1. Secure Your Future:
Invest in Real Estate
Presented By: Mark Rusnak
Copyright © 2012 Charfen Institute, LLC

2. What Will We Cover?
This presentation is designed to inform you of your
options regarding residential real estate investments.
In it, you’ll learn:
1. How real estate compares to other assets for
growth potential
2. The benefits of investing in real estate
3. How you can use retirement funds to invest in
real estate

3. Tenets: My Promise to You
I am committed to providing the highest quality
service to you through focus, honesty, and integrity.
As a CIAS, I adhere to the following tenets:
1. I always do what is best for you, and will never let you close on
a bad deal.
2. Real estate should be purchased for cash flow only;
appreciation is a bonus.
3. Real estate investing is a non-emotional event; I always do the
math.
4. You, as an investor, play a vital role in the real estate market
and deserve to be treated accordingly.

5. Real Estate
vs.
Other Assets
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6. Bonds and Certificates of Deposit
Bonds and CDs typically have low rates of return
Copyright © 2012 Charfen Institute, LLC

7. Mutual Funds
•Often underperform the market
•Average 3.66% 10-year return
(2000-2010)*
•Managed by someone else
•Dividends reinvested, not paid to investor
*Source: http://screen.morningstar.com/FundSearch/FundRank.html

8. Real Estate
4 Total Years of Negative Appreciation
Max. -13%
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9. S&P 500
11 Total Years of Negative Appreciation
Max. -38%
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10. Stocks
Stocks in S&P 500 averaged a 1.82%
dividend yield from 2000-2011
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11. Real Estate
Real estate values increased in the
last decade despite the market cycle
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12. Real Estate vs. Stocks
$100,000 invested in real estate in 2000 would have
generated $77,755 of cash flow by 2010
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13. The Benefits of
Real Estate
Copyright © 2012 Charfen Institute, LLC

14. C as h Flo w C an B e a S te ad y &
S ig n ific an t S tre am o f In c o m e
• Most stocks don’t provide cash flow
• Cash flow increases over the years
• Cash flow is liquid and can be invested
Copyright © 2012 Charfen Institute, LLC

15. Appreciation
• Appreciation should always be considered a
bonus
• Yearly home appreciation averaged more than
5% over past 40 years
• You can help property appreciate (improvements)
• Home appreciation less volatile than the stock
market

16. Appreciation
Source: HUD Historical Data: www.census.gov/indicator/www.newsreconst.pdf
Copyright © 2012 Charfen Institute, LLC

17. Leverage
Most investments don’t offer
leveraged buying power
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18. Leverage
• Earn returns with other people’s money
• Leverage is a key way to increase your returns
• Leverage is largely unique to real estate
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19. Tax Benefits
•Depreciation allows yearly deductions
on improvements to the property
•1031 Exchanges defer capital gains
taxes
•Other benefits
*Source: http://screen.morningstar.com/FundSearch/FundRank.html

20. Investors Can Deduct the Following
Items Related to Rental Property:
•Advertising • Legal Fees
•Cleaning & Maintenance • Local Transportation
•Commissions Expenses
•Depreciation • Long Distance Travel
•Employees, Contractors, • Losses
Non-Employed Staff • Professional Services
•Insurance • Repairs
•Interest • Utilities
*Source: http://screen.morningstar.com/FundSearch/FundRank.html

21. Investors Can Depreciate
Property as Tax Deferred
Copyright © 2012 Charfen Institute, LLC

22. How Depreciation Works
• Purchase a property worth $100,000. $85,000
worth is attributed to the improvement (house).
• The basis for depreciation is $85,000.
• Calculate the first year’s depreciation based on the
month of purchase.
• Every year afterwards (until 27.5 years), deduct
3.636% from the basis.
•Every year, deduct $3,090.60 in taxes.

23. Using a Self-Directed
IRA to Invest in Real
Estate
Copyright © 2012 Charfen Institute, LLC

24. Traditional IRAs
Individual Retirement Account (IRA):
•Held in trust by bank, credit union, savings and
loan, or other IRS-approved institution
‣Custodian distributes, receives, and holds funds for the
investor
•Shelters retirement savings from certain taxes
and lawsuits
•Typically invested in stocks, bonds, and mutual
funds

25. Self-Directed IRAs
• Same rules and restrictions as traditional
IRAs except...
• The investor directly chooses how the IRA
invests his or her funds
‣ Can invest in real estate
‣ Generally, any retirement funds can be rolled over
into an SD IRA

26. Retirement Savings in the US
• 44% of retirement savings in mutual funds
‣ 3.43 trillion dollars in mutual funds
‣ 90.2 million individual investors
• 52% of retirement plans in other investments
‣ 4.05 trillion dollars in other investments (stock market)
‣ 86.2 million individual investors
• 4% of retirement plans in SD IRAs
‣ 0.27 trillion dollars, or 312 billion dollars (other investments)
‣ 3.6 million individual investors

27. SD IRA Permitted Investments
• Residential Real Estate
• Single Family Homes
• Multi-Family Homes
• Apartments
• Commercial Real Estate
• Undeveloped or Raw Land
• Real Estate Notes (mortgages & deeds of trusts)
• Promissory Notes
• Private Limited Partnerships, LLCs & C-Corps
• Tax Lien Certificates

28. Borrowing Money with an SD IRA
IRS requires a non-recourse loan
•Non-recourse loan restrictions
‣Loan-to-Value Ratio (max):
- 70% for Single-Family Residence
- 50-65% for Multi-Family & Condo
‣Debt service Ratio: varies
- Typically 1.25, depending on property
‣Interest rate: typically 1-1.5% higher
‣Reserves: 10-20% of loan (depending on
property)

29. Two Scenarios:
Investor A and Investor B both contribute $5,000
annually to an IRA
Investor A: Traditional IRA
‣Invested in mutual fund earning 5% annually
Investor B: SD IRA
‣Purchased a property for cash flow in addition to 5%
annual appreciation

30. SD IRA Invested in Mutual Fund
$100,000 invested in a 5% mutual fund
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31. How an SD IRA Invested in Real
Estate Can Perform Better
In addition to 5% annual appreciation:
‣Rent: $1,200/month
‣Expenses: $325/month (including SD
IRA fees)
‣NOI: $874/month ($10,500/annual)

32. SD IRA Invested in Real Estate
For a $100,000 property appreciating at
5% annually
Copyright © 2012 Charfen Institute, LLC

33. SD IRA vs Traditional IRA
Traditional IRA SD IRA
Contributions: $25,000 Contributions: $25,000
Interest: $30,256 Appreciation: $27,628
Cash Flow: $52,500
Total: $55,256 Total: $105,128
SD IRA earns $49,872
more after 5 years
90% more
Copyright © 2012 Charfen Institute, LLC

34. Thank You!
Mark A Rusnak
RE/MAX Allegiance
@ Loehmann’s Plaza
4000 Virginia Beach Blvd # 164
Virginia Beach VA, 23452
Phone: 757-718-8865
MarkRusnak@ReMax.net
www.MarkSold.com
Copyright © 2012 Charfen Institute, LLC