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Kay, a speech therapist in the California public schools, hopes to retire soon. After the economic turbulence in 2008-09, the possibility of retiring was looking more distant than ever. Her community was hit hard; her retirement fund took a significant hit.
In the following years, she learned that she could put her retirement savings to work in ways she previously thought impossible. She transferred what remained in her 403(b) and 457(b) accounts into an Equity Trust self-directed IRA and began investing in real estate.
“When I tell people that I invest in real estate through my IRA, they usually look perplexed,” Kay says. “I can tell that most do not know what I am talking about. However, my successes spike their interest.”
Through her real estate investing, she has been able to make up for previous losses and more, while rehabilitating distressed properties in her community and giving families a place to live. She now has more than $5,000 in monthly retirement account income thanks to her investments. And after some creative strategizing, almost 90 percent of her passive income is tax-free.
A recent real estate investment with a 91-percent return on investment (ROI) illustrates how she is transforming her retirement funds into a tax-free financial future.
Kay’s trustee investment: From Traditional to Roth with 91-percent ROI
Kay tracks her county’s real estate trustee and tax sale auctions. Through her research, she learned of a distressed single family property.
She kept her eye on the property as it went to auction. Her real estate broker represented her and her IRA bought the property for $65,000.
Though she bought the property in her Traditional IRA, it would end up in a different account before it was rehabbed and sold.
“Small price” for tax-free benefits of a Roth IRA
Kay’s previous Traditional IRA investment, her first self-directed investment, was a distressed house that was rehabbed and sold for a 48-percent ROI in less than 150 days.