3 Creative Real Estate Strategies for Self-Directed IRAs Under $50,000

By J.P. Dahdah, Founder & CEO of Vantage IRA

Investing in real estate using a Self-Directed IRA (SDIRA) can be a smart tax-efficient way to build wealth for your retirement. Some people mistakenly think you need a lot of money to do it, but even if you have less than $50,000 in retirement savings, there are clever ways to combine your passion for real estate with effective investment strategies that can help you feel better about the direction of your financial future.  

Here are three creative strategies many of our clients use on their path toward financial freedom. 

1. Team Up with Others

If your IRA savings aren’t enough money to buy an investment property on its own, you can join forces with other people. Your SDIRA can invest in rental property with other investors, like friends or extended family (aka Financial Partners). For example, if a property costs $200,000, your SDIRA could put in $50,000, and others can chip in the rest. Your SDIRA owns a share of the property and would get its proportionate part of the profits, like rental income and any increase in the property’s value.

Why It’s Great:

• SDIRA can invest in higher-priced properties.

• SDIRA shares the investment risk with others.

• SDIRA can increase diversification.

Example: Your SDIRA and three other investors buy rental property together. Your SDIRA owns 25%, so it gets 25% of the rent and any profit when the property is sold.

2. Be the Lender

Instead of buying a property, your SDIRA can lend money to someone who is. This is commonly known as investing in “real estate notes.” When you do this, your SDIRA earns interest on the loan. You don’t have to worry about being a landlord, and you can start with smaller amounts, like $10,000 or $20,000.

Why It’s Great:

• No property to manage or pay someone to manage.

• SDIRA gets a fixed income from interest.

• SDIRA is the “lender” on the promissory note, giving you total control over setting the terms of the note to accomplish your investment objectives. 

Example: Your SDIRA lends $40,000 to someone fixing up a house. They agree to pay 10% interest, so after a year, your account earns $4,000 in interest tax-free and the return of the principal amount.

3. Buy Tax Liens or Trust Deeds

When people don’t pay their property taxes, the government may sell tax liens or trust deeds. Your SDIRA can buy these for a low price. If the owner pays back what they owe, your SDIRA earns interest. If they don’t, your SDIRA might even get the property.

Why It’s Great:

• It’s a cheap way to start investing in real estate-based strategies.

• SDIRA can make money from interest or even own a property.

• Low-risk investment strategy backed by tangible real estate assets. 

Example: Your SDIRA buys a tax lien for $5,000 at a 12% interest rate. After a year, the owner pays back the lien, and your SDIRA account makes $600 in interest.

Open a Vantage Self-Directed IRA by visiting www.VantageIRAs.com.