How To Use Your IRA To Invest In Cash-Flowing Real Estate Penalty Free.

By Troy Corman, www.t2realestate.com

With interest rates on CDs and bank savings rates close to nil, many are searching for ways to both protect and grow their money.

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!
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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.

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Government Considering Renting Out Foreclosures

WJS.com video posted by Troy Corman, t2realestate.com


The rental home market is booming. Landlords are delighted as rental demand is fueling multiple rental applicants and higher rent prices. Now, the US government is considering getting in on the action by making it more attractive for private investors to buy, rehab and lease foreclosed homes owned by Fannie Mae and Freddie Mac.

The top 5 ways real estate can make you money.
1. Cash Flow - renters pay more each month than the home's carrying cost.
2. Principal Pay Down - rent money pays down our mortgage each month.
3. Equity Capture - we buy homes for thousands less than they're worth.
4. Appreciation - we sell homes in a sellers market when prices are rising.
5. Depreciation - rent homes produce about $10K in deductions per $100K home annually.
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Read the full story in wsj.com.

Lenders Expect To Sue Foreclosure Home Owners In Next 2 Years.

RealtorMag article summarized by Troy Corman

Industry experts expect a wave of lawsuits in the next two years as lenders try to recoup losses from home owners who merely walk away from their mortgages. Also, those that damage homes and face foreclosure can also expect to be targets of lender lawsuits. The suits will most likely discourage future home owners from throwing in the towel. Also, as the taxpaying public grows tired of government bailouts and handouts, it's unlikely that politicians can implement crony capitalism much longer - as natural market forces are best equipped to return us to a healthy economy.

As foreclosure delinquency rates remain elevated, lenders are expected to work with homeowners who negotiate in good faith, while others can expect to face collection agencies who purchase the mortgage debt from the lender.

Banks Still Low-balling Appraisals And Hurting Themselves.

By Troy Corman, www.t2realestate.com

I'm putting in an offer for a buyer of a foreclosure home that is listed for $69,000. There have been only a couple of sales in the neighborhood (that were both foreclosures) in the last 2 years. As a result, my buyer's lender, Bank of America, comes back with a desktop appraisal of $77,000. This particular home, on the market for 9 days, has 22 offers on it. Do you really think it's only worth $77,000? A VERY similar home across the street is for sale for $119,000.

I don't know yet if Bank of America will do a more thorough appraisal if we win the bid, but I've heard stories of banks low-balling appraisals since they're drowning in bad loans. In essence, as Del Walmsley of Lifestyles Unlimited recently shared on his radio show, the banks are basically cutting off their nose to spite their face. By low-balling appraisals on new loans, they are making the property values of their existing loans in the same neighborhood worth less, which in turn makes their existing borrowers more susceptible to getting upside down - and creating even more foreclosures.

Again, 9 days on the market at $69K and the home has 22 offers. I think it's safe to say that Bank of America's appraisal of $77K is a hair off.

Todayshomedeals.com Has Launched!

We are proud to announce that todayshomedeals.com has launched. The site allows users to search the lowest price per square foot homes by areas or neighborhoods throughout the DFW metro. We'll be adding more areas and neighborhoods over the next few days.

It's FREE to use and you can create your own login and password to save your most recent searches and post to the forums. Check it out and thanks for visiting!

HUD Attempting To Derail Owner-Financed Home Sales.

By Troy Corman, t2realestate.com

Despite a slow economy and tightening of credit in business and home lending, the big hand of big government is proposing to destroy owner-financed home sales. It's amazing how out of touch bureaucrats are when it comes to the economy.

Today, American property owners can self-finance the sale of up to five homes a year without a mortgage originator license. The new proposal by HUD called the Safe Mortgage Act would allow owners to only sell a home that the seller actually occupies - otherwise, he or she would have to get a mortgage originator license.

If this act passes, it will essentially dismantle private market competition, while eliminating an entire segment of home buyers. This will surely put more downward price pressure on an already shaky housing recovery.

Many properties in need of extensive repair don't qualify for traditional mortgage financing from banks and lenders due to property condition or age. Also, some individuals have situations which prevent them from qualifying for a traditional mortgage. With tighter lending standards, a luke-warm economy, and a huge pipeline of foreclosures, I don't see how eliminating a huge segment of home buyers will help housing recover.

DFW Area Four Seasons Gets Foreclosure Notice

Wall Street Journal article summarized by Troy Corman, www.t2realestate.com

Search Dallas homes for sale at www.dallashomes2buy.com

The Four Seasons Dallas, located in Irving, Texas and home of the PGA's Byron Nelson Golf Championship received a foreclosure notice this week. The 431-room hotel was bought in 2006 by BentleyForbes Holdings LLC, which failed to make it's October mortgage payment. It seems it was hoping that the mortgage servicer, CWCapital Asset Management would revise the terms of the loan - since the hotel's cash flow isn't covering the $10.9 million interest payment.

The owners claimed that they have acted in good faith, and point out their $60 million renovation of the property since they purchased it in 2006.

The Four Seasons hotels in San Francisco and New York are also in financial trouble, as cash flows no longer cover the mortgage debt.

First Look Program Allows Owner-Occupants 15 Days To Bid On Fannie Mae REOS.

By Troy Corman, t2realestate.com

Fannie Mae has implemented it's "First Look" initiative to allow owner-occupants a chance to buy Fannie Mae foreclosures the first 15 days they're on the market. Investors and those not intending to live in the home can only make an offer after the first 15 days have passed.

Fannie Mae is also allowing owner occupant buyers up to 45 days to close, 15 days more than normal. The First Look initiative is intended to help owner-occupant buyers and low-income buyers.

This initiative will probably help a few buyers but it will undoubtedly slow down the foreclosure purging process that needs to take place. The sooner we can purge the foreclosures, the sooner ALL home owners can benefit.

How To Add $100K To Your Net Worth In Uncertain Times.

By Troy Corman, t2 Real Estate

We live in uncertain times. Pundits argue if we're out of the recession, if the stock market will continue to rise, and if we're looking at another leg down in the economy when the government exhausts it's stimulus programs.

So what's one to do to not only protect, but create wealth? You can store it in the bank in low-yielding money market accounts. But that doesn't produce gains if we get hyper-inflation. You can continue to speculate in the stock market. But the market can produce horrific losses if the doomsdayers are correct and we get a massive decline. You can buy gold, but gold doesn't pay you monthly income, or give you terrific tax deductions, and it is much more volatile than my investment of choice, rental real estate.

Rental real estate makes you money in 5 ways.
1. Cash Flow - renters pay more each month than the home's carrying cost.
2. Principal Pay Down - rent money pays down our mortgage each month.
3. Equity Capture - we buy homes for thousands less than they're worth.
4. Appreciation - we sell homes in a sellers market when prices are rising.
5. Depreciation - rent homes produce about $10K in deductions per $100K home annually.

The formula to add $100K to your net worth is simple. We buy homes that would be worth around $100K once they are repaired. We look for a $20,000 profit margin by subtracting the purchase price and rehab costs from the home's ARV (after repaired value). In other words, we buy a home for $70K, put in $10K in upgrades and repairs, and sell the home for $100K or more. Buy 5 homes using this formula and you've added $100K to your net worth.

In this price range, we're able to rent the homes for around $1,000 a month, which will produce $100-$300 a month positive cash flow. The cash flow helps cover vacancies and any repair work. We never buy homes that don't have positive cash flow because then we've just bought ourselves a liability.

So should we invest in real estate in Dallas/Fort Worth now? Yes. I expect lenders and banks to ramp up the disposition of their bank-owned real estate and foreclosed properties. Many have talked about a shadow inventory of foreclosures that have yet to hit the market. According to the November 9th issue of National Mortgage News, "Bank of America is now saddled with $33 billion worth of nonperforming assets, almost triple what it had a year ago". Wells Fargo comes in with $20 billion in nonperforming assets, double what it had a year ago. Sooner or later, those nonperforming assets, whether they're residential or commercial real estate, have to be off the books.

As a result, I think that 2010 will offer a once-in-a-lifetime gold-mine for investors willing to take action. The economy, government spending and unemployment will freeze many in fear, which means there will be more deals for those that step up to the plate. Despite some dour predictions of a W-shaped recession, the Dallas/Fort Worth real estate market is consistently ranked as one of the top 10 markets in the nation. Out-of-staters continue to migrate to the Lone Star state in droves attracted by our job market, affordable cost of living and lack of a state income tax. So take action. Because as Wayne Gretzky says, "you miss 100% of the shots you don't take".

Check out this video about the future of Texas real estate.

Fannie and Freddie Get Hammered

Lenders continue to tighten and no one really knows how long that trend will last. Just today, Fannie Mae and Freddie Mac are getting punished on Wall Street since Treasury secretary Hank Paulson said that the government would not serve as a backstop for the GSEs. However, an article in Barron's over the weekend suggested that the Treasury may have no other choice.

A government bailout would likely wash away shareholder equity in the companies. And the future doesn't look promising. I recently spoke with a large REO listing agent who said that Fannie Mae expects an increase in foreclosures in 2009.