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Creating a Lasting Legacy by Investing in the Community

Lamberto found a way to benefit his family well into the future, while helping with housing and economic development in his area now.

Lamberto of Florida’s forward thinking led him to make a drastic change in how he planned for his future: away from a pension and toward real estate investing. Several rental properties and a commercial investment later, Lamberto is filling a need for local housing while bringing in monthly tax-advantaged cash flow with an opportunity to affect his family’s financial future.

Wake-up call

In the early 2010s, Lamberto was making decent money working at a technology company in south Florida, but was concerned about the future.

“I’d been there over 20 years and I knew layoffs were coming, and I knew that if I got laid off, I could not find a job making the same money. So that was a concern for me. I had a pension that was great. It was going to provide about $2,500 a month when I was about to retire, but that really wouldn’t help me now.”

He began to think about a way he could take those funds and purchase rental properties to produce cashflow.

“I was talking to the person who does my taxes, and he told me about Equity Trust. And I was like, oh, so I [have options], rather than just have this money there in stocks or bonds, which don’t offer much control. For some people that may be great. I wanted a little bit more control of my investments and I thought rental properties were a way of doing that. So then I opened an account with Equity Trust.”

Lamberto was introduced to the concept of rental properties as a 10-year-old living in Schenectady, New York. His dad explained that he received income for renting the upstairs unit of the duplex he owned.

“And I asked him, ‘so you get money for not working?’ He’s like, ‘well, sort of,’” Lamberto recalls. “And that did it for me. I just thought that was really cool and I always wanted to do that.”

He had a brief foray into real estate in his early twenties, but he abandoned it – something he regrets.

“Later in life, I got a second chance at it and said, ‘Okay, I have a lot more skill and knowledge now, let me be serious about this and see what I can do.’”

A big step

After careful consideration, Lamberto decided to cash in his pension and take a tax hit that year. He decided it would be worth the sacrifice to be able to use the funds for what he saw was a great opportunity at the time.

“With the pension I had, once I'm gone, that pension kind of ceases to exist. The fact that I bought rental property, once I'm gone, I can leave that to my children.” 

Lamberto put the pension funds into a self-directed IRA, which vastly increased his retirement investing possibilities. Real estate was now an option for his retirement investing.

At that time, he saw great potential in the rental housing market. He found an available property that was in need of minor repairs and updates. Other investors had passed it up, thinking it to be overpriced.

“I thought it was great,” he says. “It was a three-bedroom, two-bath house, solid construction that needed some cleaning up, but nothing major. So what I did is I put the rest (of my pension) after taxes into Equity Trust. And with that, I paid cash for this house.”

The house cost $55,000. He hired someone to spend a month cleaning it up.

“I tried to improve the property, especially the curb appeal,” Lamberto says. “It improves the property as a whole, and, if you’re able to do more than one or two, it improves the overall neighborhood.”

Lamberto adds he’s also helping people find a decent place to live.

“It’s very difficult in south Florida to find a rental property,” he says. “I was talking to a coworker who asked me if I had another property. So hopefully I’m filling a need in the neighborhood.”

Worth the sacrifice

Within a week of listing the property, he found a renter and was receiving $1,400 per month.

“I still have that house; the same tenants are still there. And it’s now at $1,675 per month. Zillow probably has it at $2,300, but I keep it low because the tenant is a good tenant.”

After 10 years of $1,400 per month in rent returning to his tax-advantaged IRA, Lamberto has more than made up for the taxes he paid cashing out his pension.

If Lamberto was to sell the property, any profits would also return to his IRA, free of any long-term capital gains taxes because the investment is in a tax-advantaged retirement account.

He repeated this process with other rental properties, holding as many as five in his IRA at one time.

Aside from the passive income he’s receiving, Lamberto is glad he moved his pension to self-directed IRA investing because of the lasting impact to his family.

“With the pension I had, once I’m gone, that pension kind of ceases to exist,” he says. “The fact that I bought rental property, once I’m gone, I can leave that to my children.”

Slight shift in strategy

Lamberto has learned a lot and met many new people in his real estate investing journey. One connection led him to a commercial real estate opportunity: a warehouse that houses various small retail outlets.

Lamberto loans money from his IRA for the investment. After about 18 months, the investor pays back Lamberto and any other lenders, with monthly residual checks to follow – passive income flowing back into Lamberto’s IRA.

“You get your investment back, and then also you continue getting a lifetime amount, which is great,” he says, adding, “I’m doing another one in about a month or two. I’ll be writing another check from my Equity Trust IRA to the same firm, for a different commercial property. That’s it going forward.”

Real estate makes up just a portion of Lamberto’s portfolio, but it’s the investment that brings him the most comfort.

“It’s good to diversify,” Lamberto says. “I still have a 401(k) in stocks. But I wanted to diversify stocks with real estate, because I know a little bit more about real estate and I have a little bit more control than I do with stocks.”

Create Your Own Story: Discover what's possible with an Equity Trust Self-Directed account

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.