When a MOTIVATED seller calls, perform all your due diligence on the house.
If it’s really a good deal get a purcahse agreement, lease option or straight option on the house. Normally you need to put down some earnest money or option consideration to bind the contract. I fax my IRA custodian a request for say $100 made out to the seller, realtor or title company and use this as the earnest money.
I then go out and look for a retail buyer (hopefully I know someone before I even sign the contract).
I then assign the contract to my retail buyer for a fee OR in my case I perform a simultaneous closing where I purchase the property and immediately resell on land contract to the buyer. I make a lot more money when I sell on land contract because I can charge more and collect 11% interest to boot.
In either case all the money needs to come from and be returned to the IRA – you don’t pocket any of it until you retire.
Also keep in mind I work with junker house in the $4000 to $20,000 range (my initial purchase price). Depending on the house, I typically resell on L/C to investors for 25% to 100% more than my initial purchase.
Don’t like junker neighborhoods? This will work just as well in pretty neighborhoods on sandwich lease options you can tie up for a few thousand dollars option money.
In regards to all the great ideas about buying and selling options tax free in a Roth Ira, my questions is how big can those investments be?
Are they limited to apartment complexes, mobile home parks, homes, mobile homes, etc? Could you get an option on a shopping center or mall, and sell it tax free in the Roth? If so, what about a skyscraper or a football stadium?
Thanks for any help you can give, the idea of the lease option from Ernest Tew seems so powerful in the tax sense I am just wonderng how far you can take it? Thanks again, Matt
I’ve done several IRA deals with my IRA. They have ranged from a few thousand $ to $35,000. All have been single family homes. However, everything you mention above is also possible.
Just remember, you cannot put down $100 from your IRA and then go out and get a conventional mortgage with you signing for personal liability. Any loans for the balance of the purchase must be non-recourse, i.e., only the property as security – not you personally. So lease options, land contract and subject to’s are all fair game for your IRA.
Personally, I have been buying (or creating) mortgage notes at a discount and buying them with my IRA. Let someone else worry about rehab’s and tenants.
Hello Dave,
I’m pretty new to re investing, just starting out with assigning contracts. Can you explain how to buy with $100 from an IRA? Also, what do you mean when you say any loans for the balance of the purchse must be non-recourse?
Thanks,
Deb