Guidant Financial Group - Financial Services

While it may be increasingly difficult to view the real estate market as anything other than a glass half-empty, there is a little-known method you can employ to help your investment account virtually overflow with profit.

Because many home prices are the lowest they’ve been in a decade, and because foreclosures continue to rise at a staggering pace (30 percent each year since 2005), real estate can be purchased at bargain rates. But what do you do if you don’t have the money or cash flow to purchase the deal of a lifetime?

The answer is: you turn to your IRA or 401(k). If your retirement account holds a good chunk of change, then you can structure your account in such a way that you can purchase property with those funds. These unique accounts are generally known in the financial industry as “self-directed IRAs.”

By following certain government-approved guidelines, your real estate purchase is viewed as an IRA investment, similar to investing in stocks, bonds and mutual funds. All returns are funneled tax-deferred back into the IRA, helping to make your retirement funds grow faster. Because this is a legitimate investment, the removal of those funds does not constitute an early distribution. In other words, no high taxes or penalties for using that money before the age of 59 1/2.

Another attractive option for those with self-directed IRAs is the purchasing of a business or franchise with retirement money. Due to bruising by an ever-vacillating economy, some Denver-area businesses may be eager to sell. Picking up a franchise or small business at this time might be the ideal answer to those feeling insecure about their future in the job market, despite its recent upturn. Self-employment allows for more control of one’s economic future – especially when the business can be launched with IRA money instead of high-interest loans.

With an account structure slightly different from the one used for purchasing real estate, you can purchase a business/franchise and pay yourself a salary. You do have to meet certain government requirements – like working at least 20 hours weekly for the business – but it’s an ideal way to go into business for yourself. And you don’t have to go it alone. “You can pool your IRA resources with the retirement funds of others you take on as partners,” says Doug Smith, senior account executive in the Denver branch of Guidant Financial Group (www.guidantfinancialgroup.com), one of the country’s busiest self-directed IRA account facilitators. “This structure is perfect for husband-and-wife teams.”

The account structures required for these IRA transactions are governed by some strict rules, so the use of an experienced account facilitator is strongly recommended. Although you can find numerous companies on the Internet offering to structure your account, beware: all facilitators are not created equal. It is best to work with one that has a good reputation in the industry and that has a solid history of completing thousands of these structures.

As with almost anything in life, it is important to put in some due diligence on your part. Check out facilitator websites and contact them directly to find out their history and reputation. Many facilitators offer no-obligation consultations and educational materials, which are a great way to get started.

“The key piece of advice is to find an account facilitator offering a structure and a business philosophy that meshes with your own,” says Smith. “And make sure you’re confident with their abilities. After all, your focus should be on building a successful business.”

The right guidance -- combined with a bit of the entrepreneurial spirit -- can help you find that proverbial silver