5 Tips before Investing your IRA in House Foreclosures:
The greatest benefit of a self-directed retirement account is that you can choose an expanded list of investments. Since 1974, you can invest directly into Real Estate and real estate by-products, i.e.: mortgages, options, leases and more. You can also buy REO properties and properties at foreclosure auctions.
The current economic conditions clearly indicate that this is the greatest real estate buying opportunity since the failed savings and loans in the mid 80’s.
It doesn’t matter how you buy your properties such as auctions, realtors, asset managers, tax deeds, wholesalers, or private sellers. What really matters is what and where you buy.
With so many opportunities available, investors need to take some precautions and here’s some information that should help you.
5 Tips you need to know:
- Know why you are buying the house. That is, are you buying for a long term rental, or a quick flip or a lease option candidate. Always have an exit plan before you buy.
- If a house was built before 1978, you will have lead base paint issues. This is an area that is ripe with contingency fee-based personal injury attorneys that are looking for pockets to find money for their alleged lead-based paint victims. I know from personally experiences, I have been sued 6 times in the last 2 years on houses that I owned 15-20 years ago. That’s why we don’t buy these houses anymore. The worst thing that can happen is that you build up a portfolio of properties, work hard all your life, only to have it wiped out by a lawsuit.
- Make sure you get title insurance at closing and use a title company or an attorney. Unless you’re a title expert, you should always get title insurance when you buy. This guarantees that there are no liens on the property and you are free to sell it another buyer.
- If buying at auctions, do all your due diligence BEFORE bidding. This is a great way to find bargains but you could get burned. If you can’t get in the house, you don’t know what you’re getting-don’t buy it! There are different types of auctions and if it is a mortgage foreclosure, or trust deed sale, you must know the rules for your area. That is, what liens are wiped out, and if it’s a 1st or a 2nd mortgage that is being foreclosed on.
- Do what you do best and hire out the rest. Whether it’s locating houses to buy, fixing houses, or managing houses, you can’t be everything well, so hire out the services that others do better than you. In many cases, the things you do best is make money. So don’t quit your job or sell your business. Keep making the money you can and hire professionals to do all the above. This is truly passive investing.