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Investor Insights Blog|20+ Real Estate Investment Strategies Working in an IRA (with Real-Life Examples)

Real Life Examples

20+ Real Estate Investment Strategies Working in an IRA (with Real-Life Examples)

If you’re interested in real estate investing to diversify your portfolio but don’t know where to start, there are more options than you might realize.

Here are 23 real estate investing techniques, plus details on how real Equity Trust clients are using these approaches to grow their wealth. As diverse and wide-ranging as these examples are, they all have one thing in common: they all involved funding from a self-directed IRA or other account, enabling the investor to enjoy tax-deferred or tax-free profits.

23 Self-Directed Real Estate
Investment Strategies

1. Rental

  • Seeking to diversify, Alan of Texas opened a self-directed IRA to invest in a foreclosed home and rehabbed it as a rental property producing passive cash flow.
  • David rolled his 401(k) into a self-directed IRA to buy a rental property in a nearby Kentucky neighborhood, giving a woman and her four children a place to live after losing their home to a fire.

kitchen renovated

2. Rehab/fix-and-flip

  • Experienced real estate investor Jan of Missouri buys discounted properties with her retirement accounts, oversees high-end renovations, and sells them at top dollar. She even got her teenage daughter involved, getting her well on her way to financial freedom.
  • Mark of North Carolina’s first rehab in his IRA was a home that looked like it hadn’t been updated since the 1970s. After flipping the house and selling it 14 months later, he returned a profit of $45,000 to his IRA.

3. Wholesaling

  • Learning of a homeowner looking to sell their home quickly, Bret of Louisiana offered the seller $100 to put the home under contract. Bret then assigned the contract to another real estate investor in exchange for $21,000.

4. Duplex

  • Carmen and her teenage son bond over real estate investing. She purchased two duplexes near a local hospital using her IRA, performed necessary updates, and rented them to medical professionals and others looking for housing.

5. Real estate option

  • At age 19, Ryan of Maryland purchased a real estate option for $10, allowing him to find a buyer for a pre-foreclosure home. A real estate investor purchased the option from Ryan for $4,800.

6. Vacation rental

7. Resort campground rental

8. Pre-foreclosure

  • David of Ohio learned that a neighboring home in his rural community was near foreclosure. He made an offer to the owners and bought the property with his IRA, helping them avoid foreclosure and preventing blight in the neighborhood. He receives income back into his IRA by renting the home.

9. Mixed-use-property-turned-residential

  • Joel of Buffalo invested his IRA in a run-down property containing a storefront and second-story residence and transformed it into a two-family residential income-generator for his retirement account.

Construction after raw land sale

10. Raw land

  • Brian partnered his IRA with his children’s Coverdell Education Savings Accounts to purchase land, and after two investments, returned a total of $130,000 to the accounts in the same proportion in which they came from the accounts.
  • Josh expects a significant return on his IRA’s raw land investment. Two weeks after his IRA purchased the land for $2,243 an acre, he was offered an additional $1,720 per acre for the property – but he held out to grow timber and cultivate even higher land value.

11. Trustee/tax sale auctions

  • Through her regular research of her county’s real estate trustee and tax sale auctions, Kay of California learned of a distressed single-family property going to auction. Her Traditional IRA bought the property for $65,000, but she moved the property to a different account before it was rehabbed and sold, helping her reap additional benefits.

12. Estate/probate

  • Christine of New York used her IRA to purchase a property that was left to a family as part of an estate. She then had it cleaned out and repaired and sold it to other investors, earning a 151-percent return for her IRA.
52 Real Estate Investment Options Checklist

13. Real estate crowdfunding

Master lease example: Airbnb listing

14. Master lease agreement

  • Candice of Ohio is receiving tax-free profits in her Roth IRA from a short-term rental with master leasing. Rather than purchasing a property, she negotiated with a landlord who no longer wants the responsibilities of tenants and is renting his property for him, receiving 1,000 per month in rent plus a security deposit.

15. Condominiums

  • After coming up short with her IRA funds to purchase a condominium she found, Laurel partnered her IRA with non-IRA money to make the investment. In another transaction, she partnered with her husband’s retirement account to purchase another condo.

16. Multi-family/apartment

  • John of Indiana is not only growing his IRA through apartment rentals, but he’s also helping homeless veterans. After buying several properties – including apartment buildings – with his retirement accounts, he joined forces with local organizations that help match veterans with affordable housing.

17. Farm

18. Rent-to-own

  • Kimberly of California partnered with another investor to purchase a rental property in New York. After a few years, the tenant, a single mother, bought the home, and Kimberly received about 24 percent return on her investment.
Mill Centre exterior: commercial mixed-use real estate
Photo: The Mill Centre

19. Commercial mixed-use property

20. Tax liens

  • Brad of Indiana’s IRA invested just over $800 in a tax lien on land near a highway, later taking ownership of the deed for the land. A few years later he sold the land, netting 11,000 percent ROI for his IRA.

21. REO/foreclosure

  • Lowell of California used his IRA to purchase a property from a bank-owned (or real estate owned – REO) sale for just over $85,000. After renting the property for two years, then reselling it, his IRA generated 76-percent returns.

Vacation rental renovation before and after

22. Long-distance opportunity

  • Arnold of Michigan purchased a beach house in South Carolina with his IRA, renovated it, and rents it for income back into his account. He was able to complete the project thanks to the internet and a local real estate professional in South Carolina.

23. Town

  • While unusual, an entire town isn’t out of the realm of possibilities for a real estate IRA purchase. John of California partnered with a group of investors to buy a small town complete with cabins, a restaurant, and more. The group plans to transform it into a tourism destination.

Could you be the next real estate success story?

Are you interested in utilizing these real estate investing strategies with your retirement funds?

All of these investors started with that first step into self-directed investing. If you’re ready to get started or get up to speed on self-directed real estate investing, talk to a knowledgeable IRA Counselor today.

 

1

What investment options are possible with an Equity Trust account?

Some of the investments Equity Trust clients make using their self-directed accounts include real estate, tax liens, digital currencies such as Bitcoin, private lending, purchasing notes, private placements, precious metals, forex and other investment options that are permissible under IRS guidelines.

2

Can my IRA purchase real estate that my corporation, partnership or LLC owns?

No. This is considered a prohibited transaction (see IRC 4975).

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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