Americans Investing in America with Self-Directed IRAs

By Keith Blazek0 Comments

What the Fourth of July Can Teach You About Retirement

This Fourth of July we want to celebrate. No, not with fireworks or picnics – we want to celebrate Financial Independence Day.

You see, many of the same ideologies and principles that this country was founded upon may apply to a prosperous retirement as well.

“No taxation without representation” was the famous rallying cry of the American colonies. For self-directed IRA investors, “no taxation on investment returns within the account” is more applicable.

241 years ago our nation fought for independence from the British Empire, they fought to control their own destiny, and they fought against what they considered to be crippling taxes. The goal? FREEDOM.

Though America had a 200 year head-start, for the last 40 years Equity Trust Company has stood on some of the very same principles that spurred the birth of a new nation. Principles such as financial independence, investor control, tax-free or tax-deferred growth, and most importantly financial freedom have been the driving forces behind our growth.

So what is a self-directed IRA and how could it possibly be related to the Fourth of July? What does a retirement account have to do with freedom and independence?

I’d rather show you than tell you. Before we explore some case studies, let’s start by defining a self-directed IRA.

A self-directed IRA puts you in the driver’s seat of your financial future; giving you the freedom and control to invest in assets you know and understand best. The power of a self-directed IRA comes from the almost endless investment options. You are not limited to stocks, bonds and mutual funds – you can invest in real estate, promissory notes, tax liens, private businesses, precious metals, etc. Plus you reap the tax advantages that come with government-sponsored retirement plans.

What have some of our clients done with their financial independence? They’ve helped the men and women who served in America’s military and fought to maintain the safety and freedom of our country.

John Helps Homeless Veterans with Affordable Housing - and Nets Approximately 200% ROI

John, the 2013 Self-Directed Investor of the Year, got his first taste of real estate investing right out of college, and has had an unquenchable thirst for building a solid financial footing through real estate ever since. He recently completed the purchase of an occupied 12-unit apartment complex in Indianapolis, which was acquired for next to nothing and carries huge profit potential.

Profits are one thing, but with the strategy he’s using, John is able to keep more of what he makes. He invested in the apartment complex using funds from his Roth IRA, which means the profit he makes goes back into the account, where it grows tax-free.

He acquired the apartment building, which carried delinquent taxes, at a city sale for a grand total of $3,500. This particular deal brought additional legal costs in the process of acquiring it from the former owner, in addition to the cost of rehab work.

Eleven of the building’s 12 units are now occupied by low-income tenants, with steady rent income of $3,000 to 4,000 flowing back to his account each month. The building is worth $300,000, he says, and with the income, he’ll be in the black on the deal within a couple of years. John estimates the investment is netting him a 200-percent-plus profit after legal costs.

In addition to boosting John’s retirement account, the investment has benefited the community as well. John works with an organization that helps pair homeless veterans with a place to live. John’s property has housed three vets so far, and he’s working with the group to place two more.

“Everything I do has got to have a mission and purpose,” he says. “To make money and help people, especially these vets, excites me.”

Roger Funded a Ministry with his Self-Directed IRA to Help Veterans Suffering from PTSD

Another Equity Trust client, Roger from Maryland, used his self-directed IRA to “give life to a ministry in the town of Brunswick, which has had trouble growing – not so much for a great financial return.”

Roger’s friend Bob had a dream to help Veterans, especially those returning from Iraq and Afghanistan, who are having difficulty returning back to civilian life. Many of the veterans struggle with Post Traumatic Stress Disorder (PTSD), much like Bob did when he returned from Vietnam.

Bob’s dream was to create a ministry called Building Veterans to provide spiritual guidance and skills training, such as carpentry and construction, as both therapy and as a way to help the Veterans find meaningful and gainful employment.

Bob is a pastor and Vietnam veteran. Now retired, he and his wife had limited funds to make his dream a reality on their own. They were hoping to purchase a bank-owned property in Brunswick, MD and make it the very first building for the Building Veterans ministry. Bob thought he had a local bank lined up to finance the property, but they backed out at the last minute.

“If I wasn’t able to step in and use my self-directed IRA funds as the initial financer for the house, the whole thing would have fallen through,” recalls Roger. “If they had to go to a hard money lender, those terms are pretty onerous and would have been around 15 to 20 percent.”

Roger was able to step in and finance the property with a loan from his self-directed IRA for $100,000. He received 6 percent interest tax-deferred back into his account. Roger says, “in general the ROI isn’t great, but the real purpose of the loan was to support the Building Veterans ministry.”

The real ROI is that the organization now supports 10 veterans and is already looking for another house in Brunswick as the ministry continues to grow. The true return on Roger’s investment is that 10 veterans are now getting support, guidance, and employment opportunities and the ministry has the financial support to continue making a real impact on the lives of the courageous men and women returning from overseas.

Is there a more fulfilling 6 percent return than on one whose slogan is Building Veterans: “Building Communities Builds People, Building People Builds Communities”?

As one of America’s Founding Fathers, James Madison, once said, “The circulation of confidence is better than the circulation of money.”

Plus, a 6 percent return on a retirement portfolio isn’t too bad when you look at the industry average returns on the majority of mutual fund portfolios.

What Would Financial Freedom and Independence Look Like for You?

If you were given control of your retirement future, what would you do with your tax-exempt dollars? Self-directed IRA investing isn’t for everyone, but the mission of Equity Trust from day one has been to make sure anyone who is interested has the opportunity.

Is now the time to take control of your financial future and begin self-directing a portion of your retirement dollars towards diversified and tangible assets such as real estate, tax liens, notes, precious metals or more?

Expanding your investing into alternative assets may seem too challenging, but Benjamin Franklin has some words of wisdom: “Energy and persistence conquer all things,” he once said.

Alternative investing is no different than anything else – if you do your homework, get educated, and make decisions grounded in due diligence and research – it is certainly possible, with the right mindset.

Our founding father, Dick Desich, is passionate about educating investors about the opportunities of self-directed IRA investing. Much like America’s founding fathers, he’s fought for our clients to regain their financial independence and control their retirement future in the tax-exempt environment the accounts afford.

Just last year he joined the Investor Insights program for a 2 hour presentation to share some of his advanced and experienced knowledge.

As Ben Franklin once said, “An investment in knowledge pays the best interest.” Download the webinar recording today and join us in celebrating Financial Independence Day.

Happy Financial Independence Day!

To your success.