First deal using a self-directed IRA?

Question

Has anyone here performed their first deal using a self-directed IRA?

I've got about $15k in an IRA that I'm hoping to do my first deal with, and I also live in an expensive part of NJ, so I'm thinking of out-of-state investing using the self-directed IRA.

Looking for any advice or resources that may be helpful on this topic! Thanks in advance!

Jim Goebel · Answer

@Adam Moreschi

To be honest Adam that doesn't sound like enough money, for a few reasons.  First, the terms of lending within a self directed IRA are not great.  They add a lot of financing cost and your only option are referred to as 'non recourse' loan.  This can add somewhere between 1-2.5 % on top of whatever you'd usually get for an APR, which can absolutely kill your cash flow.  I can't imagine there is any market anywhere that you can buy and rehab a house that'd be somewhere you want to own, for $15k.  This may not be what you want to hear but you can always continue to contribute to the IRA account until you're a little closer to having the funds to get into RE.

Taylor L. · Answer

I did my first investment with my SDIRA. I passively invested in a syndication. I invested a little bit over 2x what you have at your disposal. The lowest minimum investment I've seen is $25k, as syndications go.

I agree with Jim, you'll probably need a bit more for the SDIRA to make sense in most real estate niches

Andrew Cornstubble · Answer

@Adam Moreschi sure.  It's a really small town and one of my friends sold a lady 2 houses side by side.  She wanted to sell one and turn 1 into a STR.  Somehow my wife heard about it and we've been  giving her a monthly payment on a handshake deal (basically.)  She also bought a reaturant a few years ago so she's probably just to busy.

I guess it's true what they say.  This game is all about networking.  Had I known my current residence was for sale a week before hand, before it got listed, we would have paid about $30,000 owner financed instead of a conventional loan for $40,000.

Adam Moreschi · Answer

@Andrew Cornstubble really great insight here, thank you for the detailed response!

Being from and now living in an expensive area myself, your point of a live-in duplex with an FHA Loan is something I've certainly considered. Seller financing is also an attractive option on this same note.

May I ask, how did you happen to first connect with the woman who was moving towards retirement and looked to sell you the first properties that you mentioned?

Adam Moreschi · Answer

@Andrew Cornstubble interesting strategy. Have you attended real estate education workshops or conferences before? If so, who would you consider for future events? And what types of deals would only take $5k?

Brent Shields · Answer

If I had $15k to invest I would look at loaning money on mobile homes. I have done some of those loans and made some pretty good returns.

Syndicated deals are much less work, but I can't remember any who had a minimum requirement of less than $25k.

Chris Seveney · Answer

@Adam Moreschi

I would recommend buying a note. You can get one for $15k and your interest earned is tax free. Many recommend against buying property with your IRA as you lose the tax benefits.

Adam Moreschi · Answer

@Andrew Cornstubble I agree - so many of my personal and professional connections have been instrumental in my career so far! I think to your point, applying this in real estate is also key 👍

Andrew Cornstubble · Answer

@Adam Moreschi yeah.  I took a free Rich Dad seminar and spent like $600 getting upsold.  We couldn't afford the expensive mentor / hand holding classes.  But, we have since brought our credit scores from 400s to 750+ and three houses.  Thanks to part of the class just explaining credit and telling us to sign up for Credit Karma.  They are not nice by any means but they are affordable.

If you can find a fixer upper duplex you can get an FHA loan for 3.5% down.  About $5,200 would get you a $150,000 duplex.  Or you could get a single family and rent rooms out.    I guess it all depends on your area.  Rents coincide with it but real estate in my area is very affordable.  I've bought 2 single families from a lady moving more towards retirement.  We paid one off yesterday and before i even had a chance to refinance to find another she has my wife and I looking at a decent sized house with a cellar and a trailer house with a storage shed.  We havent even been inside of them but depending on the layout of the house i believe we could put a wall up and make it a duplex.  She wants $30,000 for both.  $500 a month with no interest and no money down.

I'm alteady fed up with being a landlord though and I'm not even sure if there are property managers that would come here.  Much less good ones.

My wife is on the fence about it and honestly I'm pretty burned out with another problem rental and my 50 hour a week day job.   And trying to fix up a beater old dumptruck to run when i have time.  It looks like a good deal though so we may just fix it up and owner finance it so i dont get a phone call when a sink drain gets knocked loose.

Adam Moreschi · Answer

@Brent Shields I see. That makes sense! Thank you Brent :)

First deal using a self-directed IRA?

Most Popular Reply