Many people have questions about self-directed IRA passive income. Most of us would prefer our investments to be such that little work was required on our part, but the money kept flowing. Here’s a look at how it can be achieved.
Stocks, bonds, mutual funds, and CDs are the traditional IRA portfolio options. The problem today is that most of these investments grow slowly, without constant trading and without making the right trades. Yields on certificates of deposit barely keep pace with inflation.
One of the reasons those traditional options have been and continue to be popular is that you can usually see at least a little steady growth over the long term. Holding a position requires little effort on anyone’s part.
There is another option for self-directed IRA passive income. That choice is real estate. Real estate can help you build your account balance faster, if you make the right deals. Now, of course, there is a bit of work involved, at least in the beginning, but any source of passive income requires a bit of upfront work.
Let’s say while reading the classifieds, you find a house that needs a little work. After talking to the landlord, she finds out that she is getting old, has health problems, and plans to move in with his daughter. She wants to move as fast as possible, because she can’t even handle simple maintenance, like mowing the lawn.
He agrees to sell the property to her for $28,000. You direct your IRA custodian to make the purchase. Additional funds are needed for repairs and remodeling, say $7,500. Those costs must also come out of the IRA.
While the updates are completed, you can rent the property for one year. $10,000 in collected rent becomes part of your self-directed IRA passive income.
The couple that was renting the house likes the location and the renovations, so they inquire about buying the house. They agree to pay $135,000, the value of the house in its current condition.
After expenses, he made a profit of $93,500. It sounds incredible? It’s true. This is a real life example of a deal done by an Equity Trust client in DC.
You’ll find that most of your self-directed IRA passive income comes from interest and tax advantages. If the client had done the real estate deal using his own personal funds, his total profit would have been about $20,000 less, due to capital gains taxes.
Albert Einstein said: “The most powerful force on earth is compound interest.” Compound interest is the key to self-directed IRA passive income. You earn interest on your contributions, your earnings, and you earn interest on that interest.
If you are new to real estate investing, there are some experienced investors who are willing to help you find the right deal. If you can complete just a few offers like the one above, you’ll have all the self-directed IRA passive income you could ever want. And you can have the retirement you want…maybe sooner than you think.