Bret of Louisiana was a self-described “mutual fund person,” relying solely on this asset class to save for retirement.
A few years ago, he learned he could diversify his retirement portfolio with alternative assets such as real estate. He sought out real estate investing education and decided to expand his retirement portfolio.
Ready to strike: Creating the conditions needed to act quickly
After opening a self-directed retirement account
, he was able to find and structure an investment for only $100. It resulted in more than $21,000 in profit for his retirement account and a boost for the community.
Through real estate investment education seminars, Bret learned how to find sellers, understand and empathize with their property-related challenges, and effectively communicate and implement solutions, while also benefitting his account.
For example, Bret located a potential seller who was facing challenges with her property. It was in a struggling neighborhood (nearby homes were being auctioned off for just thousands of dollars), it needed repaired and was facing code violations.
Brett saw a potential opportunity to purchase the property, fix the violations and with some rehab he could either rent or resell it. But he had a problem: almost all of his IRA funds were currently invested in a different real estate project.
From his previous real estate training, Bret remembered an investing tactic involving a contract assignment, sometimes referred to as “wholesaling.”
Bret contacted the homeowner and explained he did not have the funds now, but negotiated a contract to purchase the property at a certain price within a certain time period. Bret’s IRA paid the homeowner $100 for the contract and the right to purchase the property in the future.
A few weeks later, Bret learned from neighbors of an individual who grew up in the neighborhood and was looking to return and who had home rehab experience. Bret contacted the former neighbor about the property. The former neighbor saw the potential in the house and agreed to buy it from Bret’s IRA.
Bret’s IRA executed the contract with the seller to purchase the property at the agreed price, the property was then sold to the former neighbor moving back to the community. The difference between what Bret’s IRA paid for the property and what it was sold for resulted in a $21,000 gain.
Personal and community ROI
Bret’s IRA investment was unique and structured based on his years of experience and education in real estate investing. He credits the flexibility of using his self-directed IRA.
Besides the positive impact on his retirement account, Bret’s transaction also benefits the seller and the community.
“The entrepreneurial spirit allowed us to relieve the seller from pressure and simultaneously provided an opportunity for another party to purchase a personal residence in a neighborhood in which they grew up and still have many connections to this day.”
He opened his self-directed account after learning this was possible from other investors and has been happy with the decision.
“I like the idea of being a steward of my own retirement and future.”
Case studies are provided for illustrative purposes only. Past performance is not indicative of future results. Investing involves risk including possible loss of principal. Information included in the above case study was provided by the investor and included with permission. Equity Trust Company does not independently verify all information provided by third parties.
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