Archive for the ‘Real Estate Investing’ Category

IRA Real Estate Investing By The Numbers

Friday, April 20th, 2012

In my last Blog, I stated that having your IRA invest in Real Estate should give you a far greater ROI than Stocks, Bonds, Gold and other types of investments.  No I will to provide you with an example that supports my statement.

Currently, there is an Overland Park Fourplex that could sell for $220,000. Since loans to self directed IRAs are unsecured by you (yes, you are not personally liable to the lender for this loan and IRAs cannot be used to secure a loan), your down payment should be $88,000 or 40% on multi-family properties (single family homes will likely require 30 – 35% down.)

The property has four (4) two bedrooms and one bathroom units, and generates monthly rental income of $750 each. Here’s how the numbers work:

 

Property Value: $220,000  

Down Payment: $88,000

Loan: $132,000 at 7% interest

Rental Income (gross): $36,000 yr.

Vacancy Loss (7.5%): $2,700 yr.

Rental Income (net of vacancy: $33,300 yr.

Property Management Fee (10%): $3,330 yr.

Maintenance/Reserve fund: $3,600 yr.

Real Estate Taxes and Insurance: $6,500

 

Net Operating Income for year 1: $19,870 yr.

 

Mortgage Expense (principal and interest): $10,538 yr.

 

Total Annual Cash Flow: $9,332    First Year ROI: $10.6% (not counting appreciation or equity)

 

Assuming a lower than a historical average appreciation of 2% a year (that includes both the Real Estate bubble and the more recent burst) over a ten year period, your equity in the property will have grown to $83,000 (that alone almost doubles your investment.)  Add to that the $113,000 you received in total cash flow over the same period for a total ROI of $196,000. That’s a 222% return. Try getting that in the stock market….

IRA Investment In Real Estate

Tuesday, April 17th, 2012

Contrary to popular belief, IRA investment in Real Estate property is not only allowed but also a great way to improve your IRA’s ROI. Just as long as the IRA buys the property as an investment, and not as your residence.

Your current investment brokerage firm may not be able to assist you with this type of investment, but you can do it by simply opening a Self Directed IRA with the help of a knowledgeable Custodian that specializes in this type of IRA.

With the price of Real Estate being as low as it currently is, and interest rates being the lowest in recent history; your potential return on investment should be far greater than what you can get from stocks, bonds or precious metals.

So what do you need to maximize the earnings potential of your IRA?

1)    Contact me or a Real Estate Broker that specializes in investment property and that is well acquainted with the process.

2)    Secure the services of a reputable Custodian and open a Self Directed IRA that allows you to invest in Real Estate.

For additional information on how to get a better return from your IRA investments, I can be reached at sean@seanroque.com or by phone at 913-706-3971