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FEBRUARY 2011 |www.opp.org.uk


INVESTMENTS RETIREMENT IRAs | 47 What do the experts think?


We asked some key industry experts on US property and IRAs for their thoughts on why so few have invested their retirement savings in real estate, and what actions developers and agents can take to tap into this interesting market...


is because the broker or dealer gets no benefit if the money is invested in real estate, so Wall Street hasn’t clued people in. Realtors also get scared by it and they need to get the basic understanding. “There are a number of


Daniel Cordoba Daniel is the CEO of Asset Exchange Strategies, and an expert on Self-Directed IRAs.


“I think the biggest reason to invest your IRA in real estate is diversity – to try and get out of the equities markets altogether. It also makes savers more empowered – they have more control over their investment –you can have the walls painted and the kitchen remodelled to enhance the value. You can’t really do that if you own 5 shares in General Motors. You also have the opportunity to create a dividend for yourself, through rent, and you can get a return on assets within 8 to 10 years – and this is for normal property, not distressed, if you get yourself a good realtor.


“The biggest reason more people don’t invest in real estate is that they don’t know they can”


“About 3% of IRAs are Self-


Directed, but this term is very broad and does not necessarily mean they are truly self-directed, so I’d say about 1.5% actually are. The biggest reason that more people don’t invest in real estate through their IRA is that they don’t know they can ... because their financial advisor doesn’t know about it. This


marketing efforts agents could make to grow this market but agents are hesitant – they’d probably see a 5 % to 10% increase in sales with some simple techniques. For example, after finishing a sale they could say something like, “I know you’re busy moving in right now, but I’d like to make an appointment with you for a few months time to discuss buying real estate with an IRA.” More often than not their client will say, “Wow, I didn’t know I could do that.” “Agents could get banner signs


outside houses that say, “Buy me with your IRA”. They might not sell that property to an IRA, but they’ll definitely get calls. “As far as an agent is concerned


it makes no difference whether they sell to an IRA – you have to watch certain transaction guarantees, and can’t have loans with a personal guarantee, they have to be secured against the property. But, there aren’t any really huge hurdles – a 2 hour class is more than enough. It’s just a bit different.


“Agents need to realise that they need to broaden their marketing – its about being professional, being available and getting referrals. If they can master this, they can place themselves as a unique agent in that market, and distinguish themselves. Now is the time for agents to position themselves, before the market gets hot again. We can help – agents can get training, marketing materials and opportunities on our website, IRAtraining.com.”


“Of the 100 or so properties that


we sold over the last year, about 3 or 4 have gone to IRAs, and about 2 or 3 of the 18 solar investments in Germany we’ve sold have gone to an IRA. It’s not a huge part of our business – you just can’t go chasing that kind of business in America, its too risky.”


Colin Murphy


Colin is the director of Torcana, an investment consultancy that has sold Florida real estate and investments in solar power to IRAs.


“We have sold real estate to IRAs and it’s not that different although there are rules that it has to be an investment and you have to keep it at arms length. I wouldn’t say agents and developers were missing a trick by not targeting this market like they have done SIPPs. I think SIPPs were over-rated ... developers spend a lot of time and money on SIPP- compliance, but they don’t actually sell that many properties into a SIPP. “There aren’t really any major


hurdles – I don’t know what else developers could do to make it easier to sell to IRAs. There are


“I think SIPPs were over-rated - developers don’t actually sell many properties to them”


marketing issues too, an American company can’t go out and market investment products or highlight capital gains at all, it has to be very straight and narrow. Promoting property is fine, but you can’t promote it as an investment. You can invite people to request more information, but it’s shaky territory to invite people to invest.


David Disick


David is an expert in fractional real estate based in the US – he is an expert at the sale and marketing of fractional developments.


“There’s a high threshold of persuasion to show that the purchase qualifies as an IRA investment – for example, if a developer is selling 5 separate developments and Dr Jones buys


“It’s highly


technical, not many fi nancial advisors have the technical know-how ”


a property in development 1 that granted him usage rights in development 2, he wouldn’t be allowed to buy it with his IRA. You’ve got to mind your P’s and Q’s to pass muster. “I think the main reason that it’s not


generally done is because it’s highly technical, and not many advisors have the technical know-how.”


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