**Seeking advice** How to double SD IRA in 12 mo or less...?

Question

Hello everyone,

I have a goal to double my SD IRA Acct Balance in 12 months or less.  Problem is that I have just over $30k available...

I am still learning the creative investing part of Real Estate and I figure that I dont want to tie that up in a rental, its likely too low for a flip, & wholesaling isnt much of an option due to being overseas & having no marketing experience.

So I wanted to throw this out there and get your feedback & suggestions....

Options that I came up with include:

Lending

Tax Liens

Obtaining a Non-Recourse loan to do a rehab/flip

Partnering on a rehab/flip (not preferred unless I know the person I am partnering with)

Brian Gibbons · Answer

@Bryan C.

I would lend on a minor rehab, like fixing an outdated kitchen, $10K to $20K, quick resell, make 10% in 2 months, do it 5 times a year.

Either you or a REI goes to expired listings, offer to buy house with dated kitchen or bathrooms,

You give a note for equity, use your IRA for rehab

Fix and resell

You get your IRA money in 2 months plus 10%.

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Go to REIA meetings and market for rehabbers

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Go to Probate attorneys and offer to update houses then resell

Jeff Rabinowitz · Answer

If you truly wish to double your IRA with a real estate backed vehicle in a year you could use options. I have heard of people putting an option on a property for $100 and selling the option for $5K to another investor in weeks. Even if you were to pay $1K for the option and sold that option for $5K you would be making a stellar return. Execute a similar strategy 6 or 7 times in a year and you would double your $30K IRA balance.      Another very high yield strategy is to buy partial real estate notes then resell another partial (that you create from the partial you purchased) for nearly all of the price you paid while retaining a portion of the note (perhaps a balloon payment). This type of strategy could return much more than double your balance. It would probably take more than a few years for the balloons to start paying off but when they do you would receive a massive income stream for very little cost. This is a sophisticated strategy. You will need to invest significant time to understand notes and how to buy partials to implement it but it may be worth doing so.

These are advanced strategies which should not be undertaken without a thorough understanding of them. I have not yet used either strategy but know of people who have and have read many credible examples of how these strategies were used.

Bryan C. · Answer

I agree dmitriy

Dmitriy Fomichenko · Answer

@Kirk Chisholm

I don't have intention to argue about this, all I'm saying that in my opinion, depending on the situation, 1-2 flips per year could be looked at as an active business by the IRS.

Kirk Chisholm · Answer

@Dmitriy Fomichenko

thanks for the tip on the name. I didn't notice the box.

In regards to your last statement

That is a misleading answer. IRS makes determinations on a lot of things, but there are standards that apply even in the grey areas.

I would love to argue a case against you if you were trying to prove that flipping one wholesale property constituted an active business.

While the IRS could rule on anything they wish, I'm very confident that the 1-2 properties I mentioned is below the threshold that would be considered an "active  business".

Dmitriy Fomichenko · Answer

Kirk, neither I nor you make this determination. The IRS does.

For example: if someone has an IRA that does 1-2 flips per year (with original intention to flip those properties), and that is the only investment activity of this IRA - the IRS may determine this to be an active business. I would not say to someone: "just do couple flips per year and you will not be subject to UBIT tax" because there is a good chance that this might not be the case.

Dmitriy Fomichenko · Answer

@Kirk Chisholm

if you wish to tag someone you need to start typing person's name immediately after @ and then look below the comments box for that person's name to appear. Then you must click on it to select it, that is how someone gets tagged and will be notified of the fact (otherwise it's just a text).

Kirk Chisholm · Answer

@Dmitriy Fomichenko

Correct. Hence my reference to getting tax advice if using more than 1-2.

However you made reference to 1-2 flips in a 12 month period being an active business. I was wonder how you made that assumption.

Dmitriy Fomichenko · Answer

Kirk, I cannot tell you exactly how many flips constitute a business. There is no clear test as to how many house flipping transactions you must engage in a given year in order to trigger the UBIT tax.  In general, the IRS has a number of factors it will examine to determine this. Firstly, the IRS will examine the frequency of the transactions - how many flipping transactions are done in a year.  Secondly, the IRS will examine the intent of the person - was the person intending to engage in an active trade or business.  Thirdly, the IRS will also look at the scope of other activities of the tax-exempt entity to determine whether the activity is part of a business activity or an investment.

Bryan C. · Answer

I like the dialogue so far....keep it going.  Thanks for the input.

Here is more info:  I am military stationed overseas so that limits me from meeting a local REI group & makes wholesaling very difficult.

Seeking advice How to double SD IRA in 12 mo or less...?

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