Self-Directed IRA A Path to Building Wealth through Real Estate

Posted by Carolyn A. Capalbo on Friday, November 10th, 2017 at 9:00am.

Millionaires Build Wealth Through Real Estate…So Can You!


Simple Strategies to Grow Your Wealth Through Self-Directed IRA


Over the years, I have worked with some incredibly savvy and wealthy people who invest in Real Estate.  Many of these folks have developed a portfolio of great investment assets that earn them tremendous income in addition to net worth and property value appreciation.  Some have mastered the art of buying distressed property below market, renovating, and reselling for a profit or flipping homes, most; however, have purchased homes close to market value and held on to the asset for years while tenants have paid off their mortgages.  I will be blogging with various strategies on how to prosper through Real Estate. 

Today’s topic is regarding some strategies utilizing a Self-Directed IRA to build wealth for retirement.  A Self-Directed IRA is an IRA held by a trustee or a custodian that allows the beneficiary to invest in a wider variety of assets than is allowed by traditional IRA custodians, such as Real Estate.  Self-Directed IRA accounts do not have to be invested in stocks, bonds, or CD’s.  In fact, you can invest in just about anything you like in a Self-Directed IRA, including Real Estate.  What I love the most about Self-Directed IRA accounts is that you can buy and sell real estate tax advantaged.  What a great way to diversify your portfolio by adding real estate investments into your retirement account.  What is even better, is you have control over your purchases and sales and investment strategy.  You can fund your Self-Directed IRA by transferring or rolling over funds from your current 401K or IRAs.  Planning is necessary since it may take a few days to a few months to fund your Self-Directed IRA.  Once your Self-Directed IRA is funded, you are ready to invest!  Here are some strategies for building wealth through a Self Directed IRA.


Example #1…

J Smith Rolled over $350,000 into a Self-Directed IRA and Purchased a $300,000 Residential Rental Property.  J Smith kept $50,000 reserved for maintenance, repair expenses, and other investment options.  With a monthly rent of $1750 and $350 per month in expenses ($250 taxes, $100 maintenance & insurance) deducted from the rent J Smith’s monthly rental income is $1400, and yearly rental income is $16,800.  Average annual property value appreciation will be estimated at 5%, $15,000.  After year one, anticipated value is $381,800, a little over 9% growth for J Smith.  After 5 years, anticipated property value will be $387,000.  Rental rates rose after year 3 to $1900 per month.  Rental income will have been $87,600 for a total gain of $174,600 in 5 years.


Example #2…

J Smith has $200,000 in his Self-Directed IRA and Purchased a $300,000 Residential Rental Property.  J Smith put $168,000 down payment on the home and borrowed $132,000.  J Smith paid $2000 in loan closing costs and set aside $30,000 in reserve for maintenance, repair expenses, and other liquid options.  With a monthly rent of $1750, $350 per month in expenses ($250 taxes, $100 maintenance & insurance), and mortgage of $870 per month (20 year 5% mortgage) deducted from the rent, J Smith’s monthly rental income is $530, and yearly rental income is $6360.  The tenant reduces the loan balance by $4000 in this scenario and J Smith can use all or part of his rental income to reduce the loan balance, if desired.  This is a great way of building equity through leverage inside of a Self-Directed IRA.  With time raising rental rates and an aggressive principal reduction strategy, J Smith should be able to pay off this mortgage and own this home free and clear in 10 years.


I have so many more wonderful investing ideas that can help you build wealth and grow your income!  Real Estate should be in everyone’s investment and/or retirement portfolio.  Call me or just reply to me with questions or a good time to chat about building your wealth through Real Estate!






Carolyn Capalbo, Best Northern VA REALTORCarolyn Capalbo,
Northern Virginia REALTOR®


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