Saturday, August 20, 2011

Can You Use Your IRA to Buy Real Estate?....Yep!


Yes, it’s true that US residents (as defined by law) can indeed use their IRA money to invest in real estate provided the defining rules are followed.  Of course, there are rules, but aren’t there rules for just about anything in life?  It’s probable that your brokerage firm or bank never told you that this could be done.  If you went to your bank or brokerage firm and asked them directly, “Can I hold real estate in my self-directed IRA?”, they may look at you as if that was the stupidest question they’ve ever heard and probably tell you, “of course not!”  Let's just say that financial institutions are interested in selling you the financial products within your IRA that make them the most money.  You may think you have a self-directed IRA but it’s more likely that you have made choices from those presented to you by your brokerage firm / bank that of course make them the most money.  You don’t likely have a true self-directed IRA, but something that’s disguised to appear that way. 

There are detailed rules that have to be followed and there are firms that provide truly self-directed IRA’s.  The types of property you can hold within an IRA are broad and most companies won’t tell you the whole truth.  True self-directed IRA’s are available from many companies throughout the United States but you probably haven’t heard of them because they don’t have huge advertising budgets to spend on self-promotion.  These operators administer self-directed IRA’s and they don’t charge you fees for all of the investments in your IRA.  They simply charge you for maintaining your IRA in which you place your various investments which could include various types of real estate.  Again, there are rules to follow but they will be able to help you to tailor your self-directed IRA to your needs while adhering to all the government rules. 

By investing in real estate, you can get monthly cash flow, and can profit from appreciation when the property is sold.  AlmaVesta Group focuses on finding multi-family properties that have value add within them and we execute those value aspects of a property to “force appreciate” it.  When we do that, we do not need to rely on market appreciation.  Of course, all the proceeds must stay within the IRA until you reach retirement age. 

Many people accept poor returns as status quo within their IRA, whereas reasonably good, solid real estate investments are available that give much better returns over the short and long term.  Coupling these gains with tax deferral makes this a viable choice for the intelligent investor.  We don’t purport to be tax experts or accountants, and offer this information for you to decide which approach is best for you.  The following list includes self-directed IRA administration companies that can help you get to your goals.  We have no affiliation with any of the following companies, and we encourage you to do your own research prior to making any investment choices whether they are in real estate or some other form.


Equity Trust Company
225 Burns Road
Elyria, OH 44035     
888-382-4727 begin_of_the_skype_highlighting            888-382-4727      end_of_the_skype_highlighting

Sterling Trust Company
P.O. Box 2526
7901 Fish Pond Road
Waco, TX 76702-76710

Pensco Trust Company
450 Sansome Street, 14th Floor
San Francisco, CA 94111

Fidelity Investments
100 Summer Street
Boston, MA 02110

Guidant Financial Group
13122 N.E. 20th Street #100
Bellevue, WA 98005

Tuesday, August 16, 2011

Do You Sell, Form Relationships, or.....?

When sales people look to sell their product or service, many fail to get to the root of human psychology.  What I mean by this is that these overly-aggressive sales people focus on what they're selling rather than focus on their client's need to have their problem solved.  Someone will buy from us only when they 1) Trust us first. and 2) Listen and accept second.  There is no guarantee ever that 2) will happen, but certainly if your client doesn't trust you, they are not going to ever buy into your idea.

Trying to get to the sale too quickly just doesn't work.  You need to understand your client's problem and then come up with solutions that work for them first and for you second.

A short time ago, I received a long letter in response to some detailed information sent.  The letter was riddled with reasons why certain things did not solve my client's problems.  This helped me narrow down what will work for them.  Now, some people would read the letter verbatim and conclude that this person is a waste of time and not interested.  I on the other hand read objections as signs of interest.  We just need to get past those objections and come to the root of the client's problems.  Think about it..........why would this person go to the trouble of answering back in a detailed manner if they weren't interested?  What do you do when you aren't interested in reading a piece of what you consider junk mail?  Do you send a detailed 3 page letter back telling the vendor why you're not interested?  Things that make you go...hmmmm. :)

So, in summary, you are constantly driven to satisfy internal and external customers whether you like it or not.  This applies to everyone, not just "sales people".  Creating relationships with the people you deal with is the first step in "selling" yourself, and your work.  Trust comes in first and only then can you get the other person to listen to you.  From there, how you handle yourself determines whether you "make the sale" or not.  Sales is not about's about forming a relationship with the other person and solving a problem that they have.  Everyone, whether they consider themselves a sales person or not, sells every single day.  The next time a problem arises, go ahead and handle it with tact and professionalism, and solve it in the end.  If problems didn't exist, none of us would have jobs or businesses.  So solve a problem, satisfy your client and you'll be compensated for your efforts.  It's not always ideal, and it can never be that way but be exceptional in your work and great things will happen.

Someone recently said it really well....being good gives poor results.....being excellent brings good results and being exceptional, produces excellent results.

Until next time, have a fantastic day! 

Saturday, August 13, 2011

How NOT to Treat Your Client

Hi Friends!

During the course of business, one occasional runs into a person who forgets that their state of mind should not affect how they behave with their clients.  Let me explain....

Last month, I came across a rather simple opportunity that involved the purchase of a time-share which I was planning on buying for a friend.  Time shares are not an area of my expertise, nor do I want it to be, so I felt I should contact an expert in the field to get comps.  I simply wanted to buy it and make sure I was getting a great price.  I won't mention the company name here, but they are very high profile, and everyone knows their name worldwide.  I inquired with a simple question about the valuation of a specific type of property and the response I got was that it depended on how many points I had.  Well, I don't own a time share so therefore, I have no points.  I wanted to know the fair market value based on comps.

By the time I got an answer (which wasn't what I requested), the opportunity had passed and I didn't give it a second thought afterwards.  They continued to hound me on the phone leaving message after message.  Does anyone seem to think that excessive communication creates exactly the opposite effect of what one wants?'s where it got interesting and funny:  I quote the following activity exactly as communicated, and I did try to be nice...!

ME: Kindly remove me from your mailing list.



REP: We do not have a mailing list. YOU contacted US on 7-14-11 asking for a value on your **** package.

ME: Well, YOU or your co-hort is calling me and leaving messages, so you do indeed have my information on a list. I'm NOT interested further, so HAVE a NICE DAY!!!

Perhaps I overdid the capitalization here but I thought I would have a little bit of fun with the rep because they insisted on capitalizing the word YOU and US in their initial communication with me (above) and then denied that they had me on a list!!

REP: First of all I do not have a "co-hort" second of all you are right we probably did call you - at YOUR REQUEST. When you ask for a value on a timeshare points package it is important to say how many points you have. We are fine if you no longer want the information buut you then need to stop requesting information. It's pretty simple. We only help those who ask - we are NOT telamrketers and have NO desire to deal with unpleasent folks. My freind is the project director at your property in Oralndo and they have no resale program so if you call them for help they will just refer you back to us.

The rep was so intent on making a point, it seems that she misspelled several words in the last paragraph.  I didn't ask for a value on a timeshare points package either and I only contacted them once, not multiple times as she claimed.  It's clear to me that this person was having a bad day, and I take it we all can have a bad day here and there, but this is clearly an example of how NOT to treat your client. 

Enjoy your day!

Thursday, August 4, 2011

US Real Estate is on Sale! What to buy?

Hello friends!

Before I get into discussing the US market, there appears to be a rather remarkable correlation between the Canadian and US real estate markets.  At AlmaVesta, we're focused more on the US markets at this time for many reasons.  I'll hint at some of the reasons here:  

"In Economics, the Majority is always wrong"

Food for thought here is that it was John Kenneth Galbraith who astutely noted that, "In economics, the majority is always wrong".  Total household mortgage debt increased by roughly a factor of 2.5 in both the USA and Canada from the period 1999 - 2010.  The above charts reflect this clearly, with the lower chart one showing USA figures.  Oddly, it seems that the "majority" in Canada still believe that real estate is a great investment and they just keep on buying and buying at ever-inflated prices.  Does this type of behavior seem familiar to any of my American friends?  The majority tend to behave in predictable patterns and that's why understanding technical analysis of markets is so essential to the serious investor.  Technical analysis measures quantitatively, mass psychology and we can get a glimpse into the future through this understanding.  It's not by any means 100% accurate as nothing is, but it is highly effective for decision making.

Anything that can be considered an investment is great if you're on the right side of the market, and only if you're on the right side of the market.  We want to buy low and sell higher, right?

Average Cost of Property in Major Cities

The average cost of a home in Toronto is now is $485,520, which is up 9% compared to $446,593 in May 2010.  We're just out of a recession barely, and sales prices are up 9% in just one year!!  This is not a normal occurrence, and when one sees this type of pattern, you have to be aware that a correction is likely on the horizon.  The average price of a home in Houston, TX is now $228,650 and in Chicago it's $209,600.  These figures courtesy of the Toronto Real Estate Board, MLS Houston and Zillow.

All three of these cities have populations in excess of 2 million people and are similar in terms of their economic make-up.  Toronto's population comes in at roughly 2.5 million, Houston at 2.3 million and Chicago near 3 million.

Understanding Mass Psychology

In a previous article, I wrote about applying technical analysis to analyze real estate using various methods.  The above two charts do not discuss pricing, however they do give a glimpse into what has transpired in terms of economic activity in real estate.  Clearly, the debt load that homeowners in the USA and Canada took on for the same period from 1999 - 2010 is almost identical in terms of percentages.  Real Estate is just like any other traded instrument be it a stock, bond, currency, or even a comic book.  Supply, demand and mass psychology determine value, and as we know from history as well as the famous words of Mr. Galbraith, the majority is truly always wrong.  He didn't say that the majority is sometimes wrong in economics.  He said, "always wrong".

So, now we have seen charts that show that average sales prices in real estate typically go in long cycles of up and down, but understanding now that the debt load % increase in both countries is almost identical over exactly the same period of time, should make one wary of buying in a market that has been appreciating for some time and now has experienced unusual short term appreciation as well.  In my view Toronto is not a market to be investing in right now based on the information at hand.  If you're selling in that market, now would be a great time to divest and move your money elsewhere where opportunity exists.  When the magazines, tv and newspapers are telling you how hot the market is, it's probably a good time to sell, and when the same groups are telling you how bad things are, then it's probably a good time to buy.  Of course this is superficial, but you get the idea I'm sure.

Can I buy at the Bottom?

Now, the US markets have probably not bottomed yet, but when it comes to commercial property, there are tremendous values to be had right now if you are careful and also in residential if that's your focus.  Also, one can almost never hit the bottom anyway, so why would you try to find that bottom?  The chances of finding the bottom in any market are about the same odds as winning the state powerball; forget about that.  You need to focus on finding value with the highest probability of appreciation.  

In the overall methodology of buying low and selling higher, the US markets are effectively on sale right now, and the saavy investors will be the ones to reap excellent rewards for their calculated risks.  You don't just blindly buy anything, but if you take an educated approach, looking at market statistics, the area you plan on buying, comparing recent sales figures in the area you plan on buying in, and then moving forward with the properties that make financial sense short and long term, you will be a winner in the long term.

I know that there will be many people that disagree with me.  I accept that completely.  It's OK to believe in what you believe, but it should be based on facts and not feelings.

What the heck?  What Does Currency Have to do With Real Estate Anyway?

A friend of mine asked me last week about buying a relatively substantial amount of Canadian dollars with US dollars.  I told her to hold off for at least a few days because the debt ceiling agreement in the US hadn't been reached yet.  The US dollar was at an 18 month low against the Canadian at the time.  My thought was that there had to be an agreement before the deadline because the US government could not afford the risk of a default.  The media played up the negative aspects of what a US default could do because the media loves negative.  That's what sells their advertising and attracts viewers and listeners (the majority that is). Once the debt ceiling agreement was announced, the US dollar shot up against the Canadian.  Two factors played here, and the reason I mention it is that mass psychology works, and it appears in the form of price charts for the ones that want to understand and learn from them.  Two decision making factors came into play at the same time:

Factor 1) 18 month low for US/CAD currency pair
Factor 2) Major news announcement which was a 99% probability of non-default.

These two factors swayed a major currency purchase and allowed a very short term 4% + gain over just a couple of days.  My friend now is 4% + in her investment as opposed to just last week.  She took my advice and gained from it.  I'm not a guru, but I am calculated and I analyze investments before making the decision to proceed.  If I see danger, I walk away.  You should too.

If you are interested in higher yield, 14%+ returns secured by multi-family real estate, please see our website:  

Until next time, have a great day!