With the disappointing trend of corporate downsizing, there is one bright spot. . .you can rollover the funds in your former employer's 401k into a self-directed IRA and do more with it other than the usual stocks and mutual funds. And, this can be done with no early-withdrawal or penalties. A custodian who has a wealth of experience and has a good track record with us in helping people with rollovers is Equity Trust Company.
We have been talking more and more lately with fellow Realtors in our local market and throughout the country about the importance of working with someone with experience working with investors through the process of purchasing real estate in their self-directed IRA.
We'll provide a case study below about how you can purchase a turn-key rental investment in Kansas City with your self-directed IRA and keep it as a long-term rental property.
The property will have approximately 25% in instant equity. Based on it's net operating income, it's set to be paid off in less than 10 years. Your IRA can purchase the property before or after all the repairs have been completed so that it's ready to rent. For this example, let's assume you purchase it when it's ready to rent.
Retail price: $80,000
Your self-directed IRA purchases the property at a discount: $56,000
Instant Equity: $24,000
Gross Rental Income: $8,400
Less 10% Vacancy: $840
Effective Rental Income: $7,560
Less Operating Expenses (taxes, maintenance, insurance, property management): $2,612
Net Operating Income (NOI): $4,948
Cash-on-Cash Return: 9%
How many years will it take in NOI to replinish the initial investment of $56,000? 11 ----- YEAH!!!!!
This is an example of what you can do with real estate in your IRA. Obviously, the numbers can and probably will vary based on market conditions, rent increases, vacancy fluctuations, etc.
For more information about how to invest with your self-directed IRA with Kansas City real estate investments, contact Paul Surles at 816-523-4400, e-mail me at psurles@gmail.com. We also have information about Kansas City real estate investing, earning passive income with your self-directed IRA and much more on our website www.TuckerOneProperties.com.
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