You can buy good paper for 18% - you just need to find a motivated seller, just like buying real property.
I always try to structure the deal where the WORST case scenario is that I get paid off with the monthly payments. If I buy right (ITV of 60% or less), the BEST case scenario is that they stop making payments.
Send it to me, I can find lots of things to do with it! :)
Will are you partnering with investors on smaller amounts like that? (50k) I remember you were seeking investors for a deal awhile back but the minimum amounts were in the low six-figures if I remember correctly.
Lets not derail the thread here, it is not allowed anyways. I am happy to answer your question in a new thread or PM or email. Answering
Just something I wanted to clear up. There's a lot of talk about how it might be worth taking funds out of a qualified account (IRA 401k 403b etc) and leveraging it to purchase RE. While its true that most people expect that their taxes will be high in the future, its not as simple as pay now or pay then. First of all because qualified funds are tax exempt you have more funds to use, like someone mentioned above $50k after tax and possible 10% early withdrawal, would really net you a little over half, depending on your individual tax situation. The idea is then to leverage those funds. Well this sounds all well and good but if you were to invest $50k from an IRA you're investing $50k with no interest and any income is still tax deferred. Compare that to taking $50k out of an IRA cutting it down to around $30k with taxes and then say 2-1 the cash at a bank to invest, this means your paying interest to someone else and any income is not tax deferred, so while you're paying down the loan with the bank, you're also paying taxes on the income your generating.
Seems to me that as long as you aren't looking to generate income, then a qualified account seems like the clear winner.
This thread concerns self-directed IRA's with a custodian and allows investment in alternative vehicles free from any early withdrawal penalties.
Since 50k doesn't really move the needle for me given my real-estate investing goals I would propose something outside the box. I realize this is a real-estate investing forum so please excuse me if this doesn't add much to the thread by proposing something non RE related. I would spend $10,000 on "reproductive matter" (for lack of a better term) from a championship show horse, spend another $10,000 on a old mare (female) that was sent out to pasture but from a championship bloodline. The in vitro would cost another $10,000 approximately. I would then spend about $10,000/year for the next two years to board and train the horse. At this point I am 50K all-in and would begin to show the horse and hope it wasn't a dud and could compete at the national level. If the horse won some national shows it could be worth in excess of $250k!!! Not a bad "investment".
This thread concerns self-directed IRA's with a custodian and allows investment in alternative vehicles free from any early withdrawal penalties.
Since 50k doesn't really move the needle for me given my real-estate investing goals I would propose something outside the box. I realize this is a real-estate investing forum so please excuse me if this doesn't add much to the thread by proposing something non RE related. I would spend $10,000 on "reproductive matter" (for lack of a better term) from a championship show horse, spend another $10,000 on a old mare (female) that was sent out to pasture but from a championship bloodline. The in vitro would cost another $10,000 approximately. I would then spend about $10,000/year for the next two years to board and train the horse. At this point I am 50K all-in and would begin to show the horse and hope it wasn't a dud and could compete at the national level. If the horse won some national shows it could be worth in excess of $250k!!! Not a bad "investment".
Your first sentence is incorrect. Self directed or not, the rules of the IRS still apply and any early withdrawal WOULD result in the 10% additional fee on top of the taxes.
As to your next scenario, I am not 100% sure if that can be done! but if so, it would be an investment into a business which would incur UBIT. Secondly, on the flip side, you could end up with a horse with little to no value. Not a very safe investment with retirement funds in my opinion. I'd rather buy into a proven franchise business and take the UBIT hits so long as the end result returns were good enough.
This thread concerns self-directed IRA's with a custodian and allows investment in alternative vehicles free from any early withdrawal penalties.
Since 50k doesn't really move the needle for me given my real-estate investing goals I would propose something outside the box. I realize this is a real-estate investing forum so please excuse me if this doesn't add much to the thread by proposing something non RE related. I would spend $10,000 on "reproductive matter" (for lack of a better term) from a championship show horse, spend another $10,000 on a old mare (female) that was sent out to pasture but from a championship bloodline. The in vitro would cost another $10,000 approximately. I would then spend about $10,000/year for the next two years to board and train the horse. At this point I am 50K all-in and would begin to show the horse and hope it wasn't a dud and could compete at the national level. If the horse won some national shows it could be worth in excess of $250k!!! Not a bad "investment".
Your first sentence is incorrect. Self directed or not, the rules of the IRS still apply and any early withdrawal WOULD result in the 10% additional fee on top of the taxes.
As to your next scenario, I am not 100% sure if that can be done! but if so, it would be an investment into a business which would incur UBIT. Secondly, on the flip side, you could end up with a horse with little to no value. Not a very safe investment with retirement funds in my opinion. I'd rather buy into a proven franchise business and take the UBIT hits so long as the end result returns were good enough.
gotcha- 10 percent penalty still applies I agree. I was just pointing out to the poster the concept of investing inside an SD-IRA; no withdrawal is required to invest as the holder can direct the custodian to make permitted investments.
Show horses are risky I agree. It would be hard to quantify the odds of success. My tolerance for risk is probably higher than most.
I have learned that sometimes a higher ROI can mean more risk. Through proper diversification your $50K SDIRA could return a double digit return with not much risk allowing you to focus on other areas of real estate.
"I am not so concerned about the return on my principle as the return of my principle." Will Rodgers
Example: I invested in a single family in Ohio. ROI was expected to be 30%, however with PM hick ups, mx issues that popped up and a vacancies my end of year ROI was drastically reduced. Not to mention a ton of emails, phone calls and time I spent towards this particular property.
I also invested w/my self directed IRA in notes. I am returned a 10% return w/an almost guarantee of funds being returned to my account. (disclaimer--nothing is 100% guaranteed). Plus side, I have no phone calls, or issues to handle to make sure my ROI is returned. I just invest and let it happen. The hardest thing I have to do is decide which deal I want to fund next as I review investment summaries for future funding.
So in conclusion... Sometimes I have learned: a lower, conservative, percentage of returned interest is better than going for the gold for a peace of mind and more importantly TIME.
You could provide a 2nd mortgage for a hard money loan or equity/split type arrangement. I'd only recommend that if you have extensive real estate investment experience and are a very hands on investor. Our fund only provides first mortgages, but we do work with borrowers in placing 2nd mortgages as well and advising them. Let me know if you'd be interested in discussing further