11/25/12: Taking Control of Your Retirement Account – Alternative Capital to Fund Your Real Estate Investing

Finding money to take advantage of the many great bargains in today’s real estate market can be challenging.  After all, those easy cash out loans and the equity they created are largely gone.  So investors have been looking in other places for investment capital.

In this episode of The Real Estate Guys™ radio show, we re-visit retirement accounts as an alternative source of investment capital.

In the broadcast control center, finding alternative topics to discuss:

  • Your air-talk traffic controller, host Robert Helms
  • Your alternative co-host, Russell Gray
  • The Godfather of Real Estate , Bob Helms
  • The Managing Director of Sovereign Pension Services, Larry Grossman

One of the still largely underutilized sources of investment capital are Individual Retirement Accounts (IRAs) and “leftover” 401ks.  A “leftover” 401k is one that is left over (and often overlooked and forgotten) from a previous employer.  Many people don’t realize these old 401ks are eligible to be converted into self-directed retirement plans.

In fact, since we’re on the topic of things many people don’t know (at least about retirement accounts), one is that retirement accounts can actually be “self-directed”.  This means the owner (YOU) can decide what investments you want to place inside the tax advantaged account and you’re NOT limited to whatever an employer, stock brokerage, insurance company or other custodian dictates or steers you towards.

In fact, you can invest in virtually ANYTHING you want, except for a VERY short list of things that the IRS prohibits.

Keep in mind we’re just radio talk show hosts.  We’re not tax guys, lawyers or investment advisors.  So be sure to check with your own advisors before you take any action based on something you hear on a radio show (even ours!).  The good news is that there are several excellent companies who provide great educational content and custodial services to help you put your retirement funds to work in “alternative” investments.

And speaking of “alternative”, think about this…

Wall Street marketing has so permeated the way people look at investing that paper assets like stocks, bonds, mutual funds and derivatives are considered “traditional”.  While “non-traditional” investments include things like real estate, mortgages (real ones, that are tied directly to a real borrower and a real property as opposed to the securitized mortgages Wall Street blew up the financial markets with), and metals (gold, silver, etc.).

Really?  Since when is paper traditional, while real estate and gold are not?  Seems to us that real estate and gold were the things that rich people traditionally invested in before Wall Street came along to “improve” everything.  But that’s a rant for a different day.

For this episode, we talk with Larry Grossman, who is Managing Director for a company that provides custodial services for investors wanting to self-direct their retirement accounts.  The reason you need a custodian is because one of the rules the IRS imposes on investors in tax -advantaged retirement accounts is you can’t touch the assets.  So you need a custodian to hold onto them for you.

But once the custodian has the assets, it’s up to you as the owner, to tell the custodian what to invest in.  It may sound complicated, but it’s actually pretty simple.  However, it’s also very important to COMPLY with the various rules to make sure you don’t trigger an unpleasant tax consequence. (Is there such a thing as a “pleasant” tax consequence?  Maybe a refund?)

So don’t be intimidated by taking charge of your retirement account and self-directing it away from Wall Street and towards investments and people you understand and trust.  You can begin by getting educated, then by taking steps to move your funds to a custodian who will support your declaration of independence from Wall Street “tradition”.

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