As soon as Brad from Indiana heard about Equity Trust and self-directed IRAs at an event in his area, he recalls, “I was hooked. It was really a no-brainer.”
Brad learned at this seminar that self-directed IRAs allowed him to use his retirement funds to invest in alternatives to the stock market such as real estate, raw land, promissory notes, and tax liens, to name a few. He immediately opened an account after the event and set out to learn as much as he could about alternative investments, specifically tax lien auctions.
After watching webinars and researching on the internet he decided he would attend his first tax lien sale in Marion County, Indiana. With his first self-directed investment, Brad netted over $90,000.
“I had done a lot of research before the sale and flagged this particular property as something I was interested in,” he says, adding “The land that was up for sale was on a very busy street next to a major hospital in Indianapolis.”
He found that roughly 15,000 to 20,000 cars drove by the property on a daily basis and knew that if he was patient, it would be of interest to a commercial developer seeking a prime location with steady traffic.
Brad purchased the lien on the half acre of vacant land for $823.71 in his IRA and held it until the one-year redemption period expired. His IRA was then awarded the deed title by rules of Indiana State Law. Because he only invested around $800, his Roth IRA could afford to hold the property until the right offer came along.
During the holding period, Brad's Roth IRA paid approximately $5,000 in holding costs and expenses to clear title to the property (including attorney fees and other administrative costs). Two years later, in the fall of 2013, his patience paid off.
Brad’s Roth IRA sold the half-acre lot to a medical office developer who needed the land for additional parking for their building next door. It sold for $97,500 – returning over $90,000 tax-free to his Roth IRA.
Brad remembers, “There was definitely a little learning curve when trying to learn how the process works and make sure the paperwork is acceptable.” He mentioned Equity Trust’s investment liaisons helped smooth out this process for him, and now he says he has a good feel for the process but takes solace in the fact that the liaisons are there when he needs them.
The success from his first investment has inspired Brad to make tax liens his specialty. “It’s not the most popular or well-known strategy” he says, “but something I can invest in with very little cost and if you do your homework correctly you can mitigate your risk and make some good profit.”
Brad’s advice to fellow investors is to “keep it simple. Sometimes the simpler strategies work better than the real advanced ones. If things make sense and you’ve done your homework, you’re probably making a good decision.”
Brad is a shining example of a client who was a beginner when it came to the world of investing in alternatives, but has done his homework and found success in his first self-directed investment. He’s excited to put that newfound knowledge to use with future investments.
Could you be Equity Trust’s next success story?
Whether you’re ready to strike on a deal or you’re still doing due diligence, talk to a Senior Account Executive
about your options for self-directed accounts and have it set up so it’s ready when you want to make your investment.