The popularity of Real Estate IRAs is on the rise. I see hundreds of transactions processed monthly and this continues to grow annually. Real estate is, by far, the most popular investment in self-directed retirement plans, and single-family homes are the top real estate assets. But as a real estate professional, how do you work with these investors? Where do you find them? How do you sell to them? The answer is that some of these people are probably already in your database. After all, Americans have more than $7.5 trillion in their individual retirement accounts. Chances are, most (if not all) of your clients have an IRA of some sort.
Nowadays, people research any investment before making a purchase. By the time your clients contact you they have a good idea of what is a Real Estate IRA and what they want to purchase. Most of the Real Estate IRA investors I deal with open a self-directed IRA when they have already identified the property.
Are You Prepared?
Would you be able to talk about Real Estate IRAs if you were approached by a client regarding this topic? Credibility goes a long way.
Recently, I attended a real estate event and talked to at least one thousand agents. Most of them did not know that real estate could be purchased with retirement dollars for investment purposes. “How come I did not know about this?” is the most frequent question, as their eyes light up with ideas on how to tap into their existing database. The answer is simple: Most big custodians that offer retirement plans promote products such as stocks, bonds and mutual funds. Therefore, investors are not aware that you can hold real estate. In fact, in some cases custodians will tell you that real estate is not allowed.
When talking to these agents I discovered that some had turned away clients that brought up the topic because they didn’t think they could assist them and therefore lost the sale.
One of the most popular questions you will get from your clients is “Can I live in the house I buy with my IRA dollars?” The answer is no. I hear this almost on a daily basis. Real estate in an IRA is for investment purposes only and not for primary residence use. The real estate investment lives in a tax-free or tax-deferred account as long as you comply with IRS rules and regulations. The income and expenses flow in and out of the IRA. It is important that you know the intent of purchase when assisting a client. You can save them and yourself a lot of time.
Education Is Key
As real estate (i.e., actual properties) and alternative investments in IRAs become more popular, real estate agents will be faced with the challenge to assist their clients with these types of real estate transactions. Educating yourself will be the key to success. You do not need to have an IRA designation or be an expert in IRAs. In fact, you shouldn’t be…real estate is, and should be, your expertise. However, you do need to know how to answer the basic questions when it comes to Real Estate IRAs and have an established working relationship with a reputable company that can assist in educating your clients on the opportunity.
Educating yourself about the potential benefits of Real Estate IRAs will set you apart from the competition. Sharing that education with your existing clients opens new opportunities for you to grow your business. Help position yourself as their trusted resource on this topic. Arming clients with this tool will help you stand out and it will help them save for retirement with investments they know and understand. It’s a win-win.
About Jason Craig, President of The Entrust Group
Jason Craig, CISP, maintains leadership and oversight of all operations for Entrust. With more than 13 years of experience in financial services, Mr. Craig joined Entrust in 2007 after several years as an Assistant Vice President with Greater Bay Bank, where he managed Deposit Operations for the Walnut Creek office, with more than $200 million in deposits.