IRA Financial’s Adam Bergman talks with IRA Financial client, Isaac Rodriguez, a real estate investor, and how he’s handling his income properties during the COVID-19 pandemic.

Mr. Bergman is pleased to be joined by long time client AND employee Isaac Rodriguez. As a real estate investor, Mr. Rodriguez has been impacted by the COVID-19 pandemic. In the podcast, he will share first hand experience how this situation has impacted his investments. Like many investors, he’s finding it hard for tenants to pay their rent in a timely fashion. He also discusses how he got into the real estate business and some tips for those looking to invest.

Advantages of Being a Real Estate Investor with Retirement Funds

As Mr. Rodriguez can attest to, becoming a real estate investor with retirement funds is not well known. Although that’s quickly changing with more education. The main advantage of investing in real estate with retirement funds is the tax advantages afforded to these accounts. However, you need the right custodian or plan administrator to invest in something other than stocks, bonds and mutual funds. You must self-direct your plan. This can be via a Self-Directed IRA or if you are self-employed, a Self-Directed Solo 401(k) plan. These plans allow you to invest in just about anything you want, including real estate.

When you invest with a retirement plan, you don’t pay taxes on the assets held by it. If you have a traditional plan, taxes are deferred until you start withdrawing during retirement. On the other hand, if you utilize a Roth plan, all income and gains are tax-free. Further, investing in real estate helps diversify your retirement plan assets. Any expert will tell you that you must not invest in one type of investment. By self-directing your retirement savings, you can spread your money across many different asset classes.

Investment properties, like rental houses, vacation properties and Airbnb spots, produce a steady stream of income. So long as someone is paying you rent, you have a fixed amount of money flowing back to your plan every month. You can’t say that about a lot of investments. Lastly, investing in hard assets, gives one the sense of pride and accomplishment. You are in control of that property. You make the decisions and invest as much as you want. Obviously, the more money you put into it, the more money you can hope to make.

Dealing with COVID-19

The COVID-19 pandemic has been tough on everyone. From business owners, to blue collar workers to investors – no one has escaped this financial crisis. This is true for real estate investors. Whether you invest with retirement funds or not, you rely on the rental income of your properties. Mr. Rodriguez can tell you that his income has fallen since March. Some of his tenants are not able to pay their rent. However, he has several properties that help each other out. If a house is fully paid for, it can help pay the mortgage of another property. Mr. Rodriguez is very understanding and empathetic to his tenants. He’s working with them to ensure they have a place to live. Every landlord should follow his lead.

One tenant can afford to pay half their rent. That’s fine with Isaac. He will use other funds to keep up with that house payment. Rent can be added on to subsequent months when this pandemic is over (or at least subsides!). Government aid has helped millions of Americans. If you do rent, don’t waste that money on frivolous things. Take care of your family, which includes making sure your housing payments are being made.

Of course, there are landlords out there that don’t care. They just want to get paid, no matter your situation. This can be tough to deal with, especially if you are in a lease. We advise our clients to not be that way. Who will want to stay with you if you don’t budge during times like these. What good is having a great property if no one will rent it?

Think about your tenant’s needs and how you can make life easier on them. When it comes time to re-up, how you treated them now will make a huge difference.

Becoming a Real Estate Investor

Follow Isaac Rodriguez’s example. He was a corrections officer in New York before semi-retiring and starting work with IRA Financial. He learned how he was eligible to open a Solo 401(k) and all the investment opportunities afforded by it. In fact, the Solo 401(k) plan is the best plan for real estate investing. Because of the little-known UBTI rules, a Solo 401(k) makes it more tax-advantageous for real estate investors. If you use an IRA and borrow funds to purchase a property, you will owe taxes on that money. However, investing with an IRA is still 100 times better than using personal funds.

Take advantage of the tax breaks of a retirement plan by investing in real estate. Of course, always work with professionals before taking this on. A good financial advisor is a must. You should also be in contact with real estate professionals, including agents and attorneys. The more information you have, the better off you will be.

Be sure to watch or listen to the podcast to listen to Issac’s story. He is a typical real estate investor. Learn from his advice and try to use that in your plan.

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