So after reading BP for quite a while and studying up on the various ways I could start investing, I finally took the plunge with my Roth IRA. Here's how I got my start and how it's elevating me to the next level and giving me confidence and leverage to do even more deals in the near future. BTW, I live in Atlanta, GA and just own my primary residence here. I don't own any investment properties locally yet (but will soon), and took a leap of faith purchasing my first 3 properties out of state. It's not as hard as you think, especially when you pick the right team to work with you!!
1. I converted my regular Roth IRA that was invested in the stock market over to a self directed IRA with a legal and reputable custodian who shall remain anonymous (I don't want stalkers / hackers going after my account). You can always visit the vendor section of BP to find a good custodian to work with BTW.
2. I then vetted several brokers/realtors from out of state who had a lot of experience helping SDIRA investors purchase buy and holds in their portfolio. They began fielding properties to me that I was reviewing on a daily basis.
3. I very quickly found my first property through a company called Growth Equity Group based out of Chicago, IL. I was a bit nervous as this was my first investment deal ever, but they turned out to be a real solid company with reliable communication and sound advice. They offered private non-recourse financing that allowed me to purchase this first property located on the east coast, which has been generating solid net returns in my SDIRA. If you would like to check them out and potentially purchase a property of your own, please direct message me and I'll connect you with my sales rep.
4. The second deal is a two for one deal where I used Marshall Reddick Real Estate out of California to purchase two homes again in an eastern state at about 50k per home. I also used seller financing (non-recourse) at very easy terms to make this deal accessible for my SDIRA. I also signed up with the same property management group the seller was using to make the transition a bit smoother and to not have to worry about finding another reputable firm in the area.
5. All loans on these properties are non-recourse to satisfy IRS requirements.
6. I had property inspectors do thorough inspections of each property and email me the reports/photos so I could make a sound decision on whether to purchase or not. I paid for their services out of my SDIRA to again remain compliant with the IRS.
7. I did not choose to have appraisals done, but BPO’s (broker price opinions) instead to save on costs, while still getting a pretty accurate value of each property. Check with your individual custodian first to ensure they’ll accept a BPO over an appraisal. Not all will.
8. While Growth Equity Group was offering turn key properties that offered little room for negotiation, I was able to negotiate for the seller to repair some minor issues with the Marshall Reddick two for one deal. I also got the seller to offer extra cash up front for allowances to cover any potential vacancies, unexpected repairs, etc. These properties are not pigs or junk properties but are already rented out to tenants and have been managed professionally over the years. Both properties combined will yield over $700 to $800 per month in net rent. On top of the rent from the GEG property, this brings over $1,100 in tax free cash into my SD Roth IRA every month. That's roughly $13,200 per year in net profit!! I've never seen the stock market do that for my IRA ever. And I still have cash left over to do a couple more smaller deals - possibly land deals, that will boost my margins even more.
9. Best part of all this, is I did this without a mentor! You're now scratching your head asking yourself why. Don't get me wrong. I love mentors and have been networking with some to possibly JV (joint venture) some local fix and flips in the future, however when it came to SDIRA investing, I just couldn't find the right people that knew what they were doing. I couldn't seem to get sound advice because the mentors I was talking to did not have SDIRA's and knew very little about how they worked. That's why I spent many months figuring it out myself, and making phone calls across the country if necessary to a professional who did. I almost got cold feet on my first deal with Growth Equity Group and was going to back out had it not been for some friendly references who reassured me the deal was solid.
10. I do want to issue a word of caution to those who wish to follow in my footsteps and try this. Do not, and I mean DO NOT do this first without consulting with attorneys, CPA's, experienced realtors, etc. You must know what non-recourse loans are, how they work and how to find or creatively structure them. You must know what UBTI and UDFI taxes are and how they could affect you. You must know what prohibited transactions are and how to avoid them. Last, you need to have cash. I spent over a decade saving up the funds in my Roth IRA and growing it through various stock / mutual fund investments during my early career years. I would sock money away in the 401(k) every paycheck, then roll it over once I changed jobs - rinse and repeat. You get the picture. I also contributed to my Roth IRA in addition to my 401(k) which many people seem to think you can't do (which you can of course).
Overall, I’m very happy with my first few investments and hope to see these propel me to even better ones over the next 10 years. Now that I’ve got experience purchasing with my SDIRA, structuring deals outside of my SDIRA using liquid funds will hopefully be a bit easier as they don’t come with as many IRS compliance / regulations attached.
Note: The numbers for my deals are attached to this post.
