To me, it's a no-brainer. Investment real estate is on sale. Home mortgage rates are at or within a whisker of all-time lows. The demand for rental housing is EXPLODING, and rental rates are going through the roof. Folks are moving to Dallas and the other major Texas cities in droves. So why not take action?
If you have money in your retirement account, you can buy real estate to live in or to invest in, penalty-free.
Investment real estate can be bought, rehabbed and managed through an IRA custodian. There are a few around, and I used a company called PENSCO, out of San Francisco, but there are also Texas companies that do this as well.
Since the money is coming from an IRA, or Roth IRA, you cannot benefit financially from this transaction until you reach your retirement age. The down payment, closing costs, insurance, property taxes and repairs/rehab all have to be financed via your IRA. You are not allowed to co-mingle personal funds with your IRA funds in any fashion.
The monthly rent is to be paid to the IRA custodian, who will then deposit the monies into your IRA account.
The only drawback is that you won't get to take advantage of some of the great personal tax deductions that investment real estate provides, like mortgage interest, depreciation, repairs and insurance. However, there are plenty of distressed properties, foreclosures and short sales to choose from right now and an oversupply of renters. I don't see that changing much in the next year or two.
In most investments, you can never be exactly sure how it's going to turn out. For me, personally, I like to see a tangible building or lot that I can touch and feel. Also, I like knowing that I'm protected from catastrophic loss with property insurance, so my downside risk is small.
As Peter Lynch, the famous stock picker once said, "most people spend more time researching the refrigerator they're going to buy, than a stock they invest in". So please at least look into real estate investing, and protect you and your family's future from the corporate and political shenanigans that affect the stock market.
Let me know if I can help or answer any questions you may have. Best of luck!
Troy Corman is the founder of t2 Real Estate LLC, a Dallas real estate firm providing specialized knowledge with a hands-on approach. Specialties include residential real estate brokerage, land and acreage, and commercial real estate services. Contact us today at 214.827.1200 if you need to sell, buy or get your DFW property leased.