Client Dreams Big, Partners to
Invest Self-Directed IRA in Town

Equity Trust Company client John Logsdon is turning a town with a troubled past into a resort and tourist destination – with the help of his self-directed IRA.

Yes – not only can investors self-direct their savings into alternative investments such as real estate and tax liens, but an entire town isn’t outside of the realm of possibilities when investors join a self-directed IRA custodian.

Logsdon’s journey began with lakefront land he owned in his IRA. When he and his wife decided to offload the parcel in exchange for something with more income potential, he worked with his partner to strike a deal with the corporation that owned an entire town.

Logsdon and his partner (another Equity Trust client) realized, after a little research into the company, that Logsdon already possessed what it wanted: lakefront property on which to build a cabin. Together the investors struck a deal to trade his land for an entire town that was under the company’s ownership. Logsdon and his wife (another ETC client) now have 50-percent stake in the northern California town of Keddie.

Overcoming the Obstacle of a Checkered Past

Ironically, the town of Keddie was born of investors’ money. It was named after surveyor Arthur Keddie, who surveyed the Western Pacific Railroad that cuts through the town. The town of Keddie was built for the workers who constructed the railroad in the early 1900s. The town’s ownership has changed hands many times since then, but many of the town’s original cabins remain.

Like Logsdon’s investment, little about the town is ordinary; it presents its own unique obstacles. For example, the town has a notorious past that brings unwanted attention.

Keddie was the setting of the brutal murder of a family in 1981. One of the survivors, a daughter and sister of the victims, was sleeping in an adjacent cabin. The murder mystery remains unsolved to this day.

The cabin has long since been torn down to deter curious visitors, but many still visit each weekend to try to find the spot where the heinous act happened. While the new town owners hope to lift the town’s image, they’re not letting the tragedy be forgotten. They plan to remember the tragedy with a memorial park and a service concurrent with the town’s grand opening.

The murders aren’t Keddie’s only source of notoriety. Famous kidnapped newspaper heiress Patty Hearst reportedly stayed there for a couple days after she was photographed robbing a Los Angeles bank with her captors. Others, including John Wayne and Clint Eastwood, are said to have passed through the town as well.

 

Rebuilding a Town, Creating Wealth

The 40-acre town, which registered a mere population of 66 in the 2010 U.S. Census, has the moral backing of several former residents who have responded positively to Logsdon’s and his partner’s pitches for help with the rejuvenation effort. Many have offered to pitch in by either volunteering to mow the grass or lending their construction expertise. The investors have also brought in skilled workers to renovate the town and have made a deal that includes reduced cabin rental in exchange for their volunteer work.

“One nice part of my project is that the final rehab supports hiring over 60 laborers, which will virtually eliminate unemployment in the local community,” Logsdon says.

Besides the cabins that are being updated for rental, the town’s 24-room hotel is being converted into 12 bridal suites. Keddie’s other lodge will either remain as a hotel or be transformed into a convention center.

The investors are also working on reopening the town’s lone restaurant and adding actual train cars to it as a sort of homage to the town’s beginnings. A restaurateur from Sacramento has donated about $250,000 worth of items from eateries he’s closed, including everything from appliances to fixtures.

In addition, a wedding chapel, gift shop, theater and coffee shop are in the works. Away from the town center, an amphitheatre is being planned for concerts and old movie screenings.

“It’s a fun project, and as you know, it’s all IRA money, so it has to build on itself,” Logsdon explains. “I can’t put anything into it. So that’s what it’s doing. The people we put into the town are working on it; they’re building it themselves. From the rent that they pay us, we buy materials they need to continue the rehab. So it’s working on itself; it’s building itself up.”

The rebuilding project has gotten favorable response from the county officials and anyone else with clout that Logsdon has approached.

“We’ve been having phenomenal support from the town,” he says. “These are the people who could say ‘No, you can’t do that.’ But they’re not; they’re helping us. They want it to come back just as much as we do.”

Once it’s near the point of opening for business – possibly sometime in 2013 – the town will be sold to other self-directed investors, producing a healthy profit for Logsdon and the others. He predicts his initial $444,000 investment will net him more than $1 million in the end.

Logsdon self-directs his funds into other profitable investments as well, including buying discounted mortgages and acting as a “private bank” by modifying payments for struggling homeowners.

Logsdon benefits because profits generated from the loan go right back into his IRA – tax-free. The homeowners benefit because they have more manageable terms than they would through a traditional bank.

Whether it’s a house or a town, Logsdon is building his nest egg on his terms and keeping every cent he makes.

“I like to create win-win situations,” he says.

Disclaimer: Equity Trust is a passive custodian and does not provide tax, legal, or investment advice. It does not endorse or recommend any contributor, company, or specific investments. Any information communicated by Equity Trust Company is for educational purposes only and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with your legal, tax, and accounting professionals.