Though it has always been legal to invest in real estate through your IRA since it was created in 1974, the idea of re-directing your retirement funds into investments other than stocks, bonds, and mutual funds is still pretty novel to a lot of people. Well, it’s not too good to be true—it’s true.

One of an IRA’s greatest features is that it allows you to enjoy the true power of tax deferred compounding interest. Compound interest occurs when interest is earned on a principal sum along with any accumulated interest on that sum. In other words, you are earning interest not only on your original investment money, but also on the interest earned from the original money.

Compound interest can occur with any investment you make, but the true power of compounding interest is obtained when you make an investment in a tax-deferred environment, like an IRA.

With a tax-deferred IRA, you do not pay tax immediately on your earnings—for example, the sale of a property, rental income on a property. Thus, you are able to get the compounding power on ALL of your pprofits, not just what is left after taxes. And with the Roth Self-Directed IRA, after five years the money is tax-free for life!

When deciding upon the appropriate IRA to roll your current retirement account into, think about Traditional vs. Roth. In both plans, your investment profits grow tax-free, but the differences are when you receive the tax advantages to the principal investment and yearly contributions. With a Roth IRA you don’t receive a tax deduction on your yearly contributions, but when you take your money out of the account you don’t have to pay any taxes. A traditional IRA gives a tax deduction every year based on your contribution, but you will have to pay income tax when you take your money out of the account.

Can you earn tax-free profits investing in real estate and real estate notes? Yes, you can. Let Great Lakes Secured Investments show you how. Many investors are successfully investing in real estate and other alternative assets through their IRA and not paying taxes on the profits. Not paying taxes on profits means more money for your retirement.

Related posts:

1. The Problem with Treasury Bonds as Fixed Income Investments
2. MORE SIGNS OF UPCOMING DECLINES IN TREASURY AND SAVINGS BONDS
3. Interest Rate Volatility

While the bond market is often called the fixed-income market, that’s not because bond traders live on a fixed income themselves. It earned the moniker because a bond pays a fixed interest rate for its lifetime. But fixed interest doesn’t tell the whole story. Bond prices fall when interest rates rise, and interest rates are currently at levels not seen since the Kennedy administration. Rates could certainly fall a bit more, but most of the downward move has already happened.

So what is an investor looking for a “fixed income investment” to do? Buying a ten-year Treasury note will lock in very low interest rates for a very long time. Buying a bond fund runs the chance that the fund’s share price will fall over time. Instead, if the mortgage has already been refinanced — at this point it’s safe to assume that many have been — seeking decent deals in the fixed-income market is the single best thing for investors to do. So forget Treasuries and municipal bonds.

Normally, a municipal bond carries a lower yield than a Treasury bond. This is because municipal bonds are free from federal income taxes. If a ten-year Treasury note carries a 3.88% yield, municipal bonds can usually be expected to yield about 1.5% less, or 2.3%.

Under normal circumstances investors would have to be in the 28% tax bracket or higher to make municipal bonds worthwhile after taxes. Today however, treasury yields are unusually low because terrified investors have been snapping them up. In short, today’s circumstances are not normal.

While treasury securities are guaranteed by the U.S. government and are considered the safest investment on earth, municipal bonds have recently seen higher yields because of concerns surrounding state finances. Currently, municipal bonds yield about the same as Treasuries and because they are tax-free, they’re better deals.

With a 3.88% return on a municipal bond, or $388 a year on a $10,000 investment, the investor keeps the full $388. With a taxable bond at the same rate however — for an investor in the 27.5% tax bracket — $107 of that same return would go to the Federal government. To earn $388 after taxes, a taxable bond would have to yield 5.4% or more.

A Great Lakes Secured Fixed Income is also a consideration for achieving an even better return. A fixed secured note of $32,000 at 10% APR (interest only) for a 5 term would pay the note holder $267 per month. Over the 5 year term the note holder would receive a total of $16,000 in 60 monthly payments. That’s a 50% ROI. Plus, the original $32,000 principle is also returned at the end of the term.

Related posts:

1. The Problem with Treasury Bonds as Fixed Income Investments
2. Market Meltdown
3. Interest Rate Volatility

With FDIC insurance protecting the principle investment of things like 1-month CDs – one of many excellent examples of these types of investments – investors are lulled into a false sense of security. What they may not realize is that while they will lose their principle the expected return on that money can fluctuate wildly.

For instance, at a given time, 1-month CD rates peaked at 19.24%. This means that if you had a $100,000 CD, you would earn a hefty $19,240 in just one year. That is if the rate held. Of course it didn’t and since short-term CDs continually roll over, each turn runs the risk of reinvesting at a lower rate. In just two years the rate dropped to less than half of where it had been, settling temporarily at 8.64%. This translated to an annual return of just $8,640 on that same $100,000 investment.

While a more than $8,000 yearly return may still not sound like a terrible deal if you flash forward, rates had fallen to a mere 0.4% — representing just $400 a year on the same $100,000. While the principal was safe, the expected return had fallen sharply. What was once a safe, high-earning investment was now essentially idle money.

Unfortunately, interest rate volatility isn’t a thing of the past, recent action in the Treasury bond market suggests it’s stirring up again. The good news is that bond yields have been moving higher and with CD rates so close to zero it certainly seems they are more likely to rise than fall. Still, the past can act as food for thought in choosing future investments.

Investing in a Great Lakes Secured Fixed Income can provide a 50% ROI. In fact, a fixed secured note of $32,000 at 10% APR (interest only) for a 5 year term pays the note holder $267 per month. Over the course of the investment the returns total $16,000 in 60 monthly payments. That’s 50% of the original principle — which is also returned at the end of term.

Related posts:

1. The Problem with Treasury Bonds as Fixed Income Investments
2. The High Yield Great Lakes Secured Income Investments
3. MORE SIGNS OF UPCOMING DECLINES IN TREASURY AND SAVINGS BONDS

In even more unfortunate news however, the dragging stock market has garnered near universal acceptance that this recession is going to be longer and deeper than the consensus estimated just three months ago. In fact, investment firm Credit Suisse lowered its projected operating earnings for S&P 500 companies to $58. It had previously expected earnings closer to $70. The firm also released its overall operating earnings expectations for the S&P 500 in 2009; a 34% fall. In lowering its estimate, Credit Suisse analysts added a note of caution to the grim forecast: “We worry that while financial earnings have already seen considerable weakness, non-financial earnings have further to fall.”

Faced with such pessimism the S&P finished below the 800 ‘technical support’ level analysts have felt is critical in maintaining investor confidence. Add to that the shaken state of investor sentiment that came with news of Japan’s economy shrinking at an annualized rate of almost 13% in the latest quarter, and we can only conclude that economic news from the world over is reinforcing the notion that this recession knows no bounds and may be gaining fury.

Even in the face of promising news — as the market sank President Obama signed a $787 billion stimulus into law with a promise more could be on the horizon if needed – this grim perception is causing investors to seek cover from the storm.

Even with recent reports from credit markets indicating that the great credit freeze may finally be starting to thaw, it isn’t likely that investors will bet on nascent signs of improving credit with the housing market in turmoil.

With funds like Great Lakes Secured Fixed Income paying a 50% ROI it’s no surprise that in turbulent times like these, investors are considering their options for fixed, secured income investments instead.

After all, a fixed secured note of $32,000 at 10% APR (interest only) for a 5 year term would pay the note holder $267 per month. That’s a total of $16,000 in 60 monthly payments; a 50% ROI plus the original $32,000 investment back at the end of the term.

Related posts:

1. The Problem with Treasury Bonds as Fixed Income Investments
2. MORE SIGNS OF UPCOMING DECLINES IN TREASURY AND SAVINGS BONDS
3. Interest Rate Volatility

Why is there this notion that “anybody can do it” and yet so very few actually do? Well, anybody can make hamburgers too, but there’s only one company that does it like McDonald’s, and that’s McDonald’s.

What gives? Why is that thing which is so popularized in shows such as “Flip That House” and on real estate infomercials and in seminars in reality more elusive than BigFoot or UFOs?

As one of the few who has beat those odds, I’ve pondered those questions for years, and I’ve distilled my answers down to the following list of things that I believe prevents most wannabe investors from ever being successful:

SELLING (“FLIPPING”) VS. HOLDING – Contrary to popular belief, very little of all real estate profits are made from buy low-sell high in short periods of time. Wannabe investors think you make money when you sell, but true investors know that you make it when you buy. And if you bought something that produces income on a regular basis, passively, why would you want to sell it? Unfortunately, talking about long-term hold isn’t as sexy as the flipping myth (you know, the one where they say “who needs tenants, toilets, and trash? You don’t need credit, partners, money, etc.—just flip it for quick cash…”) It may sell books and seminars, but it’s dead wrong. You’ve been lied to. Show me a person who claims to “flip” properties on a regular basis, and I’ll show you someone who’s either lying or doing something illegal. Wholesaling, as it is also known, is one small tool in a vast real estate toolbox, and the one which has the narrowest of applications. Almost always a solution looking for a problem; almost never a deal that closes.

VALUING PROPERTY BASED ON APPRAISED VALUE RATHER THAN ON INCOME – The bank’s, realtor’s, and appraiser’s model which says that a house is worth what other comparable houses have recently sold for is garbage. Why do you think the banking industry is on its knees right now? Because rather than looking at the income it produces (or what the borrower earns), they were focused on some other agenda, perpetuating the myth that house prices will go up forever. You’re NOT gonna sell the house whenever you want to anyway, no matter what you think, so what meaning does that appraised value have? It’s irrelevant! So is taxable value and assessed value. If the house doesn’t produce income, it’s because you paid too much for it and your payment is too high—it’s that simple. If the appraiser thinks it’s worth more, tell him to buy it. The house’s value is determined by rental income—period!!!

POOR CASH FLOW – This is more of a symptom than a problem. Usually it’s a function of bad location, paying too much, not understanding your true costs, or simply being naïve about the importance of cash flow in the first place. Cash flow is the fuel that keeps the engine running; if you want to be around long enough to be successful, you better have positive cash flow.

LOCATION – Most of the problems I hear associated with rental property are directly associated with a bad location. It’s very simple: we want to keep buildings full with people who actually aspire to live there. People don’t want to live in the ghetto. Get good people, and you’ll have minimal damage, problems, and vacancy. Conversely, if we buy only palatial estates on the golf course, we have a product that doesn’t appeal to the masses and will sit vacant too often.

MORE COMFORTABLE WITH CONCRETE DATA THAN WITH MORE SUBJECTIVE THINGS INVOLVING PEOPLE SKILLS – I’ve never borrowed money from a private lender or seller, leased a house to a tenant, or sold a house to a buyer except in a face to face personal relationship. People do business with other people. Wannabe investors seem to think there’s a cause-effect relationship or other mathematical ways to shorten the process or take away the unknowns. Math and data may be more predictable and less intimidating than meeting and building relationships with strangers, but you’re simply not going to succeed without quality people relationships.

MISINFORMATION BY AUTHORS AND SPEAKERS WITH AN AGENDA TO SELL YOU THEIR “EDUCATION” – Unfortunately, the authors and speakers in this industry have done a real disservice to individuals who might otherwise have become real investors, had they been told the truth: that this is a people business and a long-term proposition, not a data-crunching exercise and not an instant lottery ticket. Of course they do this primarily because it is easier to sell something to gullible “investors” by telling them what they want to hear than it is to tell the whole truth. The other unfortunate truth is most authors and speakers are not investors and are simply unqualified to know the truth.

Related posts:

1. REAL ESTATE FOR THE SECURITY CONSCIOUS INVESTOR
2. Why UFOs Are Always Out There and Why Real Estate is Always Easy to “Flip”…
3. MORE SIGNS OF UPCOMING DECLINES IN TREASURY AND SAVINGS BONDS