By Jennifer D. Meacham
Patrick Rice is a small-town real estate agent brokering residential and commercial property deals for his clients, with their IRAs.
It’s something he’s been doing for some 20 years now. Four years ago, he wrote the definitive book on tax-sheltered IRA investing in real estate. Today “IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment” is a best-seller, reviewed in the Wall Street Journal, Miami Herald, Forbes Book Club, The Oregonian, San Francisco Chronicle, AARP the magazine and many other media. And Rice leads a bustling brokerage office with five employees, 400 accredited investors, 200 non-accredited investors, and seven independent contractors throughout Washington, California, Florida and Idaho who find and research real property investments.
Still in the pastoral town of Camas, Wash., Rice now brokers nearly $60 million a year in IRA-financed deals though his company, IRA Resource Associates. It’s a firm I know well, having worked there for a stint to learn the industry and having worked one-on-one with Rice as he developed, first, a series of articles for the business journal I edited and, then, his book. Hence, Power Team Report has been able to acquire an exclusive: a one-on-one interview with this pioneer.
Q. What types of properties work well for your IRA clients?
A. Lately we’ve done everything from financing subdivision development, to building shopping centers and acquiring office or apartment buildings. We usually can find undervalued property in tertiary markets, like the 140-unit apartment building in Greenville, Texas, we just acquired. While cap rates are 5 ½ percent in Seattle and about 6 percent everywhere else, we found this apartment building for 12 cap. If the market falls over there, we’re still comfortable.
Q. What has helped you define your services for IRA investors?
A. I group deals into three categories: cash flow for those in retirement; cash flow and wealth building for those approaching retirement; and wealth building (for everyone else). For each we look for down markets going up, and then find a property or product that will be stable in either up or down markets.
In the cash-flow category, we bought 151,000 square feet of office space in Phoenix, with a 14% return. What we bought was the income stream, not the equity. Eventually our partner down there will refi and cash us out. Another income stream is a note and deed of trust. But no one needs that in their IRA until they’re drawing down on it. We look for a minimum of 12% return on these.
Wealth building properties have long-term potential, such as a parcel of land to make little parcels of land out of-to subdivide. Wealth increases should be much greater than 12%, usually 20 or 30%.
In between are the shopping centers that we build, because it takes two to three years before those start getting an income stream. It meets the wealth building goal because investors also have a share of the equity.
Q. As the now-dubbed “grandfather of self-directed IRA investing,” you may have some predictions on where this industry is headed….
A. I remember way back when I was the only one on the Internet. Not even the custodians advertised online yet. Now brokers and dealers are looking to add an IRA arm. In 10 years, lots of real estate companies will specialize in this.
Q. Aren’t you worried about giving away your secrets?
A. As the industry gets bigger, I get my share. I’m not afraid of the competition. There are 4.2 trillion IRA dollars out there and another $489.3 billion eligible for rollovers. There’s plenty for everyone.
Nominate a “Self-Directed Real Estate Professional” to be profiled here, or e-mail your self-directed retirement investing questions to Jennifer at firstname.lastname@example.org.