This is Part 1 of a 3 Part series exploring the relationship between “distressed” properties and Self Directed IRA real estate investing.

In Part 1, we’ll take a look at the opportunity (for investors) created by foreclosures, short sales and REO (real estate owned) property.

Part 2 will deal with the advantages of being a cash buyer utilizing a Self Directed IRA or 401(k).

Part 3 will explore having the “right plan” in place before the investment opportunity arises!

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For property owners who find themselves in a situation where the value of their real estate is less than what is owed on a mortgage, these are “distressing” times.

Usually, it’s a combination of declining values and the inability (or unwillingness) of the owner to continue to make loan payments that causes a property to be classified as “distressed”.

To describe properties in various stages of distress, certain terms have become all too familiar to us…foreclosure, short sale and REO (real estate owned property).

Here’s a quick definition of each of the stages of distressed properties:

Foreclosure – usually means the owner has stopped making mortgage payments and the note holder or lender has given notice that unless payments are brought up to date, the property will be sold at auction, to the highest bidder.  The owner can bring the loan current and thereby avoid foreclosure.  However, if this doesn’t occur, the property may be sold for the amount owed, rather than market value, making the purchase attractive to investors.

Short Sale – occurs after a property is in foreclosure, but prior to a public auction. In this circumstance, a note holder or lender agrees to accept less than what is owed on the property.  This is especially attractive to an investor, since they are able to purchase the property for less than they would pay at a foreclosure.

REO – means real estate owned by the lender.  This is similar to a short sale, except the lender owns, and has taken possession of, a foreclosed property. Typically, the mortgage holder ends up with the property because the public auction did not produce an acceptable bid. Considered the best way to buy a distressed property, an REO eliminates the seller from the equation leaving only the investor, investor’s agent, the lender and the lender’s agent. Without the emotion of ownership involved, the transaction becomes purely a numbers game.

While it is unfortunate that real people are suffering real loss, it is a foregone conclusion that each of these stages of “distress” also signals an opportunity for the Self Directed IRA & 401(k) investor.

About 70% of our Self Directed IRA clients are focused on real estate investing and, not surprisingly, many of them are pursuing distressed property sales – in their own neighborhoods and in regions of the country where the fundamentals of economic recovery are in place.

We regularly work with investors who are picking up properties at significant discounts – often for less than it would cost to build.  They are then receiving excellent cash flow as rentals, or flipping the properties for handsome profits.  Best of all, they are actively growing their retirement funds with tax deferred or tax free gains by utilizing a Checkbook IRA or Solo 401(k).

If you’re a seasoned investor then it is likely that you are already participating in this segment of the real estate investing marketplace.  If you’re a novice, but recognize there is opportunity awaiting you, then you’ll definitely want to stake your claim in this area of Self Directed IRA real estate investing.

Knowledge is power…so goes the saying.  One of the best ways to succeed in distressed properties or any other form of real estate investing is to build a solid team – and thereby leverage the knowledge of experienced professionals.

Since some Real Estate Brokers are now “specializing” in distressed sales, it is advisable to hook up with one of these professionals…who has local knowledge.  They, in turn, will be able to recommend others, such as a competent real estate attorney who can make sure your interests are being protected.

When it comes to funding real estate investments with a self directed IRA or Solo 401(k), Safeguard Financial has you covered.  We have decades of real estate investing experience in house, as well as a solid understanding of how to properly work with banks, realtors and title companies to get deals done right.

Even with a top rate team in place, you need to be able to speak the language of “distressed property sales”.  Just like with Self Directed IRA investing, there is a wealth of information on the internet and we recommend you take full advantage of it.  For your convenience, here are a few links that you will find helpful:

Handling Short Sales Foreclosure Sale Basics Buying a Short Sale Home

Distressed Homes in Default – Distressed Short Sales and Foreclosures

In Part 2 of this series, we will take a look at the advantages of being a cash buyer…utilizing a Self Directed IRA or 401(k).

In the meantime, we urge you to contact one of our Expert IRA Advisors at your earliest convenience in order to put together an investment plan that will meet your needs and put you in a position to take advantage of any opportunity that may come your way.

Safeguard Financial
877-229-9763
www.IRA123.com