Investing in Real Estate with a Self-Directed IRA

We received this question from a viewer: “Can I use funds in my IRA to purchase real estate?” In short: yes! So long as the holder of an IRA follows very specific rules, it is possible to use funds in an IRA to invest in real estate.

Investors who want to use funds in their IRA will use what’s known as a “self-directed IRA.” Before starting this process, investors should meet with a real estate attorney, CPA, and their financial advisor. Like all investments, it should fit into your overall financial plan while maximizing tax efficiency.

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There are a number of companies that handle self-directed IRA funds. There are many rules and restrictions which make a costly mistakes possible. It is imperative to work with a reputable company.

You may ask: “What do I need to do?” The investor will transfer IRA funds into a separate custodian’s account. Instead of investing in the stock market, bonds, and other securities, investing in real estate is possible. One important principle to remember is that the investor cannot comingle funds. In other words, the investor may not partner personally with IRA funds. At the outset, the investor must determine whether they have enough funds in their IRA to complete the entire transaction.

One exciting opportunity that many investors overlook is lending from a self-directed IRA to others who are investing real estate. An investor may be willing to pay a rate of interest that is far higher than the rate of return in other types of investments. As with the more traditional approach to self-directed IRA investing, before considering any type of investment, you should consult with your real estate attorney, CPA and Financial Advisor first to consider your risk and objectives.

If you would like more information about investing with a self-directed IRA, contact Stiles Law at (781) 319-1900 or stiles-law.com.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy. Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

Can I Deed My Home into my Trust?

We receive this question often: “I just purchased a property, and would like to move it into my trust. Can I do that?” A homeowner should consider a few things before doing so.

You may violate a covenant in your mortgage. Your lender has not had an opportunity to qualify your trust. If you receive permission from your lender first, you avoid the risk of the lender claiming your are in default and initiating foreclosure proceedings. There are exceptions under federal law for estate planning. You should always consult a real estate attorney, CPA, and
often times a financial advisor before deciding to place your home into trust.

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There is one more critical consideration: if you have a title insurance policy, you should check with your real estate attorney who will contact your title insurer to determine whether you need a “change endorsement.” If such an endorsement is required, transferring without it could mean your policy no longer protects your interest in your property.

You can transfer your property into trust, but check with your lender and consult a real estate attorney first. If you would like more information about transferring your property into trust, contact Stiles Law at (781) 319-1900.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

What is a 1031 Exchange?

What is a 1031 Exchange?

In the last few videos, we have discussed topics related to real estate investing. This week, we are discussing 1031 exchanges. Your natural question may be, what is a 1031 exchange? A 1031 allows a real estate investor to defer the payment of capital gains by allowing a “like-kind exchange.”

When a real estate investor sells, they may have to pay capital gains tax. If that real estate investor intends to sell their property but wants to acquire another investment property, they can utilize the services of a qualified intermediary to perform a like-kind exchange. A like-kind exchange simply means that the property that is sold and acquired is of the same kind, that is, investment property.

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What will you need? First, you must use the services of a qualified intermediary. An ordinary CPA or real estate attorney will not suffice—though you should consult both before attempting to perform such an exchange. A qualified intermediary is certified by the IRS to handle the proceeds of the sale. The real estate investor never touches the proceeds.

What are the basic limitations? A 1031 exchange is only available for investment properties. The investor must identify three properties within forty-five (45) days of the sale. Finally, the second transaction must occur within six (6) months of the sale.

1031 exchanges can defer capital gains taxes and substantially increase the real estate investor’s purchasing power. If you have any questions about 1031 exchanges or would like a referral to a qualified intermediary or CPA, contact Stiles Law by calling (781) 319-1900

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

The Massachusetts South Shore Real Estate Blog: Have You Thought Through Your Succession Plan?

As turkey day looms, we want to discuss a very important topic that most of us put off: Estate Planning. Somewhere between cleaning out the basement and washing those upstairs windows, estate planning is often regarded as that thing that we’ll get to someday. As we all know, unfortunately, there is never a guarantee that there will be a someday. In that vein, this week’s blog article is dedicated to the basics of Estate Planning and the process to complete one.
Estate Planning is a broad term that describes planning done during a person’s life to settle their affairs and transfer assets upon their death. There are countless variations and considerations, but we’re going to tackle the instruments that the vast majority of our clients ultimately sign. The following documents are the four instruments that we think EVERYONE should have:

Will: A will is a document that nominates a Personal Representative to distribute your estate (assets) to named people or organizations. In most cases, a married couple will leave the entirety of assets to the surviving spouse, with the children taking if there is no surviving spouse. A will works for smaller estates or for clients who want to avoid the expense of more complex trust planning.
Guardianship Nomination: This document is highly important to families with minor children. It sets the parents’ preference for who should look after minor children if the parents are unable.
Power of Attorney: A power of attorney is a document which authorizes another person to take actions on one’s behalf. Perhaps you are traveling overseas or are incapacitated in some way. A power of attorney allows your fiduciary to make legally binding decisions on your behalf during your incapacity or absence.
Healthcare Proxy: We like to describe this as a Power of Attorney for healthcare decisions. Suppose you’re in a car accident and are unconscious. A healthcare proxy allows your fiduciary to make medical decisions on your behalf.
Why do we need estate planning.

There are many reasons, some of which you may already be anticipating, why a person should have an estate plan:

Lack of control: without an estate plan, the rigid rules of “intestate succession” ultimately determine where your assets go. “Intestate Succession” refers to the default rules governing distribution of assets when a person does not have a will. Most people are uncomfortable letting the government decide who takes their assets upon their death.
Unintended consequences: Intestate succession has some counterintuitive results. Blended families, where some children aren’t born of both spouses, can be thrown into turmoil when the surviving spouse only takes half of the other spouse’s estate. That heir that you haven’t spoken to in twenty years may be entitled to a large portion of your assets.
No Access to Funds: Intestate estates need to be probated at court. Court can take many months before any assets are available. By executing a will, this length of time is shortened so surviving family members have quicker access to funds. Some clients wish to shorten this waiting period even further by executing and properly funding a trust or trusts—a topic for a future blog.
Minor children: without a strong guardianship nomination, determining a guardian before the probate court can take many months. Losing a parent is made worse when the child is then the subject of a legal battle for guardianship.

Estate planning is a necessary chore. While it may be uncomfortable to consider, the process is actually quite painless. This is especially true in light of the consequences of not having an estate plan. If you would like assistance creating your estate plan, please contact Attorney Ben Cote (bcote@stiles-law.com) or his paralegal, Christine Guerrier (cguerrier@stiles-law.com) to schedule a consultation. As always, you are welcome to call (781) 319-1900 to schedule an appointment.

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Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2017 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley was compensated for his likenesses and appearances in the same.

The Massachusetts South Shore Real Estate Blog: How to Approach Low Inventory to Thaw a “Frozen” Market

Anyone with familiarity with today’s market undoubtedly knows that we are in a period of low inventory. This week, we’re going to look at three strategies that allow Buyers and Agents to help thaw an otherwise frozen market.

One Day Exclusive Listing Offers:

Ordinarily, a Buyer’s Agent will search the MLS looking for homes that meet their Buyer’s requirements within a given area. Due to low inventory, very often there are few homes to show a Buyer. In this situation, an Agent should consider what’s known as a “one day exclusive listing agreement.” Very simply, the Agent will send a letter, often as simple as a post card from your local office supply store, stating that they are an agent with a Buyer who is interested in homes in the area. The Agent will represent list the recipient’s home for a single day to allow for an offer from their Buyer to be submitted.  Even if the Buyer does not make an offer, very often the Seller will ask the Agent to list their house because their mindset has shifted. The Buyer is able to see more houses, the Seller is spurred to list their house, and the Agent either Sells a house or gets a listing: this is a truly a win, win, win situation.

Negotiate a Home Sale Contingency:

Many Buyers are sitting on the sidelines waiting for inventory to increase. The problem is that many of these Buyers are also would-be Sellers. To increase inventory, Buyers who also need to sell should consider including a home sale contingency with their offer to mitigate the risk of not being able to sell their home. That said, not all home sale contingencies are created equal. There are generally four types which expire at different points of the sale process: 1) the Seller becoming party to a signed offer, 2) the Seller becoming a party to a signed purchase and sale agreement, 3) the Seller’s Buyer receiving their mortgage commitment, or 4) the Seller closing on their sale and receiving proceeds. An Agent guiding their Buyer should define precisely which type of home sale contingency they are seeking. The spectrum of possible contingencies shifts the risk from the Buyer to the Seller. In a Seller’s market, it’s unlikely that a Seller will agree to number four. Number one generally leaves the Buyer too exposed: the Buyer’s buyer may terminate after conducting a home inspection. Generally, number two or three is a fair option that Buyers and Sellers can accept. Be aware that a Seller may send a counter offer with a “Kickout Clause.” Generally speaking, a kickout clause allows the Seller to continue listing the house for sale, during which time the Seller receives a bona fide offer that is higher than the Buyer’s offer, the Buyer is given a defined period to either waive the home sale contingency or exercise their rights under the contingency to terminate the Agreement. For more information on kickout clauses, read our article, The Offer Part 2 – Contingencies for Sellers to Consider.

Negotiate a Suitable Housing Contingency:

Many Sellers are sitting on the sidelines waiting for inventory to increase so that they can find their next house. Some homeowners simply prefer to Sell before they buy. Buying before selling comes with the risk of not being able to find a home to purchase before having to Sell. As with sale contingencies, not all suitable housing contingencies are created equal. A suitable housing contingency generally expires at one of four points: when the Seller 1) signs an offer, 2) signs a purchase and sale agreement, 3) receives a mortgage commitment, or 4) closes on their purchase. Usually, Buyers will accept numbers two or three, as they fairly spread the risk between the Buyer and Seller. The benefit of spreading the risk is that Buyers that would otherwise wait for inventory to increase before listing will be willing to list and sell their homes, increasing inventory generally.

Above all, Buyers and Sellers who are motivated to move need to accept some degree of risk. Thinking creatively will help to increase inventory in this period of high demand. While not a panacea, the three strategies that we’ve listed will help to thaw today’s frozen market.