Today’s REI Classroom Lesson

Today, H. Quincy Long discusses various strategies that you can utilize if you’re looking to invest your IRA with $10k or less.

REI Classroom Summary

From joint ventures to options, there are ways to invest with your IRA without having a huge budget.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the flipnerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
H. Quincy: Hi. My name is H. Quincy Long. I’m president and founder of Quest IRA, Inc. and we provide self-directed IRAs. Today on the REI Classroom we’re going to be talking about how to invest your IRA for $10,000 or less, which is a topic that we get a lot of questions on here at Quest IRA.
Mike: This REI Classroom real estate lesson is sponsored by theinvestormachine.com, FlipNerd’s private investor coaching program and your blueprint to investing success.
H. Quincy: One way to do that is by doing wholesaling. That is to say, you simply get a contract not in your name but rather in the name of your IRA or other account and then you assign that contract to another person for a fee. I personally am not a real big fan of wholesaling in your IRA because it looks more like an excess contribution and has some other issues with it. But, some people do do that.
The second thing you can do to do this is to get options. When you have an option on a piece of property, you don’t own that piece of property. You merely have a right to acquire it under certain terms and conditions for a certain amount of time. Options are very flexible. If you have an option you can exercise that option if you want to, but you could also assign it to a third party for a fee provided it’s an assignable option. Or, you can release the option to the current owner of the property in exchange for a cancellation fee. I can give lots of examples, but in the short time we have I think we’re going to have to just leave it to your imagination there.
The next thing you can do is buy property subject to debt. Of course, if you’re going to a commercial lender, and there are some commercial lenders that will loan money to IRAs, you’re going to have to put a substantial down payment on the property. However, if you think about it, there’s always seller financing. Sometimes there’s zero money down, so that’s an option. Additionally, there are financial friends. If they know you’re a professional at making investments, they may very well be willing to finance you with little or nothing down.
The next thing you can do is joint ventures. This is probably my favorite technique of all the ones I’m going to mention today, is joint venturing. When I say that, you can joint venture in a lot of different ways. One client we had, had an opportunity to loan $55,000 to somebody with 2 points and 12% interest. What he did is he went ahead and put $500 into the deal and he kept the 2 points. He had his friends chip in the rest of the $55,000. So $54,500 was funded by other people who were just pleased as heck to get 12% interest. He put in his $500 which collected of course the 12% interest, plus he got the 2 points or $1100 up front. That’s just one example.
Another thing you can do is you can do what I like to say is to sell the difference in yield that you can get a note at and what you can sell it for. Let me give you a perfect example of this. I had a note that I bought and the note was $21,500. I bought the note for $19,000. The note had a surface interest rate of 7.75%, but my yield on the note was 12.2925% because of the discount that I bought the note at.
So what I did then is I sold the note at a 9% yield. I could sell that any number of ways, but I sold the whole note and made a profit equal to the difference between the 12.2925% yield and a yield of 9%. I also offered the opportunity to buy part of the note at a yield of 9% and I would keep the differential. Or, I also did not but could have offered to sell the first few payments to raise the money necessary to purchase the note and kept the back end of the note. That’s selling a partial. Those are opportunities.
Another deal that I did was to do a wrap around note where I was able to find the financing for a property in exchange for the ability to buy half of the wrap around second note on the property. You can joint venture in very creative ways including just property. While somebody else puts up the property you put up the deal, and you can split it unequally as long as you’re not a disqualified person.
Those are just some of the many ways that you can invest with $10,000 or less. I encourage you to come to the Quest IRA, Inc. website at questIRA.com and learn more. I look forward to seeing you in another broadcast of the REI Classroom. Thank you.
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H. Quincy Long
H. Quincy Long is the President and founder of Quest IRA, Inc., the premier provider of self-directed IRAs in the country. Mr. Long is a Texas attorney with experience in real estate as well as other areas, and is widely considered to be one of the country's foremost experts on self-directed IRAs and other plans. He is a sought after speaker on the topic of self-directed IRAs nationwide. He has been a closing attorney for a national title company, and has served on the Board of Directors of one of the largest real estate clubs in the nation. As an active real estate investor himself, he understands the needs of his clients.