Invest in Real Estate with a CIAS & secure your future today!


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Invest in Real Estate with a CIAS & secure your future today!

  1. 1. Secure Your Future: Invest in Real Estate Presented By: Mark RusnakCopyright © 2012 Charfen Institute, LLC
  2. 2. What Will We Cover? This presentation is designed to inform you of youroptions regarding residential real estate investments. In it, you’ll learn: 1. How real estate compares to other assets for growth potential 2. The benefits of investing in real estate 3. How you can use retirement funds to invest in real estate
  3. 3. Tenets: My Promise to You I am committed to providing the highest quality service to you through focus, honesty, and integrity. As a CIAS, I adhere to the following tenets:1. I always do what is best for you, and will never let you close on a bad deal.2. Real estate should be purchased for cash flow only; appreciation is a bonus.3. Real estate investing is a non-emotional event; I always do the math.4. You, as an investor, play a vital role in the real estate market and deserve to be treated accordingly.
  4. 4. Real Estate vs. Other AssetsCopyright © 2012 Charfen Institute, LLC
  5. 5. Bonds and Certificates of Deposit Bonds and CDs typically have low rates of returnCopyright © 2012 Charfen Institute, LLC
  6. 6. Mutual Funds •Often underperform the market •Average 3.66% 10-year return (2000-2010)* •Managed by someone else •Dividends reinvested, not paid to investor*Source:
  7. 7. Real Estate 4 Total Years of Negative Appreciation Max. -13%Copyright © 2012 Charfen Institute, LLC
  8. 8. S&P 500 11 Total Years of Negative Appreciation Max. -38%Copyright © 2012 Charfen Institute, LLC
  9. 9. Stocks Stocks in S&P 500 averaged a 1.82% dividend yield from 2000-2011Copyright © 2012 Charfen Institute, LLC
  10. 10. Real Estate Real estate values increased in the last decade despite the market cycleCopyright © 2012 Charfen Institute, LLC
  11. 11. Real Estate vs. Stocks $100,000 invested in real estate in 2000 would have generated $77,755 of cash flow by 2010Copyright © 2012 Charfen Institute, LLC
  12. 12. The Benefits of Real EstateCopyright © 2012 Charfen Institute, LLC
  13. 13. C as h Flo w C an B e a S te ad y & S ig n ific an t S tre am o f In c o m e • Most stocks don’t provide cash flow • Cash flow increases over the years • Cash flow is liquid and can be investedCopyright © 2012 Charfen Institute, LLC
  14. 14. Appreciation• Appreciation should always be considered a bonus• Yearly home appreciation averaged more than 5% over past 40 years• You can help property appreciate (improvements)• Home appreciation less volatile than the stock market
  15. 15. Appreciation Source: HUD Historical Data: © 2012 Charfen Institute, LLC
  16. 16. Leverage Most investments don’t offer leveraged buying powerCopyright © 2012 Charfen Institute, LLC
  17. 17. Leverage • Earn returns with other people’s money • Leverage is a key way to increase your returns • Leverage is largely unique to real estateCopyright © 2012 Charfen Institute, LLC
  18. 18. Tax Benefits •Depreciation allows yearly deductions on improvements to the property •1031 Exchanges defer capital gains taxes •Other benefits*Source:
  19. 19. Investors Can Deduct the Following Items Related to Rental Property: •Advertising • Legal Fees •Cleaning & Maintenance • Local Transportation •Commissions Expenses •Depreciation • Long Distance Travel •Employees, Contractors, • Losses Non-Employed Staff • Professional Services •Insurance • Repairs •Interest • Utilities*Source:
  20. 20. Investors Can Depreciate Property as Tax DeferredCopyright © 2012 Charfen Institute, LLC
  21. 21. How Depreciation Works• Purchase a property worth $100,000. $85,000 worth is attributed to the improvement (house).• The basis for depreciation is $85,000.• Calculate the first year’s depreciation based on the month of purchase.• Every year afterwards (until 27.5 years), deduct 3.636% from the basis.•Every year, deduct $3,090.60 in taxes.
  22. 22. Using a Self-Directed IRA to Invest in Real EstateCopyright © 2012 Charfen Institute, LLC
  23. 23. Traditional IRAs Individual Retirement Account (IRA):•Held in trust by bank, credit union, savings andloan, or other IRS-approved institution‣Custodian distributes, receives, and holds funds for theinvestor•Shelters retirement savings from certain taxesand lawsuits•Typically invested in stocks, bonds, and mutualfunds
  24. 24. Self-Directed IRAs• Same rules and restrictions as traditional IRAs except...• The investor directly chooses how the IRA invests his or her funds‣ Can invest in real estate‣ Generally, any retirement funds can be rolled over into an SD IRA
  25. 25. Retirement Savings in the US• 44% of retirement savings in mutual funds‣ 3.43 trillion dollars in mutual funds‣ 90.2 million individual investors• 52% of retirement plans in other investments‣ 4.05 trillion dollars in other investments (stock market)‣ 86.2 million individual investors• 4% of retirement plans in SD IRAs‣ 0.27 trillion dollars, or 312 billion dollars (other investments)‣ 3.6 million individual investors
  26. 26. SD IRA Permitted Investments• Residential Real Estate • Single Family Homes • Multi-Family Homes • Apartments• Commercial Real Estate• Undeveloped or Raw Land• Real Estate Notes (mortgages & deeds of trusts)• Promissory Notes• Private Limited Partnerships, LLCs & C-Corps• Tax Lien Certificates
  27. 27. Borrowing Money with an SD IRAIRS requires a non-recourse loan•Non-recourse loan restrictions‣Loan-to-Value Ratio (max): - 70% for Single-Family Residence - 50-65% for Multi-Family & Condo‣Debt service Ratio: varies - Typically 1.25, depending on property‣Interest rate: typically 1-1.5% higher‣Reserves: 10-20% of loan (depending onproperty)
  28. 28. Two Scenarios: Investor A and Investor B both contribute $5,000 annually to an IRAInvestor A: Traditional IRA‣Invested in mutual fund earning 5% annuallyInvestor B: SD IRA‣Purchased a property for cash flow in addition to 5%annual appreciation
  29. 29. SD IRA Invested in Mutual Fund $100,000 invested in a 5% mutual fundCopyright © 2012 Charfen Institute, LLC
  30. 30. How an SD IRA Invested in Real Estate Can Perform BetterIn addition to 5% annual appreciation:‣Rent: $1,200/month‣Expenses: $325/month (including SDIRA fees)‣NOI: $874/month ($10,500/annual)
  31. 31. SD IRA Invested in Real Estate For a $100,000 property appreciating at 5% annuallyCopyright © 2012 Charfen Institute, LLC
  32. 32. SD IRA vs Traditional IRA Traditional IRA SD IRA Contributions: $25,000 Contributions: $25,000 Interest: $30,256 Appreciation: $27,628 Cash Flow: $52,500 Total: $55,256 Total: $105,128 SD IRA earns $49,872 more after 5 years 90% moreCopyright © 2012 Charfen Institute, LLC
  33. 33. Thank You! Mark A Rusnak RE/MAX Allegiance @ Loehmann’s Plaza 4000 Virginia Beach Blvd # 164 Virginia Beach VA, 23452 Phone: 757-718-8865 www.MarkSold.comCopyright © 2012 Charfen Institute, LLC