Blog Post: Why IRA Funds are Ideal for Real Estate Investing

Individual Retirement Account (IRA) funds are ideal for investing in private real estate because properties are typically an income generating asset that is held long-term.

Since retirement funds are not the funds one expects to live on until they are of retirement age, and income generated from retirement accounts are not taxed (so long as they are not withdrawn), it makes sense to invest these dollars in more discretionary alternative investment options that have a longer life cycle and don’t need to be “liquid” or converted to cash quickly. Moreover, investing in real estate through Real Estate Investment Trusts (REITs) specifically allow investors to invest in diversified assets with very few limitations. Over the long-term, this, coupled with tax-free growth, tends to lead to enhanced returns.

Most people with Traditional IRAs are unaware of the power of the SD-IRA, and unaware that income-generating investment options exist outside of traditional assets such as stocks and bonds. SD-IRAs allow you direct and complete autonomy on how you manage and invest your retirement funds. With a SD-IRA, one has the power to invest as they see fit, and can invest in a variety of private entities including startups, small businesses, real estate funds, private real estate developers and managers, including those that are focused on delivering both financial and social returns.

You have the option to invest in different assets and receive market rate returns. You have the option to allocate your retirement with investments that are aligned with your values, your knowledge, your passions– all without the influence of others trying to sell investments to you or profit from you.

The issue with many brokers and advisors is they are often incentivized to push investments that make them money — not necessarily you, the customer. With a SD-IRA, you can invest in whatever you like – minus the fees and the “grey haired advisor” telling you not to.

New Crowdfunding laws have made this all possible. Now anyone can seek a better financial return by going direct into private investments like ImpactHousing.com, thus circumventing the Wall Street middleman and the extra cost associated with that “load”. The democratization of investing through Crowdfunding has leveled the playing field so that anyone and everyone can invest directly as they see fit without the unnecessary additional fees and costs. You can also help change the world in the process too!

Since a SD-IRA is a government-sponsored retirement plan like a Traditional IRA, you benefit from important tax advantages that allow you to protect and grow your assets. In terms of tax benefits, any investment through a SD-IRA is tax-free and any growth is tax-deferred, adding to your accrued wealth at retirement.

When you invest in real estate through a SD-IRA, you can defer any capital gains tax and reinvest any rental profit back in the fund, also tax-free. The SD-IRA is its own entity; therefore, you don’t have to worry about state and bankruptcy laws, or creditors coming after you based on it.

SD-IRAs complement real estate investing because of its innate long-term time horizon, ability to generate higher market yields due to compounded interest and tax-free growth, asset protection, and lastly, ability to let you invest on your own terms. Who doesn’t want to do that?

*Note that you cannot mix your personal funds with an SD-IRA, or use profits from the investments prior to your retirement without penalty. To avoid UBIT (Unrelated Business Income Taxes), all investments and expenses must be financed through the SD-IRA, and all earnings returned to the account. Also, make sure to watch out for fraudulent investments that may come up due to the lack of heavy regulation of this market. Of course, please consult with and rely only your tax advisor for any tax advice.

 

 

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Impact Housing REIT, LLC.
$1,000
Minimum
Quarterly
Dividend
A reservation is not an investment. A reservation is non-binding and you will need to confirm your reservation when Impact Housing REIT, LLC offering is live to invest. By making a reservation, you are requesting an allocation in Impact Housing REIT's upcoming offering. A copy of the Preliminary Offering Circular may be obtained here. A reservation is non-binding and you may change the amount at any time. Reservations may be accepted in whole, or in part, or not at all by Impact Housing REIT. If granted, you will be asked to confirm your investment once Impact Housing REIT's offering has been qualified by applicable authorities and the fundraise has officially begun.


Disclaimer
*Impact Housing REIT, LLC will invest in multifamily properties, income-producing real estate, a market that may produce returns that are different than the returns an investor could expect from other markets, including the stock market. Before our Sponsor receives anything, investors are entitled to a 7% annual return on their investment. Note: There is no guaranty that investors will receive any return on their investment, or get their capital back. In the last 5 years, the Sponsor has completed 28 projects (totaling 40 multifamily properties) which have achieved an average annual cash on cash return of 8.55% and an average project IRR of 24.74%. For more information about the Sponsor’s track record, see the Offering Circular, here. However, Impact Housing REIT, LLC is itself a newly formed company with no historical data of returns, and there is no assurance that it will achieve comparable success. The results that the Sponsor has achieved in the past do not guaranty that it will achieve similar results in the future. Like any investment, there is the potential to lose some or all of your investment. The ability to make distributions will depend on the availability of cash flow each quarter. There is no guarantee that we will be able to make a distribution in any given quarter. For a list of the most significant risks, click here.
Prospective Acquisition #3: Las Vegas
* Highrise with spectacular views
* 117 Units
* Built in 1975
* First time being sold
* Purchase Price: $15m to $16m
* AirBnb Potential
*Note that these properties may or may not ultimately close escrow subject to due diligence and other various factors. Impact Housing REIT cannot guarantee that these specific properties will end up being one of the multiple assets owned by the fund.
Property #2: Colorado Springs
* Mountain views
* Near commercial district
* 64 Units
* Built in 1967
* New roofs recently installed
* Purchase Price: $5m to $6m
* Units currently renting below market
*Note that these properties may or may not ultimately close escrow subject to due diligence and other various factors. Impact Housing REIT cannot guarantee that these specific properties will end up being one of the multiple assets owned by the fund.
Property #1: Mesquite, Texas
* Strong submarket: 96% Occupancy
* Located in suburb just outside of Dallas
* Multifamily, 190 Units
* Built in 1959 -1972
* New roofs recently installed
* Purchase Price: $8m to $9m
* Renting at 25% - 50% below market
*Note that these properties may or may not ultimately close escrow subject to due diligence and other various factors. Impact Housing REIT cannot guarantee that these specific properties will end up being one of the multiple assets owned by the fund.
Disclaimer
Impact Housing REIT investments are expected to be spread throughout the United States. The Manager expects Impact Housing REIT’s investment portfolio to consist of direct equity interests in individual properties. The Manager will generally target equity investments ranging from approximately $3 million to $10 million. Note that these properties may or may not ultimately close escrow subject to due diligence and other various factors. Impact Housing REIT cannot guarantee that these specific properties will end up being one of the multiple assets owned by the fund or that investors will receive any return on their investment, or get their capital back. In the last 5 years, the Sponsor has completed 28 projects (totaling 40 multifamily properties) which have achieved an average annual cash on cash return of 8.55% and an average project IRR of 24.74%. Past performance cannot guaranty future results. For information on our Sponsor’s track record, see the Offering Circular, here.