Aisha D. of Maryland discovered a way to successfully invest her relatively small retirement fund, as well as find inspiration to get her young son excited about establishing his own financial future.
Aisha is reaping the benefits from purchasing an option on a rental property with her Equity Trust self-directed IRA, doubling the value of her account in less than two years and anticipating further rewards when the option expires.
Discovering the potential of real estate options
Aisha’s current investment path wasn’t always clear to her. She had a Thrift Savings Plan with $5,000 that she had earned from her time serving in the military and as a government civilian employee. She was involved with the Baltimore Real Estate Investors Association (REIA) and interested in real estate investing, but she didn’t think she had enough money for any real estate investments.
Her mentor at the REIA taught her about options – this investment tactic can be attractive to those like Aisha who don’t have a lot of capital to get started in alternative investing. They allow investors to pay a relatively small amount to reserve the option to buy a piece of property. This gives the seller income and the prospect of a buyer. (You can learn more about real estate options and other low-dollar investments by viewing this webinar
Aisha’s mentor suggested trying southern markets for her real estate investing. She sought out an investment option on a property that would be feasible for renting.
In February 2013, after moving her retirement savings to an Equity Trust self-directed IRA, she purchased an option on a rental property in Memphis, Tenn., which would allow her to buy the property after the two-year contract ended. Aisha and the seller extended the option agreement this past February, and Aisha will purchase the property at the end of its term. She has been happy with the investment because the property was easy to acquire and she was able to charge a rent that made sense for the area while maintaining the property.
In the first 22 months that she’s owned the option on this property, Aisha’s IRA has increased in value by $5,000 from the initial $5,000 investment for the option consideration - a return on investment (ROI) of about 50 percent per year.
Empowering the next generation
While the return on investment she’s already achieved and the potential for returns in the future will give her IRA a significant boost, Aisha is most excited about the impact this investment will have on other people’s futures.
“The amazing experience I had with my IRA deal inspired me to help my son use the profits from his entrepreneurial ventures to open a self-directed Roth IRA with Equity Trust and buy his first rental property via option at the age of 10! I am looking forward to both of us earning double-digit ROIs on our rentals purchased via option,” she says.
Those who hear about her son investing in real estate don’t believe it’s possible because a child can’t legally own a property. In fact, it is possible for her son to invest in real estate because it’s actually his IRA that is purchasing the property - with her help. As long as a child has earned income, he or she can open and contribute to an IRA. In her son’s case, the earned income that started his account came from selling his music CD, children’s book and T-shirts from his clothing line, Young & Talented.
“Not only am I learning how to maximize the benefits of an IRA,” Aisha says, “I am also teaching my son to do the same thing. Hopefully, he will in turn teach his children to do the same.”
Aisha’s passion for teaching others how to take control of their own financial future doesn’t stop with her son. She runs an educational non-profit called I Am O’Kah
!, that teaches children ages 10-18 from low-to-moderate income families how to create wealth through business ownership and investing in real estate. Students are introduced to self-directed investing and taught how to save their part-time earned income in an IRA and get a jumpstart on their retirement savings.
She says she hopes to change a common mindset about personal finance and open more people’s eyes about their retirement-saving options: “People focus on what they can’t
do, not what they can do
Schedule a one-on-one consultation with one of our Senior Account Executives to find out more about self-directed IRAs.