Mostly smooth sailing with ROTH IRA funded cash buy and hold

[Chris Prichard]

Investment Info:

Single-family residence buy & hold investment in Birmingham, AL.

Purchase price: $59,000
Cash invested: $59,000

Purchased with self directed ROTH IRA. It is in great shape for a 100 year old house on this side of town. Maintained fairly well, but could use some updates. I purchased it from the matriarch of a 3-generation family living there. It was too small for the whole crew and she had health issues, so they needed a larger home. A 3rd-generation family member stayed on as a tenant. Zero turnover cost. Rents for $750/month--slightly below market rent, but I don't have to immediately update.

What made you interested in investing in this type of deal?

I'm familiar with this area of Birmingham (Woodlawn/East Lake) and know a solid deal when I see it. This family really needed to sell and needed not to sell out to people offering ridiculously low prices for it. It was definitely a win-win. I also thought it could be an option for my friend who was house hunting at the time, but we found her another place.

How did you find this deal and how did you negotiate it?

If found it on a local investment group on Facebook. The daughter of the owner posted it and quite a few people were interested, but they really were lowballing her. I paid almost asking price because it is in very good shape for its age and it is located in the path of progress. So I'll wait and let appreciation do its thing.

How did you finance this deal?

Cash from my self directed ROTH IRA.

How did you add value to the deal?

I allowed the family to stay in the house at no charge for 10 days after closing in order for them to smoothly transition. They needed longer, so they started paying rent. Since I'm not making $ off of it until I retire, it was kind of a no brainer.

What was the outcome?

I've only had to put in about $1,500 in some plumbing, water heater, and HVAC maintenance issues and I gained a tenant paying $750/month with very little effort.

Lessons learned? Challenges?

Getting tenant on board and paying rent. I should have done a background check. But we had some long discussions, and he is now current and understands the concept of paying me first or he is out and/or I'll sell the house. I'm pretty confident there is at least $20k in equity without doing anything to the house

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am a real estate agent in Birmingham. I use IRA Innovations as the trustee for my ROTH IRA. Happy to share my vendor list and talk real estate with anyone.