Why he chose a Self-Directed Roth IRA…
In August of 2005, David G., one of our clients, opened a self-directed Roth IRA. He’d heard about self-directed IRAs through a seminar that I did. The reason he opened a self-directed Roth IRA is because he wanted an account that grows tax-free and allows for future distributions that are tax-free forever.
The one thing that you’ve got to understand about a Roth is that once it’s qualified, it’s tax-free forever.
Direct non-taxable transfer from his Roth IRA to his self-directed Roth IRA
He funded his Roth IRA with a direct non-taxable transfer. Many people say “is there any consequence to me transferring from my current provider to a self-direct account? What is sometimes overlooked is that they’re the same account.”
We have the same job as the securities industry, except we allow you to invest in different types of assets, as opposed to just securities. These are non-taxable transfers from two previously established Roth IRAs in the amount of $6,800; $3,800 and $3,000. That was his funding for the account.
Yes, David G. began with only $6,800 and yet in 5 short years, he grew his self-directed Roth IRA to $293,000! Many people believe that they don’t have enough money to start a self-directed Roth IRA…David G.’s success is proof positive that great success can come even with a small account. This article covers his 1st deal!
David G.’s first purchase with his self-directed Roth IRA
In January 2007, David G. found an oversized residential lot with water, sewer, a phenomenal view of the mountains, and a separate deed for each of its two separate parcels, for sale. It was listed for $18,900 and David knew the market value was $31,000.
How does $6,800 turn into $18,900?
David G. obtained the additional funds he needed by partnering with his wife’s Roth IRA. I know…you are thinking: “Hold on! His wife is a prohibited person!” You are absolutely correct; however, you can partner with prohibited people so long as you do so at the time of acquisition. If you don’t have a large account, you can still do a transaction by partnering with someone else.
Why he opened his self-directed Roth IRA 2 years before he used it…
David G. had lost his confidence in Wall Street. Even though he didn’t have an investment picked out at the time, he opened his self-directed Roth IRA and he had confidence that he would find a worthwhile future investment to direct his retirement funds to.
What you have to consider is that many times what we find is that the client says I’ll open an account when I find something. If you wait until you find something and you find a very good deal, there’s a timeframe to open these accounts. We can do it very quickly. However, getting the money from provider A to us does take time – anywhere from one to three weeks, and in some cases longer if they drag their feet.
You’ve got to be prepared to make the investment, and tripping over a couple of pennies of perceived return may be interest that you may think you’re going to get or the stock market hoping it doesn’t go down before you make the move.
If you enjoy real estate, you want the chance to use leverage within your IRA account to fund your retirement, and you are up for acting as a landlord, you should consider using a self-directed Roth IRA to own real estate. For a free consultation, please call us at 1-866-7500-IRA (472).
This is a great opportunity afforded to us by our government; as long as you follow the IRS guidelines, this is a phenomenal tool!