IRA Financial’s Adam Bergman talks about the latest trends involving house flipping and how you can use your Self-Directed IRA for real estate investments.
After reading a recent Wall Street Journal article about real estate and house flipping trends, IRA Financial’s Adam Bergman decided to do this podcast. In it, Mr. Bergman explains the different trends and how to take advantage of them. Further, he explains how to use your Self-Directed IRA to flip houses in a tax-efficient manner.
House Flipping Trends
So, what are the biggest house flipping trends according to the WSJ article? Well, two stood out to Mr. Bergman. First, 10.6% of homes sold in the 4th Quarter of 2018 were flips. This is less than 1% off the record levels from Quarter One of 2006. 2006 is considered the peak of the housing market, before crashing just two years later. Secondly, of those 10.6% of house flips, 40% were corporate investors and sellers. These include companies, private equity firms and the like. This means that instead of holding onto properties, sellers are instead flipping the houses for faster profits. Note: All data was gathered by CoreLogic.
Moreover, Self-Directed IRA real estate investors are continuing this trend as well. House flips continue to trend in an upward direction, according to client surveys. Our clients continue to benefit from the rising real estate market. No need to hold onto rental properties when you can make money on a quick flip, and then move on to the next one. Of course, some investors still prefer the steady income stream that rentals bring in. Either route you take, it’s a great time to take advantages of a strong real estate market.
Did you know you can also use your Self-Directed Roth IRA to Invest in real estate?
Using Your Retirement to Flip Homes
If you’ve been following our podcast or blog, you know you can use retirement funds for alternative assets, including real estate. It’s actually quite easy to do. Have IRA Financial set up your Self-Directed IRA LLC. Fund the account. Use checkbook control to make an investment whenever you want.
There are a few things to consider when investing in real estate:
- Pay attention to the prohibited transaction rules – Never make a real estate investment with a disqualified person.
- Everything flows in and out from the IRA – Make sure all gains from the investment flow back into your IRA. Further, all expenses should be paid from your IRA.
- Be careful if you borrow money – If you take out a mortgage on a property, only non-recourse loans are permitted by an IRA.
- UBTI Tax – Be mindful of the Unrelated Business Taxable Income rules. A 37% tax will be due on profits from leveraged real estate. Rental income is an example. Note: A 401(k) are not subject to the UBTI rules.
Get in Touch
For more information about the latest house flipping trends and using your Self-Directed IRA to flip houses, please contact IRA Financial Group at 800-472-0646. You can also fill out the form above or on our contact page. We look forward to hearing from you!