taxed in the year they're contributed, but can be withdrawn 100% tax-free during retirement. Roths are a very powerful way to save for retirement when you factor compounded annual growth rates into the size of your retirement portfolio. But Roths are limited to those households that make less than $160K per year, preventing most wealthy Americans from utilizing them.

The TIPRA exemption presents a big opportunity...here's how. When you convert your traditional IRA to a Roth, the total amount converted is considered a taxable distribution, taxed at your current rate. But the 10% early withdrawal penalty is waived. So if a $200K IRA was converted and you're in the 30% tax bracket, you would have $60K to pay in taxes. That's not cheap, but consider the long-term tax advantages.

That same $200K invested for 15 years earning 10% annually would be worth $835K in 2025. Assuming your tax bracket in 2025 is 20%, you would pay $167K in taxes upon withdrawal. By paying the $60K in taxes now, you can earn $107K in tax savings to use or invest when you retire! Of course, if you have a larger IRA to convert, longer to invest or if you achieve a higher annual return, the tax savings will be even more dramatic.

So here's the strategy in its simplest form. You purchase a Go Zone property in the next 18 months to not only obtain a cash-flowing investment property in one of the fastest growing real estate markets in the country, but you also receive a huge tax deduction. Then next year you convert your traditional IRA to a Roth. You can then use the Go Zone tax deduction to OFFSET the additional taxes from the Roth conversion and avoid "paying" any taxes!

So, using the numbers from the examples above, you purchase a $150K Go Zone property and receive the $60K tax deduction. You then convert your $200K traditional IRA to a Roth triggering the $60K tax bill. You offset the $60K bill with your $60K deduction. You're left with a cash flowing investment property AND a $200K Roth IRA that will continue to appreciate tax free until you retire. I challenge anyone to find a better opportunity.

Of course there are a lot of stipulations in the tax code that require very precise implementation of this strategy. Your financial planner, CPA, or real estate agent may not be versed with the nuances of each program, but Freedom Growth and our partners are. We know how to implement this investment strategy allowing you to take full advantage of this once-in-YOUR-lifetime gift from the IRS!.

Don't let this opportunity pass you by. Contact us to learn more about this strategy and to see how it makes sense for your retirement and long term financial health.

Retirement Dreams Disappear With 401(k)s

As more and more people have their lives devastated by their diminishing 401(k)s, more and more reports like this 60 Minutes piece will be produced. The havoc that Wall Street has wrought in the name of profit is beyond scandalous and borderline criminal. It's only a matter of time until the current retirement sytsem is radically altered to do what it was initially designed to do....help people save for retirement! Do yourself a favor and watch this 10 minute segment on CBS's website. You could also read the transcript here.

An entire generation's retirement dreams have been wrecked due to their blind faith in the stock market. And why wouldn't they? Brilliant marketing campaigns convinced them equities were the best way to grow their retirement accounts. Then the retirement accounts themselves (IRA's and 401k's) were structured so stocks and mutual funds were the ONLY investments allowed. Starting in the '80s, TRILLIONS of post-pension dollars were pumped into the market via mutual funds and IPO, tech-stock mania. The market responded with the best 15 year run in it's history averaging 17% year-over-year growth. A generation was hooked, line and sinker.

But then the tech bubble emphatically popped losing 35% in early 1999. That was followed 8 years later by last year's 43% clubbing. Will the market recover? Probably, but to what extent?

What if the next generation learns from their parent's and peer's financial decisions and become more savvy to the pitfalls of stock market investing? What if they start building diversified retirement plans that aren't predominantly invested in the market? What if trillions of dollars are permanently moved out of the market and invested in commodities, real estate, cash or other investments? Warren Buffet predicts the growth that happened towards the end of the 20th century was the heyday of Wall Street and the chances of a repeat performance are slim.

I believe our current unregulated, falsely reported, hedged and ponzi schemed system has permanently soiled Wall Street's reputation for an entire generation. I'm sure one on them. Without the mass capital, hidden fees and blind faith necessary to build their financial house of cards, Wall Street will have a tough time reproducing last century's results.

Do yourself a favor NOW and begin building a better retirement portfolio. Don't rely on the stock market to be the sole provider of your retirement dreams. True diversification is possible through self directed retirement accounts that allow you to spread your risk over multiple investment classes. And more importantly, they can prevent your retirement from being wiped out or delayed by an unexpected bear.

Change in Employment = Change in Retirement Strategy

The most unfortunate consequence of the current recession is the incredible loss of jobs. Since it began in December 2007, 5.1 million jobs have been lost, with almost two-thirds (3.3 million) of the decrease occurring in the last 5 months. While having to look for a new job means making a lot of hard decisions, what to do with your existing 401k should not be one them.

If your entire retirement portfolio has been invested in the stock market, now's the time to make a change...for the better. Roll your 401k from your previous employer to a self directed IRA. A 401k to IRA rollover is very easy to accomplish and will allow you to finally diversify your retirement savings account. Here's why:

1. True Diversification: When your portfolio is diversified, it can provide consistent performance in a range of economic conditions. The only way to truly diversify your retirement portfolio is with a self directed retirement account.
2. More Investment Choices: A self directed IRA works like your current 401k with one major difference. You're allowed to invest in anything that is legal by the letter of the law and not limited to the investments that your current custodian profits from.
   
3. Real Estate Is Proven: A self directed IRA allows you to use tax-sheltered dollars to purchase real estate with no withdrawal penalties. Once converted, you can own a range of real estate investments including commercial, multi-family, raw land, trust deeds and tax liens.
4. Gain Control: With a retirement portfolio purely invested into mutual funds, control lies in the hands of those that manage it. How have they been doing? Not well. Check out this story from the Chicago Tribune and read how Congress is finally calling these guys out to the mat. You and you alone should be responsible for your retirement. Don't leave it in the hands of someone you don't know.
   
5. Comprehensive Retirement Planning: Retirement planning should be a comprehensive approach covering the financial planning process including insurance planning, investment planning, tax planning, planning for college, employee benefits, and estate planning, as well as retirement planning. If you've ever reached out to your current Wall Street custodian and asked for guidance, they probably only offered advice on the products they sold. With a self directed IRA, you can get comprehensive advice from a qualified Certified Financial Planner.
   
6. Beneficiary Advantages: Named beneficiaries of an IRA other than a spouse (like your children or grandchildren) have tax advantages not available with 401k plans. Named beneficiaries of an IRA are able to stretch the required distribution over their life expectancy deferring income tax and allowing funds to continue to compound exponentially. Beneficiaries of 401ks do not have this option.

Losing your job is always tough and the silver linings are hard to see. But what you do with your retirement plan right now could drastically alter when and how you retire. Use the time you have to research the self directed world and possible investment scenarios. It may end up being a blessing in disguise.

If Only I Had More Time

As I speak with folks about investing in real estate using their IRAs, I hear one common concern, “I love the idea of self-directing my retirement money and investing in real estate but I just don’t have the time to do it.”

We understand and appreciate this sentiment which is one of the main reasons we started Freedom Growth. Americans are extremely busy and have little time left over after family and work commitments to plan for their retirements. It’s true that self-directing a retirement portfolio does requires some time and effort but it’s not nearly as much as you might think.

Real estate investors short on time have access to a free source of information, research, and advice. These are the services provided by your real estate broker. Real estate brokers representing investors as buyers are typically paid by the seller so they don't charge you a dime. It’s important to contact a broker who specializes in IRA real estate investing and tell him or her what results you’re looking for. If the broker does not already know of specific real estate investments that fit your needs, he or she can probably find one or more that do. This means you initially spend 20 – 30 minutes with a broker discussing your situation and needs.

The broker then finds opportunities that you might like and presents them in a clear, concise way. With real estate investing, the focus is not on how cute the property is, but on hard numbers, especially the ROI (return on investment). Your broker probably has opportunities for you but he or she might also need to find others which might take a few days or weeks. Ideally, your broker presents you a comparison of the various opportunities allowing you to quickly and easily make a decision. Done properly, this only takes a few hours of your time.

Now it’s time to make the investment. Documents are drawn and signed. In a matter of days (sometimes weeks,) the deal closes and the IRA now owns a real estate asset. You have diversified your retirement savings and paid nothing for the services provided by your broker. I challenge anyone to find a better deal.

So don't let time be an obstacle to building a better retirement plan. An IRA real estate specialist will gladly minimize your time involvement and give you great real estate investment advice...for free!

10 Reasons Why You Need an IRA Real Estate Specialist

As we continue to help people diversify their IRAs and 401ks with real estate, we've come across this question more than once: "Why should I work with you instead of representing myself or working with my local real estate agent?" A fair question so I thought I'd formalize our response to it.

Using your brother, uncle or the neighborhood residential specialist as your real estate agent when investing your IRA in real estate is not a good idea unless they have specialized knowledge and experience with this type of transaction. What's needed is the combination of a good real estate lawyer, a real estate agent specializing in investing and a CPA that either does, or is willing to understand self-directed investing. Here are ten reasons why you need a specialist like Freedom Growth when making IRA real estate investments.

1. Not the usual real estate deal. Real estate investing is a specialty much different than buying or selling your home. Beware of residential and commercial agents claiming to know about IRA investing especially now that the market is tight and agents are hungry. You could get stuck in a binding agreement with someone who is not equipped to handle these transactions.
   
2. Property selection. The factors used to select the right owner-occupied home are driven by subjective and emotional motives. Real estate investing uses business and finance principals to locate the right investment. Your agent needs to crunch the numbers to make sure it’s the right investment for your needs.
3. Who is the buyer? When investing using your IRA, you are not the buyer. You need to understand what role you, your IRA and the self-directed custodian play in the deal.
4. Prohibited transactions. Very few real estate agents understand anything about the perils of making the wrong investment. The consequences can be rather severe so it’s best to work with someone who understands real estate investing and the rules on self-directed investing.
5. The offer. After finding the right investment property, writing a good offer using your IRA requires specialized knowledge that many real estate professionals do not have. Doing it wrong can result in delays and missed opportunities.
6. Joining Forces. Thinking about investing with a family member or friends? Getting solid advice about joining with other investors is crucial to avoiding the pitfalls that can result in trouble for you and your retirement account.
7. Commissions. Who receives a commission on an IRA real estate deal matters. This is especially true and dangerous when agents represent themselves or a family member is the agent.
8. Titling the property. How should title to the property be taken? Your real estate agent probably does not know. The answer depends on several factors. Some are legal. Some are practical.
9. Financing. Is financing available? If so, you need to understand the merits and drawbacks associated with leveraging the property. Again, specialized IRA real estate knowledge and contacts are required here.
10. Liability. Let’s assume you’re buying a four-unit income property. What happens if someone is injured on the property? You need to understand how your IRA handles insurance claims, negotiations, and settlements.

Freedom Growth brings together the real estate, legal, and financial skills required to assist its clients in making successful IRA real estate investments. If not us, be sure the team you enlist has what it takes to keep you and your retirement account on solid ground.

"Finance Companies are Better Off With Customers Being Financially Illiterate"

Financially illiterate consumers are good for the financial sector according to Adam Levin, chief executive of the consumer education website Credit.com in yesterday's LA Times story entitled "Rescuing Teens from Economic Ignorance". In his story he talks about how adept kids are today with computer literacy, social networking and cell phone mastery. But they have no idea what balancing a checkbook, setting a budget or saving for retirement means.

Here are the highlights of the story, or low lights if you're a teenager on the verge of adulthood in today's economic environment.

• Millions of Americans are learning the hard way about the pitfalls of teaser mortgage interest rates and runaway credit card debt. Sadly, their children may be doomed to repeat the mistakes of their overdrawn elders.
• "We've been going for years without that education, and it's one of many factors contributing to the whole mess we're in," said Karen P. Varcoe, a consumer economics specialist for the University of California.
• "It's kind of scary, thinking about doing this on my own," said Steffy Sulub, 17. "People our age are just let out on our own when we don't even know what to do."
• Nearly all young people agree that acquiring good money habits and setting financial goals are crucial to success, surveys and studies show. But high school seniors correctly answered fewer than half the questions on a 2008 test of basic finance knowledge, said the Jump$tart Coalition, a financial literacy group.
• And, although most young people attribute their financial knowledge to their parents, only 30% of students surveyed for Charles Schwab said their parents tried to provide some economic education.
• It's a dangerous cycle, said Adam Levin, chief executive of the consumer education website Credit.com. Parents are so preoccupied with -- or embarrassed by -- their financial affairs that they don't take time to mentor their children about money.
  
• The good news, Varcoe said, is that teens are keenly interested in learning about money. Arming them with some fundamentals may help them weather the next recession better than their parents are faring now.

As Levin stated, financial institutions make huge profits from the fiscally uneducated masses. So do your kids a huge favor. Besides teaching them how to drive a car, respect their elders and to do unto others as you'd have them do unto you, teach them about managing their money before they have any to manage. Few of us received that education growing up in the '60s, '70s and '80s and were forced to learn the hard way. Make sure your children fare better.

And while you're at it, treat yourself to a little updated financial knowledge. What's happening with today's economy is wreaking havoc on everyone's portfolio. Make sure you're better prepared for the next financial downturn since it may appear when you're on the cusp of retirement. There are plenty that are willing to help, but YOUR future financial independence starts with YOU taking the reigns.

As dire as the news is coming out of Wall Street and Washington, opportunity exists. Looking past the headlines to find it takes a little moxie, but you have the power to shape your financial future right now. If you don't see the opportunity, find someone who does and listen to what they have to say. Even if you don't agree, at least you took the time to explore options and listen to alternative theories to staying put and waiting for the market to rebound. You may learn something that you can implement at another time...and maybe gain knowledge that you can impart to your children.

Mistakes To Avoid in Today's Market

Did you happen to notice what the stock market did yesterday? Of course you did. It's nearly impossible to avoid the never ending stream of dire news about our economic slow down...er, recession...wait, depression? Whatever history will deem worthy for this economy, the question remains: What should you be doing with your retirement account to survive?

Here are six mistakes to avoid with your retirement account...sprinkled with a dash of opportunity. Now is not the time to let your retirement statements remain unopened, stash money under the mattress and ride out the economic malaise. You only get one retirement, so the time to take action is now.

1. Quit Contributing: Most would argue that a lack of personal (and institutional) savings is at the core of this current financial mess. Without savings, we sustain our supplement our standard of living by borrowing, usually via credit cards and home equity lines. The plan is to pay that debt with future income increases or home appreciation since time is on your side. But when you’re retired, your future income potential is at best limited and probably non-existent. And we’ve all seen that counting on unlimited home appreciation is a bad idea. Unlike other business ventures we may engage in or entertain over the course of life, there’s no “recovery” from poor retirement planning since time is no longer on your side. Saving for your retirement should always be a priority, no matter what the condition of the economy. So continue to save as much as you can, especially if your employer offers matching funds. Why would anyone pass up free income?

2. Convert All Assets to Cash: As the market has gone from bull to bear to vulture, the natural instinct is to convert all of your retirement nest egg to cash to eliminate losses. While there’s merit in that approach for a short period of time, keeping your money in cash over the long haul is just another way to lose money. Assuming your custodian pays you a 1% - 2% return on your cash or money market account, your money will continue to rise year over year. But also assuming inflation will remain steady at 3% - 4%, you are “losing” money every year.

3. Un-diversified Portfolios: How many people had all of their retirement savings strictly in equities? Nearly 80% of all retirement assets were invested in mutual funds and stocks according to the Investment Company Institutes’ US Retirement Market report published in Q3 of last year. True diversification is NOT owning different stocks and mutual funds no matter what your brokerage tells you. True diversification involves spreading your retirement beyond equities to include investments in asset classes such as fixed-income, cash, commodities and real estate. A well diversified portfolio helps to reduce the risk of substantial losses in a range of economic conditions and provides steady, proven growth to your retirement account.

4. Ignore Opportunity: It’s very easy to get caught up in the hysteria of what’s happening each day to the stock market, our banking industry and key economic indicators. But don’t get so overwhelmed that you miss the opportunities around you. People are having a hard time borrowing money these days? Why not use your retirement account to make trust deed loans? Investors are using their IRA, 401(k) and pension plans right now to make loans to other investors, secured by real estate, that are producing double digit returns. People are having a hard time paying their property taxes? Why not use your retirement account to purchase tax liens? Investors are using their accounts to purchase tax liens at public auctions and again are making double digit returns on their retirement savings. Are these types of investments guaranteed to produce returns? No...no investment ever is. But the current market IS providing opportunity if you're willing to look beyond the headlines and the norm.

5. Go It Alone: Most individuals have a very passive attitude about their retirement account. They’ve historically trusted their “diversified” stock market portfolios to provide for them and now too overwhelmed with everyday responsibilities to find a way around the current mess. We’re all busy, but your retirement is your responsibility alone, so take control. You need to develop your own personal recovery plan that unfortunately will not involve any Federal bail out money. If you don’t have the desire or inclination to develop one on your own, there are professionals out there to help. Find a “fee based” certified financial planner or CPA that isn’t beholden to a singular financial institution and will design a diversified portfolio for you to help survive...and maybe even thrive...in this market.

6. Keep Everything In the Market: It will come back, right? Yes, it probably will. But when? Waiting for Wall Street to rescue you from the mess that it created is like trying to lose weight by switching from Quarter Pounders to Big Macs. You need to alter your behavior and build a stronger portfolio today, not once the market comes back. Don’t cash out of everything, but other investment classes are offering opportunity right now while the market continues to decline. There are plenty of self-directed custodians out there that offer a range of investment accounts that will allow you to take full advantage of ALL investments that are possible by the letter of the law. So don’t limit your personal recovery plan to the investments offered by your current retirement plan. There are options out there, it’s up to you to find them.

10 Questions With - Ace Capital

Today's installment of "10 Questions With" offers an overview of land banking with Ace Capital. We love land banking in a retirement account since it is by nature a long-term appreciation building investment with very little maintenance. And this particular company is offering land banking in the Antelope Valley area of Los Angeles, which we feel is about to explode with clean energy development. Check out this segment from NBC news that outlines the vision of the Valley from the current political leaders.

I invite you to learn more about land banking with Ace Capital. Please take a read and let me know what you think.

1. Tell us a little about you and your company.
ACE Capital Group is a real estate company. We are not real estate brokers or financial advisors. We are the principals who purchase and sell carefully selected California pre-developed real estate.

2. Please tell me about your real estate opportunity.
Our programs and services are offered with the primary purpose of using land banking as an easy, secure and superior alternative for building sustainable wealth:

• We effectively use the strategy of long-term appreciation in land ownership by purchasing and selling property in the growth path of major metropolitan centers.
• We help qualified retirement account holders to roll over their funds from the volatile stock market into more predictable California real estate. Of course, we also work with cash. In addition, 1031 Exchanges are an ideal way to move money into a Land Banking strategy.

3. Where does your opportunity exist?
Ace Capital Group has perfected the formula for making sure the land we purchase in indeed in the path of growth and will be in a position to appreciate at a safe and predictable rate. The best place we have found is right here in Southern California within a sixty mile radius of Los Angeles.

4. How long have you been offering this real estate opportunity?
Our business has evolved from the extremely successful personal investments of our founders. Since 1974 their enterprises have helped over 10,000 individual buyers build their personal wealth with land banking. Our proven three step formula provides individuals and business owners with an innovative option to secure a better retirement, a legacy for their children and grandchildren; and we have voluminous testimonials from our buyers attesting to their satisfaction.

5. Does your opportunity help investors build long term wealth, immediate cash flow or both?
Land Banking is a term used by both individual investors and corporate land developers. It is the strategy of purchasing a parcel of land and holding (or banking it) it for typically five or more years for future sale or development.

Land banking is a proven long-term appreciation strategy for building wealth and providing individuals with a safe and profitable alternative for building their retirement nest egg. But, successful land banking requires planning and patience

6. Is financing available for your opportunity?
At this time there is no financing available for our process. We focus on helping people make their retirement funds work smarter and harder than they can in traditional methods. Therefore, it is cash that is already available but performing at less than the optimum capacity.

7. Are there any special tax advantages?
If using retirement funds then the tax advantages are great, especially if held in a Roth account.

8. Why is your opportunity ideal for self-directed IRA investing?
IRA monies are already set aside for long term wealth building. This is exactly what Land banking is all about. It is a long term strategy that blends perfectly in the IRA model.

9. How does your company make money?
ACE Capital makes it‘s money at the time of purchase. Our acquisition department is second to none in finding properties that meet our specific formula specifications that ensure appreciation. We buy direct from private owner with cash so we are able to strike great deals. We do not buy from the MLS or brokers so the prices are much better. As we are able to purchase the properties at well below market value we are able to cover our expenses and still offer the properties back out at below fair market value. The appetite for profit is low as we are able to help many people move into Land Banking. Therefore, volume sales help keep the prices where we can put people in equity position right away.

10. What type of results can investors expect with your opportunity?
First and foremost, we have never lost anyone’s money. It is a tangible, grant deeded, title insure piece of property. We have statistical data provided by an outside source that shows the appreciation rates in the area where we focus has been able to provide consistent 18-20% compounded annual appreciation for years. Specific information is available upon request.

10 Questions With - Hanover Investments

Congratulations on your brand new self-directed retirement account! Now what are you going to invest in?

I've been finding that some new investors when confronted with this question aren't sure how to answer it. They're enchanted by the freedom of controlling their retirement account and the range of investments the self-directed environment provides. So they take the first step and open a self-directed account. But when it's time to make an actual investment, they are frozen with indecision by the same, unlimited choices that they were initially attracted to. In essence, their path to financial freedom is mired in a money market account making 1% instead of the larger returns they envisioned.

We believe one way to thaw this indecision is with more in-depth knowledge on what's possible, how these investments work and who is behind them. We are currently adding a new section to our site entitled "10 Questions With". For every opportunity we believe in, we're going to ask 10 questions to the provider allowing them an opportunity to explain how their investment works and why it is ideal to hold within a self-directed IRA.

The first few will be posted on this blog, so check back often. For today, I invite you to learn more about "Go Zone" investing with Hanover Investments. Please take a read and let me know what you think.

1. Tell us a little about you and your company.
My name is Matthew Stearns and I am Vice President of Sales for Hanover Investments. Hanover is a subsidiary of Guterman Partners which has been around 40+ years. We are fund advisors, developers, real estate investors, and property managers.

2. Please tell me about your real estate opportunity.
Our opportunity is ideal for every day business professionals that want to invest in real estate passively and are looking for strong returns and tax breaks with a turn key strategy. Because of the current market conditions, and the low cost of purchasing as opposed to developing, we are currently buying in bulk directly from developers of new condominium and townhome projects with our own cash. The in bulk discount we receive is passed on to investors who purchase the individual unit or portfolio of units from us at today’s current market value as an investment vehicle. We also offer a “total leasing program” which contractually guarantees 30 months NET cash-on-cash returns from the day a purchase is made. At the end of the 30 months, the investor can continue to hold and manage the unit, still with positive cash flow, or sell it at current market value.

3. Where does your opportunity exist?
Our opportunities are in “make sense” markets. The primary market of focus right now is the Gulf Coast of Mississippi in an area called the Go Zone. The Go Zone is short for The Gulf Opportunity Zone Act of 2005, signed into law by President Bush on December 21, 2005. It contains significant economic incentives to rebuild the Gulf Coast, as well as to attract new investments to the affected areas. This market was rated #1 by realtor.org in 2008 and offers huge tax incentives to investors and home buyers. We have limited inventory and demand is high down there because of the strong condition of the housing and jobs markets in Mississippi.

4. How long have you been offering this real estate opportunity?
As I mentioned earlier, Hanover is a subsidiary of Guterman Partners which has been around 40+ years. We have successfully deployed this business model for the last 40 plus years, starting in New York with apartment buildings in the late 60’s. Currently, we have been focused on the Gulf Coast since the Go Zone legislation was enacted in 2005. We currently manage 25 plus complexes Nationwide and have over 500 units in our "total leasing program."

5. Does your opportunity help investors build long term wealth, immediate cash flow or both?
These opportunities build both. Investors will see cash on cash returns during our lease as high as 40% for the term. And this doesn’t take into consideration the tax benefits or future capital appreciation potential that we believe the Gulf Coast offers.

6. Is financing available for your opportunity?
Yes. We have non recourse lending institutions for those investing in their IRA and private, portfolio, and conventional banks for those that want to purchase with cash. We still go as high as 90% financing for investors purchasing with a conventional or portfolio lender.

7. Are there any special tax advantages?
Yes. The "Go Zone" offers a 50% bonus depreciation in the first year they place the property into service to offset other gains. Please see your CPA for your specific scenario. This is the biggest reason to purchase in the Go Zone. Take a $200k offering. You can depreciate 50% of that asset in the first year you place that asset into service minus that tax bracket you fall into, to offset other gains!

8. Why is your opportunity ideal for self-directed IRA investing?
This is a fully managed real estate that cash flows from day one. It’s as easy as watching your IRA statements coming to you in the mail. Moreover, non recourse lenders for IRA’s are just like commercial lenders and they look at the performance of the asset, not the individual. This makes the approval process very easy. Investing in real estate through your IRA is becoming the latest trend!

9. How does your company make money?
Hanover makes money by subletting the unit out to other renters after the investor purchases the property. The investor will cash flow on the lease with Hanover and we will cash flow with our tenant. This is possible because when we purchase from the developer we purchase with cash and in bulk. That discount is passed onto the investor through the "total lease program", a discount they could not obtain on their own. Our profit is solely made by subletting and managing the unit. The investor utilizes our discount to hedge any risk on the property making it a safe and secure investment from day one. After our lease is up at 30 months, we can continue to manage the investment for the investor and take a management fee that is originally covered through our lease until the day they sell.

10. What type of results can investors expect with your opportunity?
All investment opportunities result in positive cash flow from day one through the life of the investment. As stated previously, it’s a managed real estate investment with minimum assured 30% cash-on-cash returns. Additionally, investors can take advantage of the "Go Zone" tax credit, if they apply.