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Updated over 10 years ago on . Most recent reply

User Stats

410
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337
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Douglas Larson
  • Rental Property Investor
  • Salt Lake City, UT
337
Votes |
410
Posts

What we did with a Self-Directed IRA . . .

Douglas Larson
  • Rental Property Investor
  • Salt Lake City, UT
Posted

About 3 years ago my Wife's 85K IRA was making mediocre returns and we decided it was time to use it for real estate, which we understand far better than stocks. We converted it to a ROTH and took the tax hit in a low income year (no more taxes to pay!)

We then transferred the account from Fidelity to a Self-directed custodian (Equity Trust - BTW, they have worked well enough for us but there have been several frustrations with lost paperwork, mistakes and slow processing). Then we purchased 2 REO lots in a nice subdivision. We sold one of them after about a year to a builder for a 30K Profit. The other will sell in a few months for a 40K profit. We have already reinvested in 2 more lots in other areas and plan to hold for a while. According to appraisals, our properties in the account are now worth 160K, almost double what the account started with. If we can continue to roll into investments with similar returns we should see about 500K by retirement time in 7 years. Please follow up with me in 2021 to see how we fared.

Before we invested in land we entertained the idea of private lending, buying a cheap rental or doing a rehab flip within the IRA. We have quite a bit of experience with these in our daily investing business so we understand the ins & outs. There are enough difficulties with paying bills, getting bids, collecting rents, buying supplies and materials, etc. with rehab and rental properties that we decided that vacant lots would just be easier in an IRA. There are big discounts when you pay cash for land, and less competition because most investors want cashflow, which you generally don't get from vacant lots.

I personally know other investors who have used their SDIRA funds to "partner" with other investors or to leverage with private money, non-recourse loans into larger deals. I think any of these can be an effective way to grow your retirement account if you understand the business model and are willing to work through the restrictions and extra layers of paperwork that are a part of SDIRA investing.

I would love to hear from other investors who have had success with SDIRA investing.

  • Douglas Larson
  • Podcast Guest on Show #41
  • Most Popular Reply

    User Stats

    88
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    44
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    Dan K.
    • Investor
    • San Antonio, TX
    44
    Votes |
    88
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    Dan K.
    • Investor
    • San Antonio, TX
    Replied

    Hi,

    I did something similar.

    I purchased a duplex for $132K cash with my self directed IRA, put $15,000 into rehab for a total of $147,000. Instead of selling, I rented out both sides of the duplex for $1700/month. I will now be doing a Cash out refinance with a Non-Recourse loan for 60%. The terms of the loan are: 6.25% for a fixed 20year loan. I still cash flow but in 20 years the duplex will be paid off entirely.

    I plan on using the cash out refinance money to purchase another property and do this a few more times.

    One things that's different from you situation is that I set my SDIRA into an LLC in order to have check book control, as well as to reduce my fees for my custodian which can be substantial if you hold loans in the SDIRA.

    I'll keep a look out for your next deal. Happy investing and thanks for sharing.

    DK

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