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A Family Affair: Building Retirement Wealth and Providing Affordable Housing

New York investor Michelle and her family grew their self-directed IRAs while investing in affordable housing in the community.

New York investor Michelle, alongside her husband Alex and their daughter Sidney, have strategically used their IRAs for real estate investments that not only yielded significant financial returns but also contributed positively to their community.

Michelle and her family identified a promising opportunity in a lower-income part of Rochester, using their combined IRA funds to purchase a property for $24,000. This investment was unique as it involved not just Michelle and Alex, but also their then 17-year-old daughter Sidney, all utilizing their self-directed IRAs. Over five years, the property, catering to lower-income tenants, provided affordable housing while helping Michelle’s family grow their retirement savings.

“We collected rents on the property, had very few expenses, and recently closed the sale at $66,000,” Michelle recounts. With about $5,100 in expenses and $10,000 in rental income, the net profit amounted to $18,600 for each IRA involved.

“For our daughter Sidney, who was 17 at the time and is now 24, this growth of $18,600 by her IRA will have a significant positive impact when she retires,” Michelle adds.

Sidney invested $7,980 into the property. Through this property and private lending, she now has more than $42,000 in her IRA. “If this grows at just 8 percent, she will have over $620,000 when she retires,” Michelle adds.

“For our daughter Sidney, who is now 24, this growth of $18,600 by her IRA will have a significant positive impact when she retires."

Tax-free growth

Michelle and her family used traditional IRAs, which allow profits to grow tax-deferred. She said if she had to do it again, she would opt for Roth IRAs, after-tax accounts that enable tax-free withdrawals (once the qualifications are met).

Still, Michelle sees benefits to investing traditional IRAs in real estate. “There was no long-term capital gains tax because it was in a self-directed IRA,” Michelle explains. “All of the profits from the sale of the property contributed to tax-free growth.”

Impact beyond ROI

Beyond the financial metrics, Michelle’s investment impacts the community. Active in real estate investment groups and serving as a private lender, she leverages self-directed IRAs not only for property purchases but also for private lending, significantly impacting her community by providing alternative financing options as well as affordable housing.

“Rochester is one of the most affordable places in the United States to purchase rental property,” Michelle says. “There are great growth opportunities for the IRAs while also impacting the community positively.”

Where to start

For those considering navigating the realm of self-directed IRAs in real estate, Michelle offers words of wisdom: “Seek out someone who already has one and ask questions,” she says, adding, “Utilize Equity Trust’s information online, attend webinars, and real estate meetings.” Michelle attends local real estate investor association meetings, which is how she first learned about the concept of self-directed IRA investing.

Most importantly, Michelle says, just take that first step in controlling your financial future.

“I don’t have a lot of faith in the stock market, but I have faith in myself and being able to control my retirement investment in whatever way I choose to do: purchasing properties, private lending, and other avenues that are offered through the self-directed IRAs.”

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.