A few converging events put Tim of North Carolina on his current path to wealth creation.
“One is I had an accumulation of funds in 401(k)s and I didn’t trust the stock market. I had friends getting into real estate. There’s a local REI group, investor group, that I got involved in and they got me interested in real estate.”
He put his retirement funds into a self-directed IRA so he could invest his account in real estate. He started with rental properties in his IRA, but recently sold them in search of a more hands-off real estate approach.
“I don’t want to be out there on the road,” Tim says. “I don’t want to be sending postcards and all the other aspects of real estate investing that people are promoting. I want to be as simple as can be and … just moving paper.”
His IRA has purchased two mortgages on a property: one in Ohio and one in Kansas, which will generate payments to his account for about 20 years. “I just get the checks,” he says. “I don’t have to do anything for those.”
A welcome respite
Tim sees real estate investing as a welcome change of pace from the “dog-eat-dog” world of corporate America, where he worked before retiring.
“Real estate is definitely competitive, but it’s very friendly, very agreeable,” he says.
It’s still wise to do your due diligence though, he adds.
“Be careful,” Tim says. “Approach new people carefully but once you get in there and you’re around, you see John Bowens [for example] at several conferences and other people saying, ‘Hey, John’s a good guy.’ You get your network going.”
In little time, Tim has established a solid investing network.
“It astounds me how many people I could reach out to today just by attending conferences, meeting people, listening,” he says.
“There’s lots of people out there trying to help other people and not always for a price, just helpful information all over the place.”
Tim sometimes partners his Traditional and/or Roth IRA with his wife’s Traditional and/or Roth IRA, which has been a great way to boost their purchasing power when they don’t have enough in a single account for a transaction, but Tim notes that you have to be sure that all parties involved know about the unique arrangement.
“I have to do that up front and tell the attorney clearly that this amount is coming out of this IRA account and it’s this percentage of that deal,” he says. “And when the money all comes back, it’s got to go back in at the same percentages.”
“We started small”
Despite what some may think, it doesn’t take a large IRA balance to break into self-directed real estate investing.
“We’re not millionaires,” Tim says, adding, “We started small. We kept working at it. And those mortgages we bought they’re $25,000 or $30,000 mortgages. You can buy them at that price. And I mean that inexpensive, you don’t have to come in at $100,000 or $400,000 or some crazy number.”
It may surprise investors how accessible this strategy can be, he adds.
“You can come in rather small. I don’t know how small, but I think a lot of people can afford it,” he says. They don’t know they can afford it.”
Do what you need to do to get started: educate yourself by reading and watching videos on the topic. But whatever you do, just get started so your money works for you, he adds.
“Don’t let money sit idly.”