Archive for December 2008
Buy Real Estate in Your IRA
If the plunging stock market is costing you dearly in your retirement account, you might consider investing those funds in real estate. Real estate is considered a non-traditional investment and if your current custodian does not invest in real estate, you’ll need to re-locate your account to a custodian that allows real estate investments. Section 408 of the Internal Revenue Code permits individuals to purchase various forms of real estate with funds held in many common forms of IRAs. Unfortunately, the IRS will not let you use the real estate owned by your IRA as a residence or a vacation home. The underlying premise for any real estate investment purchased with IRA funds is that you can’t have any personal use or benefit of the property. Therefore, a residential lot such as a Tessera lot might just be the ideal investment for your IRA. Even though you could purchase a house or commercial building, a piece of vacant land has the advantage of very little maintenance costs, since expenses must be paid from funds in your IRA. It’s also possible to sell properties while they are held by your IRA, so long as the purchaser is not a family member. Once a deal closes, the IRA account will hold the cash proceeds-ready for you to make your next investment. The above is a little known IRS provision that lets you extend you real estate purchasing with tax-deferred dollars. It also may just be the investment vehicle that allows you to avoid the ups and downs of the stock market.
How Tight is Your Envelope?
Energy Efficiency is a significant component of the emerging Green Building phenomenon. Many municipalities, including Santa Fe, are in the process of re-writing building codes to embrace the movement toward sustainable building practices. Santa Fe has required a HERS rating to be included in all applications for building permits since Jan 1, 2008. In addition, they require that the HERS rating be posted on the home until the ultimate buyer occupies the home. This practice is reminiscent of the Monroney stickers commonplace on new cars. The HERS rating is similar to the EPA mileage estimates that appear on those window stickers. The US DOE Energy Star site (www.energystar.gov) has an excellent definition and explanation of the HERS rating system. Basically, it compares the home to a standard 2006 code built house (100 HERS). If a home has a HERS rating of 85, it is 15% more efficient than the standard house. The Tessera 18 House pictured above has a HERS rating of 67. Therefore, it is 33% more efficient than a standard code built house. There are homes being built right now that have HERS ratings of 0 or a Net Zero Home. Many of the systems required to achieve exceptionally low ratings are quite expensive with very long paybacks. The Tessera 18 house was built using the best available building practices similar to those that exist in all of our houses. The addition of two solar systems discussed in an earlier post represent a conservative addition to the home which will, hopefully, provide a reasonable payback period. The other driving force towards Green is a social conscience. Those who can and care will integrate those Green elements into their design that they feel most strong about regardless of the cost. Photovoltaic, for example, will allow you to spin the meter backwards selling electricity back to the power company. However, the years it takes to offset the cost of electricity is very long. A homeowner might find that they feel better about using photovoltaic and saving some small portion of coal thus doing their part to reduce our energy consumption. Whatever the choice, it is clear that energy efficient buildings are going to be first choice among the buyers of the future. It has been said that a standard code built house of the past will be functionally obsolete within 5 years. At Hurlocker Homes we will begin the design process with your energy saving and green building goals in mind. We are prepared to meet the challenges of reducing our energy consumption with cutting edge techniques and products.
