Compounding Returns in your Self Directed IRA

By now you have heard many different aspects of why I am an advocate of Self Directed IRA's and everyone talks about real estate being a great investment in a SDIRA, but why?

Let's take a look at an example:

Bonnie Alderson buys an investment property for $25,000. Her property management firm finds a tenant where she will net $500 a month in her ROTH IRA. Bonnie also believes in contributing the annual max to her IRA so after 1 year in her IRA she has the following:

A property worth $25,000 (we are assuming no increase in value)

$11,000 in available cash. $5,000 from contributions, $6,000 from payments

In year 2 she follows the same formula. On New Years eve, her account consists of:

A property worth $25,000

$22,000 in available cash. $5,000 from contributions, $6,000 from payments

Now look what happens in year 3. She has enough for a second $25,000 property. How much did it cost her out of her own money? Just the $10,000 from contributions

If Bonnie kept up with this program for 10 years she would end up with:

11 $25,000 properties

Earning $72,000 a year in cashflow 

All from an original $25,000 purchase and 10 years of $5,000 contributions. Bonnie now owns $275,000 in real estate with cash flow for life!

In 20 years that would grow to:

103 $25,000 properties worth $2,575,000

Bonnie also receives $618,000 a year in cash flow for the life of the properties.

It gets even better if Bonnie does this in a ROTH IRA. Its all tax free

Kevin Kaczmarek is the founder of Capital Blueprints, LLC an IRA education and investment company in Carmel, IN. Recognized as an innovative thinker, teacher and business leader Kevin helps others achieve their financial goals with Self Directed IRA Investments, and Passive Income Strategies. Kevin can be reached at [email protected] or 317-564-4820