According to the Center for Disease Control and Prevention, on average women are now living to be 80 years of age and men 74. In 1920, the average lifespan of an American was 60 years. That said we are living longer and with that comes a certain level of responsibility, not the least of which is retirement planning. For Realtors looking to enjoy their retirement years, there is good news. You, too, like the clients you advise, can start an individual retirement account and invest in income-generating real estate.

"With the future of Social Security uncertain and low interest rates and smaller returns on stocks, bonds and mutual funds, more and more investors are discovering that they can use money in their IRAs to buy real estate, and so too can Realtors," said Michael Matheson, Director of RealSource Retirement Services, whose firm presents investors with self-directed retirement opportunities including IRA's, 401(k), SEP, 529, and other investment plans with reasonable risk levels and higher net returns. "Investors work with us because for 18 years we have been able to pinpoint where markets and local economies are going, not where they have been, and present income generating properties that realize real profits, sometimes tax free."

Matheson notes that Realtors, who are already accustomed to a lot of work professionally, should be prepared for the same in self-directing retirement funds into real estate. First, Realtors, who are mostly self-employed, would need to establish an individual retirement plan, preferably with a Roth component, or convert an existing retirement arrangement. A Roth product, Matheson says, allows for tax-free withdrawals on the profits realized.

The next step for a Realtor will be to reverse her traditional role, this time playing the part of a buyer.

"This is where we excel," added Matheson. "Our niche historically has been multifamily but we are now into development and all other property types. What we do is find income properties that meet an individual investor's needs, desires and risk levels."

A Realtor looking to self-direct retirement funds into real estate will need to find an IRA custodian that allows real estate investments. Matheson urges investors to conduct significant due diligence in that selection process. "The custodian must be someone you can trust and who has a solid reputation for offering this type of service," he said. "The IRS sanctioned self-directed arrangements about 30 years ago, yet this is still a relative new business, so choose carefully because there a several rules, regulations and restrictions involved."

"The rules are complex and investors should discuss them with the appropriate professionals" cautioned Matheson. "For example, a mistake can disqualify your IRA's tax-deferred status, forcing you to pay tax on its full value plus penalties if you're under age 59.5, and in some states IRA monies can be left unprotected from creditors whereas 401(k) plans are typically untouchable."

There is no denying that a key benefit of owning rental property is the myriad of tax breaks. While most of the 1.4-million members of the National Association of Realtors understand and are aware of mortgage interest deductibility and insurance write-offs, others may go unnoticed. For example, interest on credit cards used to purchase goods or services used in a rental activity is deductible as are ordinary, necessary and reasonable repairs in a given year.

"While the actual cost of an income property is not fully deductible in the year in which it is paid, owners do get back the cost of real estate through depreciation," explained Matheson. "Depreciation involves deducting a portion of the cost of the real estate over a certain number of years, the length of which is determined by the property type."

Other tax breaks include travel costs, such as mileage reimbursement, airfare, hotel bills, and meals as well as home office expenses and professional service provider fees associated with the income generating property. Casualty losses, those that occur from damage or destruction due to a sudden event like a fire or flood, can also be deductible as is the premiums paid for property-related insurance polices like fire, theft, and flood premiums.

For more information, contact Mr. Matheson at mmatheson@realsource.net, 801.601.2700 or go to realsource.net.

Published: April 17, 2007

Use of this article without permission is a violation of federal copyright laws.

Peter L. Mosca is president and founder of BAK Communications, Inc. He has over 22 years of communications and media consulting experience, serving a variety of nonprofit organizations, including the CCIM Institute and the REALTOR Association on all three levels – national, state and local. He is the Spokesperson Trainer for the CCIM's Jay Levine Academy and trains hundreds of residential REALTORS nationwide to be effective industry spokespeople. He is consistently ranked as "excellent" by about 90% of those who attend his presentations. While his principal consulting focuses are public speaking and media relations development and content delivery and management, Peter is also the host of the Voice America Network's weekly radio program, "Income Property Investment Talk," a one-hour program that brings the powerhouses of commercial and residential real estate to property investors every Wednesday at 11 a.m. EST. Peter is married 17 years to his wife Barbara. They have two children: Ashley, 15 and Kelli, 12. Hence, the name BAK Communications, Inc.