I’d like to talk about a recent deal which highlights how my passive Private Money Partners grow their Self-Directed IRA accounts. This is an example of how simple it was for a Money Partner to “fatten” her Self-Directed IRA account as a result of funding one of my real estate acquisitions.
I found a house that when fixed up would be worth at least $160,000. I was able to negotiate an ALL CASH purchase price of $100,000…but the house needed approximately $7,000 in fix up, i.e. paint, carpet and some work on the air conditioning unit.
I presented the deal to the entire Affordable Housing Partners Group and soon I received several commitments for funding. Of course, the rule is “first come first serve” so I accepted the first that sent in their commitment form.
The Money Partner committed to provide $107,000 to fund the acquisition. She directed her Self-Directed IRA custodian (Advanta IRA), to send $107,000 to the closing attorney. NOTE…Money Partners NEVER send the monies directly to me. Our standard operating procedure is that all funds are ALWAYS sent to the closing attorney or closing title company. Because we want all the paperwork signed, documented and recorded properly. The attorney prepares the promissory note, security deed (mortgage) according to the terms that we have agreed upon as well as all the other essential documents to protect the Money Partner’s investment.
The loan went a full 18 months and the original principle of $107,000 in addition to the agreed upon interest was paid back into the Money Partner’s Self-Directed IRA account. She didn’t want the money back and was a little upset…she wanted it to stay out there working for her…so of course we are diligently looking to find another house that she can fund the acquisition again.
When you plug the actual figures into a financial calculator you’d discover the yield that the Money Partner earned and it is well-above today’s average returns. Not bad for a PASSIVE investment! However I always stress to my Money Partners that they can’t eat “yield”. Yield is only an indicator of how fast money moves i.e. in other words “the velocity of money”. The faster money comes back to you, the higher the yield.
********************************* If you are reading my blog for the first time, let me inform you that… My company buys single-family houses and I write this blog weekly which is primarily directed to educate 1 group of individuals:
Individuals who are losing their shirt as a result of the “roller coaster” volatility of the stock market and low paying rate of other traditional investments, i.e. people that are looking for an opportunity that’ll provide a secured place to put their money to get it working for them to earn better than average returns.
However, often times, homeowners that need to sell their house, stop by to take a peek because they are curious and wondering how and/or where we get the funding to purchase houses. And if they stick around long enough, they begin to understand why individuals partner with us to provide the funding which empowers us to be able to purchase real estate on a continual basis. Simple, it’s because we teach them a secured way to earn better rates of return than they are currently earning.
Request your FREE Education Kit if you are interested in learning how passively investing in real estate may help place you in a better financial position.
Disclaimer: This site is intended for educational purposes only. I am not an accountant, attorney or licensed financial planner. While the information I’m writing here is based on many years of experience buying houses that doesn’t really constitute professional advice (since everyone’s experiences and situations are different).