I just wanted to share to the world the success that I have had so far in 2015! I am a slow and steady type of guy and have decided recently to accelerate my business, and have already seen the results of my work!
First of all, I am a Realtor and love being one! I scout the MLS in real time literally every day with my custom searches looking for good deals. If I had unlimited access to funding I could do a dozen deals a month easy (for both buy and hold & rehab acquisitions) but as anyone knows it is not that easy.
So far I have three accepted deals and two of them are closing here in a few weeks. The third is a Short Sale so there is a timeline there but I am hoping to set up a pipeline of deals now (many short sales under contract) locked in at the (lower) winter prices for me to work with in the summer. I have already witnessed prices bouncing a little from the winter doldrums and it is only February!
One of the properties purchased I will be putting into my IRA. This is an exciting strategy that will yield tremendous tax free returns (as soon as I get it rented).
Hopefully this post will serve as inspiration for those out there just sitting and waiting or stuck with analysis paralysis. Get out there and write some offers if you want some deals!!
Are you buying these property to buy and hold? Most MLS properties are deal breakers because of the price. What type of properties are searching for on the MLS?
That is amazing! We have 3 houses under contract right now :)
Awesome and thanks for sharing your success story!
I am in the Western Suburbs too. In fact, I have a property in N Aurora.
I am a full time real estate investor and I am a private lender as well.
I update BP every week what happens to both of these businesses. Below are the links:
Hope you'll learn a ton from these forum threads and will help you become even more successful!
@James Ihssen That's great news, Congrats! I'm a rehabber in the Arlington Heights area, let me know if you get anything under contract around me. Keep it up!
@Tuan Le Thank you! Buy and Hold is one of my strategies but I also rehab and resell as well. I am a Huge believer in Buy and Hold for long term wealth but also need short term cash flow so I do both. Regarding the MLS, I do agree that a high percentage of the properties are not ideal for a real estate investor. There are needles amongst the haystack though. That is where you have to be diligent and sometimes persistent. The mls is not my only strategy for acquisition though. I enjoy buying at the courthouse steps, more risk but more reward. More research but that is where my passion lies so I enjoy doing it.
I often track CLSD listings in the mls and say wow I would have bought that for that price and the realization I came to is that you have to make offers and get out there and get going otherwise you will never even put yourself into the situation where the opportunity arises to get that fantastic deal.
@Elizabeth Colegrove That is awesome! It feels good to be on the path to meeting my real estate goals for this year. I bet you know what that feels like!!
@Wendell De Guzman Thank you for the links to your forums. I will check them out. Good luck with your properties!
Congrats on your success so far! Quick question - how did you purchase a property using your IRA?
@Roman Pak Thank you Sir!! I will do that!
@Justin Howe Using my IRA to purchase property was a decision I made after much thought and planning. Basically, I transferred my 401k to a custodian, in this case Equity Trust (i have no affiliation, just trying to help folks) and via them directed the purchase of the property via letter of direction similar to a Land Trust type of Transaction. I negotiated the deal (this was an out of state purchase) and directed my custodian to purchase the property. All rents go directly back into my Roth IRA Account Tax Free!!!
The house I am purchasing (closing next week, just received closing docs today) will rent for 900 a month once fixed up (needs general cosmetic work and a good cleaning) and my purchase price is 21,500!! It is a 1100sf brick ranch with 3br and 1ba on 1/2 acre.
My Illinois Real Estate I hold outside of my IRA but when I can achieve returns like that plus tax free on top of that it is like triple icing on the cake! My IRA Account goes up by $10,800 a year (12x900) and the property is appreciating (it will sell for much more than what I paid in 20 years) And it will all be tax free! Once I have my targeted number of properties generating cash flow into my IRA it will grow quite quickly and almost exponentially.
Regarding the actual specifics of the transaction, all expenses paid and income received have to go through the custodian account. Another huge plus is that the property can be titled with privacy in mind, keeping your personal name off the records.
Hopefully this answered your question!
@James Ihssen Great going on your recent 3 property acquisitions:)
Few questions on Investing through IRA.
Did you set up a check book IRA with LLC or just using the custodian to handle
all transactions ( e.g. a rapier bill from plumber for $15 also have to be paid by the
custodian - and typically they charge some fee for each transaction).
What state/city did you get a deal under 22K - if you don't mind to share!
Originally posted by @James Ihssen : Tjam you for your post! Can you break down for us newbies?
"One of the properties purchased I will be putting into my IRA. This is an exciting strategy that will yield tremendous tax free returns (as soon as I get it rented)."
@Gautam S. The best way for me to explain it is my IRA account, which has a balance, has a facility where I can issue checks either on a one time or recurring basis to cover expenses for the property. All utilities for the property (that are turned on while it gets rehabbed) will go in the name of the trust. It is kind of like bill pay from your checking account.
There are no fees for doing this with my account. I did some good diligence and called multiple custodian companies, both on the national and regional level and compared their services and fees. Some companies do charge fees for this.
This property in question is located in Berrien County Michigan. I am familiar enough with that area to be comfortable investing 'out of state'. To be fair it is only a few hours away. I bought my first house out there in 2009 for 25k, put under 10k into it, and have had a quality tenant in there paying me steadily $900 per month for years now. That place has paid for it self by now at least once and going on twice. This house is also on five acres, and less than one mile from Lake Michigan. That place was a score but I bought that when the market was at the very or near bottom of the cycle. I would have loved to bought 10 back then!!
@Gautam S. I do not mind to share at all! The way I see it, there is plenty of property for everybody and I am an open book! I love talking about real estate and spreading my knowledge! My first purchase was a single family house in Seattle in 1999!! I feel lucky to have witnessed the rapid rise and rapid fall of the market. There is NOTHING Like experience to gain knowledge and wisdom. This cannot be found in a book!
@Pyrrha Rivers There is a ton of info out there on the subject! I would search these forums for REAL ESTATE in your IRA or google the same to get some good overview information. If you have any specific questions please feel free to ask! Good Luck!!
@James Ihssen I've read you can't deduct anything with having a rental in your IRA. Are you doing this with a percentage of rentals just to have the tax free account building up? Do you plan on selling the properties when you retire?
@Pyrrha Rivers Glad I could help!! I have read many forums and posts and podcasts here that I have taken notes on in the past. The fact that you took notes makes me feel like I am spreading valuable information. Thank you for saying that!
@David Holland You are correct in your statement but it is not a negative so much as it is a fact. What I mean is you cannot deduct any expenses (off an IRA held property) off your personal returns but that would only be a factor if you had income to write off against that expense. So, in this case where the property is held in an IRA, the income will be sheltered tax free and while the expenses will come out of the IRA account directly, you cannot write those off because they are not generating 'taxable income'. Does that make sense? Hopefully I explained that sufficiently.
Most of my rentals are not held in this manner, but I do love the tax free benefits (rent getting deposited right into your IRA tax free) and will continue to use this as one arm of my multi-faceted strategy in real estate. As the rents snowball in my IRA eventually I will have the buying power for more properties and while there is work involved, I think of it as working for my retirement. I plan on building my IRA portfolio right along side with my existing growing portfolio of rentals.
I do plan to sell at some point, right now 20 years plus out. If the market ever jumps like it did in the late 2000's then I will sell everything I own!! In this specific case the proceeds of the sale would go right into my IRA tax free!!!
Unless my strategy changes drastically (maybe a focus towards commercial only as I get older) then I plan on holding all my rental properties for the long term. I have dreamed of selling everything and buying a commercial strip center (I have managed them in the past) or even a NNN walgreens. Then I can travel the world someday and just get a rental check direct deposited into my account every month by a AAA+ rated commercial tenant.
@James Ihssen Congratulations on your successful start of the year!
Way to go James......fantastic start and I bet there will be a better finish to 2015!! Valuable information being shared by you and the experiences associated with each project. Keep the momentum going.......
Update: I figured I would update everyone on the status of everything that has been going on so far!!
First of all, to everybody out there just learning and waiting, if you have the means to do a deal, go out and find someone with experience and get it done!! Opportunities are lost and wealth will never be made if you don't start taking action ie.. writing offers on properties....
I feel like it is all starting to snow ball for me. In a FANTASTIC WAY!!! I listed my rehab project in North Aurora at the top of the market and it sold in One Day!!!
The place turned out fantastic though and I put a lot of attention to detail into it!
I am working on two flips right now. One is a multifamily building with 10 units on 3 acres and the other will be my primary residence.
My buy and hold leg of my real estate investing strategy has not progressed as much as I would like. I am working on financing, not necessarily acquisition but for the stabilization of my portfolio. I have established relationships with three of the main "hedge fund SF buyer turned landlord lender" companies and intend to work with them as I build my portfolio. I also have a small list of hopeful portfolio lenders in my area but have yet to reach out to them. I am getting there I just need to line up some more hard money for buy and hold properties.
There are still decent deals to be had out there, even on the mls, especially for buy and hold properties. I go and look at properties at least two to three times a week, and would buy a lot more if I could. Some day when the market peaks I will be saying the exact opposite (think 20 years down the road when the bad taste of this recession has left everyone's mouth). I remember how it was in the 2000s and when I see the market get like that again I will begin to sell!!
Good luck everybody!!! Get out there and do some deals!!!
Are you a rehabber or a Realtor?
In my amateur profession, neither make much dough. Sure they make dough but not the good stuff.
I have an idea. On the next deal you get. See if it's lower than your trustee sale buyers. You know the ones at the courthouse buying all cash. Haven't seen the inside etc. put his name on the contract (in escrow) and take a check outside of escrow. See how much you'll make in a minute vs fixing, listing etc.
This model is pretty recession proof as the pieces that make up the puzzle are not based on economic trends, rather the laziness of people. Which I think will continue into perpetuity.
I am a Realtor. A Real Estate Managing Broker to be exact. I manage a boutique brokerage firm downtown where I indirectly helped a few investors build a portfolio of over 200 rental units. My personal real estate investing is mostly not in the City but in the suburbs and even outside the Chicago MSA.
I also am a Rehabber. I buy properties to fix and then resell. It is fun and rewarding for me.
I am also a Long Term Investor. I feel this is the key to building long term wealth for my family and my Legacy.
You are correct in saying that neither "make the good stuff" as far as "making dough" is concerned but the key is to use the knowledge of your profession to adopt a strategy to build long term wealth. Every Smart Realtor should be an Investor as well!!
For example, you could develop a strategy that dictated every third flip would be a buy and hold deal. This would be a great way to get going.
I actually prefer the sheriff sales for the best deals. Buying on the courthouse steps is risky, but has its rewards as well. You just have to be diligent.
You simply cannot find the same deals in the mls as you can get at the courthouse. The pool of buyers is miniscule compared to retail (the mls). But you have to learn the business and know what you are doing! Definitely Buyer Beware!!!!!
Putting RE into a retirement account has its positives and negatives. You lose all the writeoffs. You cannot write of taxes, insurance, maintenance, etc. You lose the ability to depreciate it as well. For this reason, many investors choose not to put RE into their IRA or 401K. I will use mine as a last resort if I need funding and cannot find private money but ideally, I prefer to hold it outside my 401K for the very reasons already mentioned.
@James Ihssen thanks for sharing your success. I am also a licensed Realtor in Washington DC and Maryland. I also search the MLS daily for deals. Can you tell me some details about your system? What keywords are you using? How far below asking price are you going? How many offers do you make weekly? etc. Thanks in advance.
Regarding the tax write offs and holding property in your IRA, you are correct that you cannot write off any expenses... but the income is 100% tax shielded. So you will never pay any taxes on the income. If you can manage the expenses and maximize the income this is the way to go.
I also like the idea of lending my self money from my IRA also. I am planning on doing a few flips in my IRA to get my account balance bigger and bigger then I will have more options.
I also own property outside of my IRA, in fact this was the first time I have purchased Real Estate with my IRA @John Thedford
@Walter Davis I really do not have such a system planned out in such a clear and cut fashion. I often feel more like a deal hunter, or 'rain maker' as they used to say. I have searches in the mls based on REOs, Short Sales, in and around my target areas. I also have searches for any property under certain price thresholds. I also use courthouse lis pendens lists and buy at the sheriff sales when I can.
I also have many 'rubber band map' based searches that get my everything in the target area. This allows me to become a market expert in a specific area by knowing Everything that is going on in that area. I love telling people 'oh yea that place just came on the market for xxxx and it sold for xxxx and so on and so forth. It is an extremely effective way to demonstrate your knowledge of the local market!
Sometimes you just have to be in the right place at the right time with the mls. I have gotten lucky with deals and also been beat out on many many many multiple offer situations where the highest and best has been asked for.
I think the key is consistency. You cannot beat yourself up if you cannot get a place but you have to keep writing offers and trying. There is no tried and true rule for me regarding offer amounts. It really is deal specific. I always feel out the listing agent and determine if there is significant activity, etc etc. Also the potential profit on the deal will determine my bid amount. It is definitely not like it used to be a few years ago, there is much more demand for my bread and butter rental properties and fix and flips....
If I had access to more capital I would be writing 5 to 10 offers per week but for now I am limited in my resources and that is what is keeping me from writing more offers. I always say I need to find five to ten motivated and savvy investors that I could consistently find deals for. I love negotiating deals and the 'art of the deal'!!
@Mike Osterman There will always be deals to be had due to the foreclosure process the key is just sifting through the deals to find the ones with equity on the table!! Good Luck!!
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