Ideas for Self Directed Investments

Want to pump up your investing? Consider learning more about Self Directing. To give you a few ideas, we have turned to a few case studies you can find on Equity Trust’s website www.TrustETC.com.

19-Year-Old Investor Turns $10 into $4,800 for His IRA

Ryan of Maryland recently completed his first self-directed real estate investment – one that earned him a nearly 48,000- percent tax-free return. It’s a great start for any investor, but especially one who completed the investment when he was 19.

He grew up in his father’s real estate rehab and rental management company to make sure that's what he wanted to do, becoming a full-time employee after graduating high school. At a seminar he learned about selfdirected accounts and opened a Roth IRA.

In one deal, Ryan found a local homeowner who was underwater on their property and offered to help them get out of their mortgage by finding a buyer.

Ryan offered a real estate option for $10, which allows him the opportunity to find a buyer or purchase the property. He ended up finding a buyer who purchased the option from him for $4,800 – a return on his investment of nearly 48,000 percent. The purchase was completed approximately two months after he entered into the agreement.

Mother Bonds with Teenaged Son over Self- Directed Real Estate Investing – Earns 13% Annual ROI

Carmen, a real estate agent, often talked to her sons about financial literacy and real estate income as a way to secure their financial future. She was thrilled when her oldest son took an interest in real estate and began to talk to her about building passive income through real estate investing.

Carmen wanted to encourage her son’s interest by showing him a real estate investment close-up, but she was short on funds to make an investment. Soon after, another real estate agent told her she could use her retirement account to invest in a variety of assets including real estate. A self-directed IRA or other account at a custodian such as Equity Trust made such investments possible. Carmen decided to roll over her 401(k) into an Equity Trust IRA.

For her first self-directed investment, Carmen’s IRA purchased two duplexes near a local hospital. Her initial investment was $110,000, plus the cost of updates, which included new roofs and windows. All expenses related to the property must come from Carmen’s IRA, per IRS rule. The rent was around $500 per unit when she purchased the properties. The duplexes already had tenants, who were able to stay in the units during the updates. And after some research, she decided she could charge as much as $620 per unit once the updates were completed, bringing the rent more in line with the regional average. This income will bring her annual return on investment to 13 percent.

With the initial self-directed investment experience completed, Carmen is on a roll. She added units to her portfolio and is now receiving income from six rental units. Her goal is to accrue enough rental properties in her portfolio that she can receive $10,000 per month in passive income back to her IRA.

2 Investments Earn $130,000 in Profits to Help Boost 5 Self-Directed Accounts

When Brian from Tennessee learned that he could self-direct his retirement account and his children’s education savings accounts into alternative investments such as real estate, he was eager to begin.

One concern, however, was that there wasn’t enough money in his children’s accounts to invest in any real estate opportunity he might find.

Brian learned he could include his children’s accounts in his real estate investments to grow the accounts for their future education needs. An active real estate investor, Brian decided to try to grow his children’s savings using self-directed CE- SAs.

A CESA’s annual contribution limit is $2,000. Brian was concerned that it would take a while to build up enough capital in the account to be able to invest in real estate. His purchasing power increased when he learned that he could partner with other self-directed accounts to make investments.

Brian thought it would be difficult to find a suitable investment property for less than $50,000 in the city of Nashville, but before long he found a vacant lot in the city for $8,000. He partnered three of his children’s self-directed CESA accounts to purchase the lot. One child’s CESA invested $4,000, and his two other children’s CESAs each invested $2,000. The land was sold 60 days later for $60,000. The sale proceeds returned the CESA accounts in the same proportion as was used for the purchase.

After the lot sale was complete, the CESAs had a combined total of approximately $60,000. Brian began to look for a larger investment, where he could again partner the accounts together. He found two adjacent lots, one of which included a dilapidated house.

For this investment, five accounts partnered in equal proportions to produce the $120,000 purchase price: his Roth IRA, his wife's Roth IRA, and three of his children's CESAs.

He divided the two lots into three and put it back on the market for sale. A year after purchasing the land, he sold all three lots for $200,000 to a developer who wanted to build homes on the site.

The profit went back into the accounts in the same proportion it came out of the accounts.

If you want to learn more about Self Directed accounts we suggest visiting Equity Trust’s website and exploring. Once you know the basic rules you can conduct almost any type of real estate transaction with in a Self Directed Account or you can lend your account to others for their investment and teach others about Self Directed Accounts so they can lend to you. We will be discussing Self Directed Accounts more at the October 8th MAREI meeting, please join us.