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I Doubled My Retirement Fund with One Bank REO

by Edward Sullivan, REIA Cleveland   
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I found a 4-bedroom bank REO (real estate owned), with a full basement, 2 baths, 2-car attached garage, central air, a utility room attached to the garage with outside access and a heated 10 x 10 vestibule. I offered $52,000 in "as is" condition. I paid for an appraisal which came back at $105,000 "as is."

I hired my son to clean, paint, etc. I added new carpeting throughout, a new water tank, new driveway, minor added repairs--bringing my total investment of $65,000

I paid cash using funds from my self-directed IRA. We all know what has happened to the market recently, however, I placed a tenant in the home on a two-year lease option. I received, $5,000 up front from the tenant, plus $999/month for 2 years; his buyout is $99,000. This is a win-win all the way.

I received 24 x $999 = $23,976 + $5,000 up front + $99,000 buy out for a total of $127,976 - $65,000 out of pocket for a profit of $62,976 My IRA receives the entire $127,976 to reinvest.

The tenant gets a home for $99,000 + $5,000 up front payment for a total of $104,000, which is still below the "as is" appraised value. The after repairs value is $129,000 leaving the tenant with an equity position of $25,000.

What of his two years at $999? This is what he was paying for rent elsewhere before he and I met.

I am ready to do it again...

 
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