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Real Life Examples
Self-directed IRAs are unique. Rather than a stock or mutual fund, alternative investment options can be something tangible…something seen and felt with a tangible impact. The investment of choice for John, an Indianapolis resident? Affordable housing for American veterans.
A 2016 Point-in-Time (PiT) Homeless Count released by the Indiana Housing and Community Development Authority identified over 5,500 homeless persons in the state of Indiana, more than 650 of whom were veterans.
John’s hometown of Indianapolis is in Marion County, where on any given night there are more than 300 homeless veterans, according to information provided by the Hoosier Veterans Assistance Foundation (HVAF).
Using his self-directed IRA, John helps provide affordable housing opportunities to these individuals while saving for his retirement in the process.
John bought his first duplex* after graduating from Purdue University over a decade ago, renting out half of it to help pay the mortgage. That’s when he realized the income potential that buy-and-hold real estate investing offered.
It wasn’t until later that he learned he could use his Roth IRA to invest in real estate and allow the profits from the investment to grow tax-free in his account.
“Most of the veterans have slept in a homeless shelter the night before they move into the property…Many of them haven’t had a place to call home in 6-12 months.”
John, Investor, Indiana
Several years later at a city sale, John identified an apartment building that carried delinquent taxes and was available for a greatly reduced price. He decided it would make a sound first investment for his self-directed IRA.
After his Roth IRA paid for rehab work and the legal costs associated with the purchase, it was ready for tenants.
Since his first self-directed IRA investment, John has continued to use his Roth IRA to invest in smaller apartment buildings averaging between four and twelve units per property.
He’s found his niche between larger commercial investors and single-family home investors, targeting older buildings his IRA can acquire and perform value-add rehabs.
“I like to buy things that need work,” he says, “I see the potential of a project and look to bring it out.”
After purchasing additional properties in 2016 and 2017, John’s Roth IRA now has some level of ownership interest in 10 buildings in the Indianapolis area, totaling approximately 80 units.
The rental income, often capped by the organizations he works with to keep the units affordable for members in their programs, returns tax-free to his Roth IRA.
“I believe most people just want a stable life. They want a clean, safe, and affordable place to rest their head at night,” John says. “If I’m going to help a tenant find a place to stay, I like when it’s someone who’s done something special (like serving in the military) because in my mind, they’ve earned that chance.”
He now works with three organizations in the Indianapolis area that help place the homeless, particularly homeless veterans, in units held by his Roth IRA.
Over the years, John estimates his work with these organizations has helped place over 100 veterans in units owned by his Roth IRA.
“Most of the veterans have slept in a homeless shelter the night before they move into the property,” John says. “Many of them haven’t had a place to call home in 6-12 months and have been floating around to places that will let them stay.”
John decided long ago that his main focus would be on providing affordable housing opportunities, while working with the various agencies.
“The agencies we work with help the veteran navigate through the VA for medical assistance, seek employment, apply for grants, or look for housing,” he says. “The agency does the heavy lifting in preparing the tenants for success.”
Kalisha Hayes, Housing Coordinator at HVAF, has been working with John for over 6 years. “I feel like I’ve known John forever,” she says. “He’s been so helpful, and it’s a great feeling to know someone will give our vets a chance and hear us out.”
Together, they’ve formed a relationship that has helped numerous veterans find affordable housing through the transitional and permanent housing programs which the HVAF offers.
“He talks to them and is very understanding and flexible,” Hayes says, adding, “You can tell he truly cares about people.”
John has become one of her go-to contacts for vets that may have a difficult time finding housing due to credit, background, or income limitations. “He’s never stopped helping, even if one of the tenants didn’t work out so well.”
Lannette is one of John’s tenants from the HVAF programs. After ten years in and out of homeless shelters or crashing at friends’ apartments, she moved into her new apartment in November 2016.
Now, working part-time and set to graduate with an Associate’s Degree, she is one of the many success stories from the HVAF that John has supported.
In another instance, John was contacted by a veteran needing housing assistance. John reached out to Kalisha at the HVAF and discovered this man was working with InteCare’s Supportive Services for Veteran Families.
John worked through the process with InteCare, who paid the first two months’ rent and security deposit, and scheduled a time for him to move out of the shelter.
“I enjoy seeing the success of my tenants,” John says. “It’s encouraging to see them engage, succeed, and be able to move forward in their lives.”
In addition to saving for retirement, John’s investments are benefitting his community — offering housing to those who may not be able to afford it otherwise, but in John’s mind, deserve the help.
“In working with some of these vets, I see their struggles,” John says. “I think it’s my responsibility to try and give back, maybe just a little, for their efforts.”
John, who is in his thirties, is excited about what he’s been able to accomplish with his Roth IRA in the last few years. “You can see how my account has grown,” John says, “but it’s cool to know I’ve been able to help people with my IRA along the way.”
With no signs of slowing down, John hopes to continue working with HVAF, the Homeless Initiative Program, and InteCare to increase the impact he’s been able to make for homeless veterans in Indianapolis.
John’s story demonstrates the unique ability of self-directed IRAs to provide for retirement, while also impacting other people and their communities.
“Everything I do has to have a mission and purpose,” he says. “To make money and help people, especially these vets, excites me. To watch them from the first day I meet them to 120 days later when they’re housed, hopefully employed, and getting back on their feet is encouraging.”
In addition to traditional investments in retirement accounts, such as stocks and mutual funds, John demonstrates it’s also possible for a self-directed IRA to invest in a place for previously homeless vets to call home.
Can my IRA purchase real estate that I currently own?
Can my IRA purchase real estate that my corporation, partnership or LLC owns?
*This investment was not completed in an IRA. The IRS does not permit someone to live in a property their IRA owns.
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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