Real estate purchases in IRAs expand to new areas

Investors with a real estate IRA not only moved into new states in their quest for property investments, they also focused on single- and multifamily and commercial properties during 2017.

According to the 2018 Real Estate Investor Market Research Report from the Entrust Group, the firm’s clients—well, their IRAs—are buying property in Kansas, Idaho and Illinois. And while purchases fell in Texas, Arizona and Montana, they rose in Florida, Indiana and Georgia.

Buyers don’t necessarily live in the states where they’re purchasing property, either, perhaps because of property prices—the report says that although more than half of California clients still bought in their home state, the percentage of those purchases dropped 5 percent from 2016.

Other states that saw in-state purchases fall included Florida, where they were down 8 percent, and both Arizona and Texas, where such deals dropped in the double digits: 12 percent for the former and 18 percent for the latter.

But in contrast, adds the report, clients living in North Carolina, Georgia and Indiana started buying within their home states for the first time in the report’s history.

“While clients in the West have a long history of investing in real estate, we are seeing upticks in the purchase of real estate in the Midwest and South,” Irene Vann, real estate manager at The Entrust Group, is quoted saying. Vann adds, “More people are becoming aware of the value of investing in what you know, in markets that are familiar to you.”

Sales figures reflect substantial regional differences, too, with the average return on investment in Florida 58 percent—while in Georgia it reached 41 percent. In California, in contrast, ROI fell to 23 percent.

Prices actually fell for the first time in several years, the report adds, with the total average purchase price down just over $18k from 2016. Says the report, “One contributing factor for the average purchase price decrease could be that purchasers are looking for a good buy in new locations with lower listing prices,” adding that last year was the first time that Kansas, Idaho and Illinois were included on its roster.

Investors have pretty much stuck to single- and multifamily homes, which topped the list of types of real estate—although the latter fell 7 percent from 2016. On the other hand, commercial real estate got a boost as an IRA asset, accounting for 5 percent of all purchases; that was an increase of nearly 4 percent. Vacant land buys also rose by just over 1 percent.

And for those who don’t actually want to own property, this year’s report reflects their purchases of alternative investments such as tax liens and deeds of trust.