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IRA Real Estate Investing By The Numbers

In my last Blog, I stated that having your IRA invest in Real Estate should give you a far greater ROI than Stocks, Bonds, Gold and other types of investments.  No I will to provide you with an example that supports my statement.

Currently, there is an Overland Park Fourplex that could sell for $220,000. Since loans to self directed IRAs are unsecured by you (yes, you are not personally liable to the lender for this loan and IRAs cannot be used to secure a loan), your down payment should be $88,000 or 40% on multi-family properties (single family homes will likely require 30 – 35% down.)

The property has four (4) two bedrooms and one bathroom units, and generates monthly rental income of $750 each. Here’s how the numbers work:


Property Value: $220,000  

Down Payment: $88,000

Loan: $132,000 at 7% interest

Rental Income (gross): $36,000 yr.

Vacancy Loss (7.5%): $2,700 yr.

Rental Income (net of vacancy: $33,300 yr.

Property Management Fee (10%): $3,330 yr.

Maintenance/Reserve fund: $3,600 yr.

Real Estate Taxes and Insurance: $6,500


Net Operating Income for year 1: $19,870 yr.


Mortgage Expense (principal and interest): $10,538 yr.


Total Annual Cash Flow: $9,332    First Year ROI: $10.6% (not counting appreciation or equity)


Assuming a lower than a historical average appreciation of 2% a year (that includes both the Real Estate bubble and the more recent burst) over a ten year period, your equity in the property will have grown to $83,000 (that alone almost doubles your investment.)  Add to that the $113,000 you received in total cash flow over the same period for a total ROI of $196,000. That’s a 222% return. Try getting that in the stock market….


Sean Roque

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