Yes, you can use your IRA funds to buy real estate investment property. But there are at least two things to consider before you do.

1. You won’t benefit from a depreciation deduction. One of the great advantages of real estate investment comes from the tax savings related to depreciation (a paper loss referred to as passive loss by the IRS). Real estate investors investing through IRAs aren’t granted these passive losses from depreciation.
2. You won’t benefit from the capital gains tax. Profit made on real estate investment property held for more than one year benefits from the 15% capital gains tax allowed by the IRS. Real estate investing through IRAs, however, loses the capital gains benefit and profits get taxed at the the marginal income tax.

Obviously both characteristics of using an IRA to fund a real estate investment are worth considering before you invest. And it is strongly recommended that you first consult with your tax advisor.

I recently came across this article written by a real estate investor named David Jaymes entitled “How To Find Owners of Vacant Properties” that seems appropriate for those who might just be starting out with real estate investment property.

We’ve all been told at one time or another just how profitable abandoned and/or vacant properties can be. The tales of insane profits made from vacant properties are easy to find. The people whose signatures you’ll need to get into those deals, however, are slightly more elusive. I feel your pain, and I’d like to offer a little help. Here are a few steps to find those owners, even if they don’t want to be found.

Tax Records

One of the simplest ways to find homeowners is by heading down to the Tax Assessor’s office and looking at the property’s tax history (which should be freely available for viewing). Some cities and counties make this information available on the Internet, making this process significantly easier. Once you find the tax history for your property, take note of the owner’s address. Is it the same address as the property you’re looking at? Are there multiple owners listed? Note these things and anything you think may be relevant.

Phone Book

If the owner’s address of record matches the address of the property, you’ll have to dig a bit deeper. Remember the “other” owners you found on the tax record? Let’s give them a call. See if you can find them in the telephone directory and give them a call. If there weren’t any other owners on the tax record, it may be worthwile to call people with the owner’s last name who live in the owner’s city or neighborhood. This is fairly hit and miss, but it does pay off from time to time.

Postal Service

Another hit and miss option is to send a certified letter, Return Receipt Requested, to the owner at the property address. If the owner has a forwarding order on his mail at the post office, your letter will be forwarded to him and the return receipt will let you know he got it. Of course, if the owner chooses not to call you from your letter, the trail is still pretty cold.

Neighbors

It is likely that your property owner lived in the property for more than a couple months, and at least one of the neighbors probably knows him. Knock on the neighbors’ doors and ask them if they know where you could find your guy. Some neighbors will be suspicious, thinking you’re either a process server or collection official come to darken an already bleak situation. All you can do is reassure each of them that you’re a real estate investor and just want to get hold of the owner to discuss possibly buying the property from him. If the neighbors aren’t home, leave a short note taped to their storm door along with one of your business cards.

Service Professionals

Another excellent source of leads is the property’s mail carrier, newspaper carrier, UPS/FedEx driver and the like. These people drive this neighborhood every day and may have had contact with your owner. If so, they may be able to point you in the right direction to find him or get in contact with him.

Websites

There are sites on the Internet which claim to be able to find owners of vacant properties for a nominal fee. We can’t link them here, but they do exist and several of them are fairly well respected among the investors who use them.

Private Investigators

Sometimes you have to leave a job to a professional. When you can’t find the owner of your distressed property, sometimes it’s a good idea to hire a private eye to root him out for you. These folks snoop for a living and are much better at it than you or I. They’ll cost you more than a trip to the courthouse or a knock on a neighbor’s door, but if they find you your guy and you do the deal, it’s worth it!

Hopefully these examples will give you an idea of how to approach the task of tracking down the ever-elusive vacant property owner. If you have success finding owners using another method, please e-mail me and I’ll be happy to include it in a future version of this article.

About the Author

David Jaymes is a professional real estate investor with over 15 years’ experience in the creative real estate investment field. David operates Worth Repeating, an online creative real estate community by and for budding investors.

Although no one who buys residential or commercial real estate ever wants to think about their real estate investment losing its value, it can happen. And not unlike a perfect storm of colliding fronts, it can have a drastic effect upon a rental income property’s ability to generate profitability. Here are undoubtedly the worst contributors.

Decline in Neighborhoods

The community surrounding the income property simply changes in a variety of ways that adversely affect the location of the real estate income property. This slide (usually due to a lack of good long range planning) can and does cause the owner to face a number of challenges. Increasing vacancy can eventually lead to reduced rents. As a result, less income often means reduced maintenance. As the building deteriorates, it influences the whole neighborhood, and in turn triggers a domino effect that simply compounds the problem. In this case, the best the owner can hope for is a new economic conversion brought into the area.

Adverse Effects of Infrastructure

The impact of an airport that puts a residential property directly under the glide path of an aircraft landing, for example, can have a negative impact on a property’s ability to attract (or keep) tenants.

Governmental Controls

Regulatory changes to zoning can impact the real estate development industry and, in fact, grind it to a halt. Real estate investors should never purchase real estate based on yesterday’s rules and regulations, otherwise they may find one day that the property’s use no longer meets the investor’s needs. It’s always prudent to visit the local planning department during the purchase process and make the offer contingent upon buyer approval.

Economic Obsolenscence

All things just have a habit of wearing out. Whether it’s air and heating equipment, driveway surface, electrical wiring, hot water heaters and boilers, roofing structure, plumbing or paint, there is no lifetime guarantee and sooner or later it will require maintenance and/or replacement. A smart way to deal with this is for the landlord to maintain a sinking fund that sets money aside in anticipation for future replacement costs.

Supply and Demand

The availability of long-term financing is a prime contributor. But it’s a two-edged sword. Whereas low interest rates can be a blessing to real estate developers, apartment owners may feel the curse of higher vacancy due to a shrinking poll of tenants who become home owners; and vice versa. Moreover, when new construction gluts, and an overbuilt situation occurs, the market can decrease quickly and stay down for a long time.

Lack of Proper Maintenance

A run-down property in the neighborhood is never a good thing. Whether its due to an absentee owner, poor management, lack of funds, or some other owner problem. Each often results in a deteriorating property that affect the values of properties that adjoin or are nearby it.

Urgency to Sell

Highly motivated sellers may reduce a property to a bargain basement prices. All investors should try to avoid ever reaching the moment when they are forced to sell.