SELF-DIRECTED IRA WITH CHECKBOOK CONTROL – an example of how it works

An ICO account is a great way to team up with a partner or your spouse to invest in real estate and build both of your retirement accounts.

elderly_couple_photo

Meet George and Betty.  They each have an IRA account.

  • George’s account value = $250K (Roth IRA)
  • Betty’s account value = $125K (Traditional IRA)
  • Total IRA = $375K

This husband and wife duo has found an investment property that is worth $1 million.  If they fix it up, along with appreciation, they estimate that in 3 years it will be worth $2 million.

Their objective is to purchase the property with their IRA monies and have the capital gains go back into their IRA accounts.

THE PROCESS

George and Betty will send us their ICO account applications.  We set-up an IRA for George, an IRA for Betty, one LLC and help them rollover their IRA accounts with their current custodian into the new self-directed account.

George & Betty direct us to transfer money from the IRA to LLC in the form of purchasing membership units.

George & Betty’s combined IRA accounts do not have enough money to make the purchase on their own so the LLC secures debt financing of $625,000 from a lender.

The LLC purchases the $1 million property with its own money plus the lender monies.

The LLC rents the property to generate cash flow to make the required payments to the bank for the loan.

Property appreciates to $2 million over 3 years.

LLC sells the property for $2 million, enabling the loan to be paid back to the bank and allowing the LLC to receive $1.34 million net from the sale.¹ The LLC will have to pay taxes on gains related to debt financed portion of the sale, but the remaining profit can go back into George and Betty’s IRAs TAX DEFERRED!

SUMMATION WITH RESULTS

George and Betty used money from their IRAs, each owned by the LLC.

The bank financed some of their $1 million purchase.

The property sold for $2 million and after the loan was paid back to the bank, George and Betty had $1.3M to put back into their IRA accounts. That’s return of almost 360% in approximately 3 years.

The ICO account offers a great opportunity for husbands and wives or business partners to build their retirement nest egg by investing in non-traditional assets like real estate.

Visit our website to learn more about the self-directed world – view brochures, videos and more.  While on our website you can chat with one of our IRA Specialists, or you can give me a call directly.  I would love to chat with you about your investment goals and find out if our ICO account is the best fit for your situation.  Please also check out Accuplan and me on your favorite social media site(s).  We are continuously posting educational information about the self-directed world.

Author:

Jaclyn M. Grella

800-454-2649 x1119

[email protected]

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¹Based upon a $675K note, 30 years, 7% interest, paid for a period of 36 months. No fees or other closing costs included. Rental payments received not included in distributions. Any applicable UBIT not factored as a result of using debt financing. These figures and results are for illustration purposes only. Actual results experienced may vary depending on your circumstances.


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