Your IRA account, (which by now should be in a Roth IRA) is an important vehicle to have for your investments, but you must find the right administrator to help you with these deals. Now, say you have $20,000 in your IRA of cash that is earning a meager 8-10% in stocks-but not every year. Some years have a negative return!
What if you did this instead?
Buy a property which needs some fixing up at 75-80% of the value, say an $80,000 property for $64,000. Your IRA puts down $10,000, and your seller agrees to a one year balloon mortgage with a $54,000 balance. You would pay $396.23/mo for 12 months, (@ an 8% rate)with a balloon payment due of $53,548.93.
But you lease option the house to someone who wishes to get credit in work on their house. The option price is $76,0000, with rent paid of $750 per month. But you give the lessee $350 per month credit for their work. When their 12-month option ends, you should see these results:
Your Income Your Expenses
Down payment (10,000)
Rent cash $400/mo Mort. 396.23/mo net 3.77/mo 8 12 = $45.24
Home buyer credit to Down Pmt
$350*12 = $4200
Home buyer pays $76,000 Net $71,800 after rent credits.
You pay the balloon of $53,548.93
Final net of $18251.07 – $10,000 Down = $8251.07
Add rent diff. of $45.24. = 8296.31
So you bought a house, optioned it to a buyer for good terms, and from your $10000 down ended up with $18296.31. That’s a return of 82.96%. How many times shouldd you do this per year. About four? Yes. Make about $36000 per yr in your IRA. If this is a Roth, it’s TAX FREE FOR LIFE! Twenty years of this @ 36000 / yr is $720,000 (in addition to the original $20000). Comfy yet? Do it the first year twice with the other 10000 serving to buy the other property.
By the way, your original seller who holds the note? These mortgage notes are marketable on the secondary market. nother individual could buy his note at about $52980 and make 10% for the year as he accepts the $396.23 per month mort pmts from you, and then the balloon pmt in one year of $53548.93. You could also find notes the same way. The seller gets 52980+10000= 62980, you make 8251 as landlord, and the notebuyer makes 568.93 + 396.23*12 = $5323.69.
Hmm $5323.69 holding a note, no landlording.
But you get 8296.31 with the landlord role.
How much time does this save the note buyer 40-60 hrs week?
Choose one and do it!