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I Earned $88,000 Tax Free for My Retirement Fund

by Karen Woyak   

Last Fall, I started hearing about using your IRA for real estate investing. In the past, I haven't invested much in retirement accounts because I didn't think there was much flexibility to invest my cash. Once I heard about the possibilities with a Roth IRA and real estate, I knew I had to try it.

Through Entrust Midwest, I opened a Roth IRA self-directed account with a $3,000 deposit. I had to use post tax dollars to open the account, but with a Roth, all the earning or gains are tax free at 59 1/2.

Now I had to find a property to assign or option, since I didn't have much money in the account. I found the property on my way to the grocery store on a Saturday afternoon by following some "Estate Sale" signs.

I moved to a new neighborhood a year ago, and there has been a house that I have had my eye on since day one. It was a small cottage on a large lot with a gravel driveway and two John Deere tractors in the back yard and a lot of deferred maintenance.

It's a neighborhood of $500,000 to $1,000,000+ houses built in the 1950s, so this one was out of place. (The tractors gave it away.) The estate sale told me there might be a great opportunity.

After entering the sale, I took one of the friends of the family on the side to ask about the availability of the property. He told me that they were asking $275,000, and they already had a written offer. I told him that I could probably go up to $280,000, and he contacted to the estate attorney immediately to let her know my interest.

After a few frustrating weeks of trying to get it in writing, I got the signed purchase agreement between the estate and Entrust Midwest fbo KW "and/or assigns" for $282,000. Entrust Midwest issued an earnest money check in the amount of $2,820 for me. Now I had to find my buyer.

I make a point of knowing my neighborhood, so I knocked on every door of any house that had been rehabbed, sold, or had builders working. I had two offers from rehabbers who had done other houses in the neighborhood.

I met them both for the first time when I knocked on their doors and asked if they wanted the property. Their offers were $50,000 and $65,000 assignment fees, but I knew I could do better if I could find someone interested in the lot.

I changed my game plan to look for builders/developers instead. I started visiting building sites and got the word out to Realtors that I was looking for someone who wanted a great lot in a great neighborhood. Two days later a Realtor brought me a builder who was looking to get into the neighborhood.

Entrust Midwest, on my behalf, assigned them my interest in the property for $98,000. The Realtor got a $10,000 finders fee, and my Roth IRA got the other $88,000 tax free! Now that's FUN!

 
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