Entrust Learning Center > IRA Insights > 2008: Is this a Good Time to Self-Direct My IRA?

2008: Is this a Good Time to Self-Direct My IRA?

By: Jack Kiley

IRA Insights

IRA Insights - January 2008

By: Jack Kiley

With the gyrations in the stock market followed by the bad news regarding sub prime mortgages, we’ve been getting asked this question a lot lately.

As you might expect, the answer to this question (like many things in life) is, “it depends.” It’s a good idea to talk to your advisors and evaluate your aversion to risk before making any decisions and then proceed with your eyes open. What we can share with you are the types of investments many clients have been purchasing lately.

As real estate values in many areas have declined and owners feel the pain of rising mortgage rates, some clients feel there are deals to be had. In many areas, the pendulum is swinging from a ‘buyers’ market’ to a ‘sellers market.’ Lately, buyers have been able to wrest concessions from sellers they probably wouldn’t have received six months ago.

Secondarily, as interest rates on mortgages have risen, we have seen a lot of activity in lending. This usually takes the form of a client extending credit at favorable terms, usually with points and fees, and taking a security interest in the property.

Another common lending activity involves renovation projects. Credit is extended (or an equity position is taken), in a project at favorable rates with a kicker on the sale of the property. Many investors like this because their funds are not tied up in a project as long as the original investor’s funds were.

For example, the project may be 50% complete and it has taken 18 months to get to that point. The project needs a cash infusion to complete the balance of the project over the next 12 months. The other reason investors like these deals is because the initial investors are usually worn out due to market conditions; they are willing to accept a smaller return just to complete the project and will discount new funds coming into the project.

As with any investment opportunity, you will need to do your own due diligence and consult your advisors to be sure the investments suit your needs.

Jack Kiley, CPA is a Partner of Entrust MidAtlantic, LLC., serving the states of Maryland, Virginia, DC, and the Western Counties of West Virginia. To contact Jack, please email jkiley@theentrustgroup.com.

Entrust does not give investment advice, Entrust can only report the types of common investments made by clients.  We have seen alot of activity in lending, including renovation projects.

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