An increasing number of consumers with Individual Retirement Accounts are using their IRA funds to increase the size of their fund through strategic real estate investments. They do this with the use of a self-directed IRA, where the account owner makes investment decision on behalf of the retirement plan.

The Internal Revenue Service requires the owner to have either a qualified trustee or custodian to hold the IRA asset on behalf of the IRA owner. Generally, the trustee will maintain the assets and all transaction and other records pertaining to them. Most self-directed IRA custodians will permit their clients to engage in a wide variety of investments including real estate — even foreign properties. Investments in mortgages also is permitted in most cases.

Such investments can substantially increase the owner's IRA account and help to secure the owner's financial situation during retirement years. It's a little-known but highly effective way to invest in real estate using IRA funds.

"Self-directed IRAs are an enormous, overlooked source of capital for real estate investing," said Tom Anderson, CEO of Pensco Trust. "The emerging $4.2 trillion IRA market is growing at about $200 billion per year, mostly from pension plan rollovers and 401(k)s into IRAs as baby-boomers retire. The underserved market craves more retirement investment options beyond the stock market, and investors are actively seeking new ways to allocate their assets for optimum diversification. About 66 percent of wealth creation in the U.S. has been through real estate and private equity, so why wouldn't you invest your IRA in what you know."

It should be noted that if the real estate investment held in a self-directed IRA is employed for personal use, or to gain any other personal benefit (other than a return for the IRA), the investment income may become immediately taxable, according to the IRS.

For more information about self-directed IRAs, consult with your financial advisor or attorney.

Interest rates on long-term mortgages with fixed rates are still bouncing up and down, but generally they are edging downward. At the same time, adjustable-rate mortgages are increasing their rates. This opens the door of opportunity a bit wider for today's homebuyers who want secure fixed-rate financing for their home purchase.

"Interest rates on conforming long-term fixed-rate mortgages are declining slightly, while rates on one-year adjustable-rate mortgages are increasing," said Frank Nothaft, chief economist for Freddie Mac, a major government-sponsored buyer of existing home mortgages. "The increase in ARM rates is consistent with movement of the yield on short-term Treasury securities that have exhibited higher volatility recently due to market uncertainties."

Even though the number of home sales is down, there are strong advantages for purchasing a home today. Inventories are large, offering the buyer a wide variety of available homes — sellers are highly motivated to negotiate a favorable price and terms — and mortgage interest rates remain at very low levels.

Most mortgage borrowers have no problem in keeping their payments current. Most of the problems arise from risky subprime loans and borrowers mortgaging homes that are not their personal residence. Mortgages on non-owner occupied homes accounts for about 13 percent of all prime defaults and 11 percent of subprime defaults nationwide, according to a report from Mortgage Bankers Association.

The Hispanic population is growing, along with the number of Hispanic homebuyers and mortgage applicants.

Nearly one in every 10 of the nation's counties now have a population that is more than 50 percent minorities, according to a recent report from the U.S. Census Bureau. Growing minority populations are particularly strong in suburban and rural areas, and is fueled primarily by the growth in the Hispanic population.

Cities are still the major target area for minorities. Los Angeles County had the country's largest minority population, where 7 million (or 71 percent of the population) are minorities. However, locales with the highest percentage of minority population growth are on the East coast and in the South.

"One could describe it as the 'Hispanization' of the United States," said former U.S. Secretary of Housing and Urban Development Henry Cisneros, who has studied Hispanic demographics and homebuying trends in depth.

"This is a very important population," he said. "It's very entrepreneurial, capable of saving money and is the fastest growing segment of middle class. That will add to the capacity to buy homes. Add to that the subjective element. This is a population that is very family oriented. Homeownership is their vision of the American dream."

There may soon be a jump in the popularity of Tenant-in-Common investments in real property.

TIC investments are arrangements whereby two or more owners of a property have an equal or unequal interest. Each owner has full and simultaneous rights to the same property, regardless of the amount of interest owned. These investments are particularly attractive to owners of commercial or other investment properties who want to sell and avoid paying immediate capital gains tax. They can do so by executing a 1031 Exchange into a TIC — approved by the Internal Revenue Service.

The new development is a proposed arrangement whereby real estate brokers and their agents can earn fees for referring clients to TICs. This currently is not permitted. If finalized, it could focus new light on this investment form. The National Association of Realtors and the Securities & Exchange Commission are now working to complete an exemption that will make this possible.

(Jim Woodard, a Ventura resident, writes a nationally syndicated column and freelance features in addition to his Star columns. He also is a storyteller with a Web site at: www.jimwoodard.net. E-mail: Storyjim@aol.com.)