How to Invest and Grow your Small-Dollar Self-Directed IRA

Estimated reading time: 5 minutesLast updated on: June 18, 2021

Many people think that they don’t have enough money to get started with self-​directed retirement accounts. It’s a common misconception that keeps people from investing, even though taking the plunge sounds nice. Investors with small accounts can’t possibly see how an account with only $10k can purchase real estate

We have always believed that as long as you have the education, you have all the money you need to get started and that it is never too late or too early to start taking control of your retirement. Strategies such as partnering, options, and other real estate techniques provide the opportunity for even the smallest accounts to participate and grow. Creating a financial network will also allow you to come together with ease when making partnerships. 

Sometimes, seeing is believing because these possibilities are hard to imagine. At Quest, we see these types of small-dollar deals every day! One Quest client, Nancy Wallace-Laabs, shares her personal case study here about how she was able to use her small dollar IRA to get a 114% return on her investment, and this is only one example. This case study is an opportunity to see what others have done and, hopefully, provide some ideas for yourself on how you can grow your retirement account, too!

How I Used My Small Dollar IRA To Get A 114% Return On My Investment

By Nancy Wallace-Laabs

I was earning a measly interest rate, and even with compound interest, I was not reaching my desired levels of retirement income, and there were limits to how much money I could put away each year. Quest Trust Company offered a series: “How to Invest with your SDIRA” through their lunch and learns.  I was completely hooked that this is the information I need to start taking control and growing my retirement account and having the funds tax deferred!

I opened a Self-Directed IRA and started to look for an investment property that my SDIRA would own and generate “income” for my retirement account. Marketing was the mainstay of any real estate business and investing. My methods of marketing included direct mail, networking, driving for dollars, and referrals.

From one of my postcard mailings, I had a seller call, got the property under contract, sight unseen! I knew that the purchase price was right for the area, I was familiar with the area and knew it was in transition, I had an escape clause in the contract – called an option period, and lastly, that I had more than one exit strategy (wholesale, owner finance, or rental).

I purchased the property for $10,000. I had a partner on this deal, and we owned 50% each of property. The partner paid cash, and I paid my half with my Self-Directed IRA.  We opened and closed at a title company, and only had a small amount of paperwork to file due to using my Self-Directed IRA.

The next step was marketing the property. My exit strategy was still unknown at the time of purchase, so I put a sign in the yard that was handwritten. One side was in English, and the other side Spanish. Within 3 days, we sold property for $50,000, owner finance. The terms? 20% down – financed for 15 yrs. @ 9.5% interest.

With the terms set up, we were able to recoup our purchase price. For the next 15 years, my IRA is receiving half of the buyer’s monthly payment. For those of you who might be wondering – yes, this is only the interest and principal payment, for this case study example, I did not include what the buyer is paying for taxes and insurance.

So, how does this look for my IRA when you chart it out? Check it out:*

Principal PaidInterest PaidEarnings on $5,000 Investment
$20,000$17,592.09$37,592

There were NO tax ramifications of this deal for me. I do not have to worry about that until I take the funds my IRA is earning out as a distribution. So, my IRA is growing tax-free over the next 15 years! In the meantime, I can continue to grow this IRA via other real estate investments, which I have continued to do. 

The point is that I am taking control of my retirement account, and growing it tax deferred, until I am ready to take out the funds. If I had just “flipped” this property for $50,000, I would have taken a huge hit on the earnings/proceeds, and I would have only made $20,000. By owner financing, I was able to capitalize on my initial investment.

Nancy’s story is just one of many. The creative strategies real estate investors have been utilizing for years can usually be done in SDIRAs too, and they make investing possible for those with small amounts. Quest offers classes about how to make big bucks in small accounts, and can always answer questions about how you can get started. To learn more about how to get started investing with a small dollar self-directed IRA, schedule a 1-on-1 consultation with an IRA Specialist by clicking HERE.

To find out more about Nancy Wallace-Laabs, or to get a copy of Nancy’s E-Book, click this link:  https://bit.ly/30eEDR5 or email her at www.nancywallacelaabs.com. *Owner Finance Terms set up for 15 years (180 months) the numbers above only reflect my 50% stake in the property. Based on 180 months my monthly payment equals $208.84 per month.

DISCLAIMER: The purpose of this article is to provide education and is intended for this use only. Quest Trust Company does not in any way endorse or recommend individuals, products or services that may be discussed in this article and is not responsible for any communication between clients and guest speakers. As always, Quest Trust Company does not render tax, legal, accounting, investment, or other professional advice. If tax, legal, accounting, investment, or other similar expert assistance is required, the services of a competent professional should be sought.

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