Diversification. What's Old is New

We got a press inquiry the other day from a reporter looking for new and non-traditional strategies to protect and grow your IRA. Right up our alley. Not sure if we'll make the final article, but our take on creating true diversification with self-directed IRAs is worth sharing. Are you truly diversified?

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The primary retirement strategy we're advising our clients to follow is tried and true...diversification. But we preach true diversification, not the diversification offered by most Wall Street institutions. True diversification involves spreading your risk among different asset classes, not just stocks and mutual funds. The best way to achieve true diversification is through a self-directed IRA. A self-directed IRA allows the investor to spread their risk into a wider range of asset classes such as commodities, private placements and our favorite, real estate.

All asset classes have taken a hit over the last three years, but we believe real estate offers the best way to protect and rebuild IRAs. On top of this being the best time to acquire investment property in a generation, real estate offers four different ways to earn a profit. Investors can make money via appreciation on the property, monthly cash flow, debt repayment and tax deductions. While you don't get the tax deductions when owing real estate in your IRA, you do get the other three. Real estate is the only investment class that allows an investor to achieve returns this many ways.

Anyone looking for new strategies to rebuild their retirement account just needs to consider going back to the basics and diversifying. But this time, don't solely invest in a mix of stocks and mutual funds. Take the time to understand true diversification and the advantages of owning real estate in a self-directed IRA.

Memphis Rated #1 for Foreclosure Investments

I spent some time in Memphis this week looking at investment opportunities. On the 2nd day of my trip, Realty Track reported that Memphis was the #1 market in the US to find a foreclosure bargain. The ranking was based on the discounts available for the properties, rising home prices over the last year and a stable job market. Another market we're excited about, Cleveland, was #4 on the list.

Finding out that Memphis was #1 was icing on an already mouthwatering cake. What I found in Memphis were solid neighborhoods, homes that have been properly remodeled, quality property management, a superstar real estate agent, one hell of a pulled pork sandwich and some great blues music. What can I say, my hotel was only 1 block off Beale St!

Our partner in Memphis is OCG Properties. OCG is based here in Southern California and run by Mathew Owens. OCG has purchased and renovated over 200 properties in the last few years and really knows the intricacies of the Memphis market. Besides being a real estate investor, Matt is also a CPA and specializes in the due diligence of each investment.

After a few negative experiences with property managers in Memphis, Matt decided to open up his own property management company. He hired his old friend Lester and set him up in a great place in Southern Memphis. Lester is on the ground and he and his team oversee all renovation and property management issues. Like I always say, any investment can go south quickly with poor property management. OCG has the right solution in place to protect thier clients' investments.

To see my photos of the properties in Memphis, click here. Be sure to check out the Statue of Liberty, Memphis style! I spent two days with Matt, Sean and Lester looking at a wide range of SFR investments. All of their properties are currently rented (a good sign) but one tenant did allow us inside to take a look at the interior renovations. They do sensible renovations that minimize costs to the investor while offering enough touches to help attract quality tenants. You can see the color scheme they use, the crown molding, the new hardware and lighting, new windows (when appropriate). Roof, plumbing, electrical...all major systems...all seemed newly renovated. We also explored a few new listings so I could walk through the "before" condition of some of these foreclosures. These properties are not that old and most of the renovations needed are cosmetic in nature.

Of course, I wouldn't be writing about this at all if the properties didn't offer solid returns. The price-to-rent ratio in Memphis is as good as any market you'll find in the US. And the discounted foreclosure prices that Realty Trac reported leads to great fix-and-flip opportunities, as well as longer term buy-and-hold deals.

Speaking of, the one part of the OCG system that I felt needed improvement was in liquidation of the fix-and-flip properties. OCG's focus when selling a newly renovated property is find another investor. While still turning a profit, the maximum return can be found in selling the property to an end user...a first time home buyer. To do that, we needed to find a local agent that specialized in selling homes, not just listing homes. I found that partner in Jennifer Carstensen with Keller Williams. Jen has built her business specializing in social media and digital marketing. She's smart, aggressive and implements marketing that matches how today's home buyers shop for homes. While I was in Memphis, I was fortunate to hear Jennifer speak on a panel about the state of the Memphis real estate market. Having her on our team is a key addition and allows for multiple exit strategies on each investment.

Like I always say, there's no "I" in real estate. Real estate investing is a team sport and I feel like the team that's assembled to handle investments in Memphis is a strong one. If you would like to learn more or see the returns on a specific property, please let me know.