Hey everyone! Hayley Gant here from Quest Trust Company. Today, we’re diving into some exciting tax-free home run deals you can make with self-directed IRAs. Joining me is Nate Hare, Executive Vice President of Quest Trust Company. We have new case studies to share, so let’s get started!
What is a Home Run Deal?
A “home run deal” is an investment that yields substantial returns with minimal initial investment. Our clients have structured their IRA investments in various ways to achieve these types of deals. Whether you’re a seasoned investor or new to self-directed IRAs, there’s something to learn from each of these case studies.
Owner Financing: A Hot Topic
One of the popular strategies right now is owner financing. It can help increase your overall returns over several years. Let’s explore two owner-finance deals that were real home runs.
Case Study 1: Turning a Junker into Gold
Meet my dad, an experienced investor and HomeVestors franchisee. He bought a run-down property for just $9,000 and owner-financed it for $51,000. With a down payment of $5,000, his IRA was only out $4,000. Over 15 years, at an interest rate of 9.9%, the total return to the IRA will be just over $93,000. The buyer has never missed a payment, making this a stress-free, lucrative investment.
Case Study 2: Flipping with a Roth IRA
Nancy Wallace-Laabs partnered her Roth IRA with her business partner to purchase a vacant property for $10,000. They put a sign in the yard and sold it via owner financing within three days. The total earnings over 15 years are $87,000, with half of that going to her IRA. An incredible return for a first-time IRA investment!
Real Estate Options: A Unique Approach
Real estate options can be a powerful tool for hitting home runs. They give you the first right to buy a property within a set period for an agreed-upon price.
Case Study 3: From $10,000 to $297,000
A client in Houston used his Roth IRA to give a $10,000 consideration for a two-year option on a property in a rough area. Over two years, the area saw significant appreciation due to nearby development. When he exercised the option, the property was worth close to $300,000. This deal netted him $297,000 in tax-free returns. Talk about a grand slam!
Partnering for Bigger Deals
Sometimes, partnering multiple IRAs can help you fund bigger deals. I partnered my IRA with my parents for several fix-and-flips. Nate did something similar with promissory notes, involving multiple IRAs to fund a single investment.
Case Study 4: Teamwork Pays Off
Nate found a borrower needing $55,000 to rehab a property. By partnering with seven other Quest employees’ IRAs, they pooled the funds. Nate structured the deal to retain two points upfront for his IRA, doubling his initial investment of $550 just through the points. The deal paid off within a year, with all investors receiving a nice return.
Final Thoughts
Home run deals in self-directed IRAs are not just about massive returns; they’re about smartly structuring investments and leveraging available resources. Don’t wait for the perfect deal. Sometimes, a single or double can set you up for future home runs.
Share your success stories and questions in the comments below. We love hearing from you! If you’re ready to start hitting home runs with your self-directed IRA, contact us today at 855-FUN-IRAS or visit our website. Keep learning, keep investing, and let’s make those IRA dreams come true.
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