This post is based on a real deal in Rhode Island and approximate numbers. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free Our model involves primarily single family homes. But I always talk about becoming a master transaction engineer, and that means knowing how to handle any deal that comes your way. Real estate is forever evolving, so it’s important not to be pigeon holed into one particular technique or niche. If you’re generating leads properly, you’ll come across all kinds of different deals and scenarios. Then, inside of the different deals, there are different ways to handle them relative to cash flow, wealth building, and various tax vehicles. Related: How to Invest in Real Estate With a Self-Directed IRA Self-Directed IRAs and IRA-Owned LLCs I’m a big advocate of self-directed IRAs, because my real estate is something I can control and protect. I cannot control or protect myself inside the stock market. And one thing I do know for certain is that a stock can go to $0 value. My properties cannot. Now, you can set up a self-directed IRA pretty easily. But then in order to move those funds to a deal, you’ve got to do what’s referred to as a letter of direction of investment—meaning that you instruct the administrator for your self-directed IRA where to send your funds for the deposit, the closing, etc. Instead, I set up a one-time direction that funded (“invested” in) an LLC, and now that LLC can operate and do deals without having to go through the administrator and all the related paperwork.* Keep in Mind, You Cannot Own it or Be a Manager of it In my case, my wife and I have our IRAs own the LLC. So it’s actually owned by “Quest IRA, Inc., FBO Chris & Kim” (FBO stands for “for benefit of…”), and the manager is a non-related individual. Be sure to check with your CPA and attorney before doing anything like this, of course. I mentioned above that if you’re doing lead generation, you’ll come across different opportunities. You can also pointedly target lead generation. Several years ago, we decided we’d purchase a few multi-unit buildings in addition to our core strategy. We selected “free and clear” (meaning no mortgage) as our niche, chose a zip code, and purchased a list. We then sent letters to that niche of only 400 or so owners of buildings with 4 to 10 units. From that one mailing, we purchased a 6-unit building. So, clearly you can watch for different deals to come your way by your normal lead generation, or you can pointedly seek whatever type of deal you’d like by choice. Incidentally, we liked that list, so we did another mailing and bought a 4-unit building. Everything you do can and should be predictable like that. We purchased it with no money down. Sort of. Here’s How it Was Negotiated We agreed to a $5,000 down payment but structured the closing date to be on or about the third or fourth of the month. When you do that, the seller will give you full credit (less the three or four days he or she still owned the building prorated) for the rents for that month. This is a simple but effective technique when buying multi-unit properties, because if you closed, say, on the 25th or 30th, you would only receive a few days’ worth of prorated rent and you’d have to go collect rents due on the first. Why not have them collect them and you get paid at closing? So on this deal, we walked away at closing with several thousand dollars: We were paid to buy the building! This was purchased with owner financing with principal-only payments (each month we make the payment to the seller, full principal is being paid down) at $269,900—the seller’s asking price. The seller’s dad had built the building in the ’80s and recently passed away. So the seller was living at the property but didn’t want to run it any longer due to business travel. He signed a lease with us and stayed as a tenant. Related: Take Advantage of an Underused Law — and Invest Using Your Self-Directed IRA $269,900 purchase Monthly principal payments: $1023.00 Monthly net cash flow after expenses including property manager: approximately $1,100 deposited monthly by the management company directly to our IRA-owned LLC We liked the property—it was easy to run via the management company, and it had very good cash flow. Ordinarily, we may have considered cashing it with the seller and keeping it still, but because it was held in our IRA-owned LLC, we couldn’t buy it out of the current arrangement (before the balloon date of 36 months)—that would be a conflict and against IRS rules relative to self-directed IRAs. Let’s Sell We decided to sell it with a real estate agent. We had several offers within a few weeks. One sure way to make sure you not only know your numbers but also get top dollar is to use the NOI (net operating income) calculator for 4+ unit buildings. We sold for a net profit of $116,000. Keep in mind that the proceeds went straight back into the IRA-owned LLC, tax free. Unlike single-family homes, a multi-unit is all about the match. Improve the rents and expenses, and that improves the NOI; improve the NOI, and the price goes up. What Else Can You Do With Your IRA-owned LLC? Relative to our main strategy, which is buying on TERMS (lease purchase, owner financing, and subject to with single family homes), we can and often do place them in the IRA-owned LLC for huge, tax-free returns. For example, you can use $100 or $500 down on a lease purchase deal to then have all three paydays (we create three paydays per deal we do: cash now, cash monthly, and large back-end cash out paydays) go right into the IRA-owned LLC. *I’m not an attorney or tax specialist. I’m simply sharing my experience. Please consult your CPA and attorney. What deals have you done with your IRA-owned LLC? Share some examples in the comments below!