Real Estate IRA Income Opens Doors to Meaningful Community Causes: Wayne’s Story

Montana resident Wayne has some experience with real estate investing and his wife is a real estate broker, so it made sense to him to invest his retirement account in real estate to grow his wealth. This income helps the couple support more charitable opportunities in their community.

“I started with about $160,000 roughly and invested in a triplex lodge in the Bozeman, Montana area,” Wayne says. “My rate of return was over 30 percent per year. I was able to trade that lot for a townhouse worth approximately $270,000 in the 26 months I held it.”

That townhouse provided him an income of about $1,600 a month, a little over 7-percent rate of return on the value of the asset.

After holding that asset for 26 months, he leveraged it into commercial property far from home. The investment was in Indiana.

“Why Indiana? I’m not as interested in the appreciation at my age,” Wayne explains. “I’m 65, I’m more interested in the income. And my rates of return for what I can buy in Indiana…that $160,000 that was producing nothing is now producing $4,500 a month.”

Wayne supplements his Social Security checks with the income he receives in his IRA from this investment.

“I’m able to leave my other investments set,” he says. “Right now, as you know, the stock market isn’t that great to be involved with, but there will be some opportunities down the road. But I don’t have to touch that because I’m using the money that those rental incomes are providing for me.”

The additional income enables Wayne to take on more causes he’s passionate about.

“People say, ‘Well, if you have money, that gives you the ability to do the right thing.’ And I think that going from zero income in an IRA to over $4,500 a month gives me the ability…It’s not my only retirement income, but it gives me the ability to – when people call or when we’re approached, or if there are projects that we’re interested in or causes that we want to put our efforts behind – we’ve got the financial ability to do that.”

Wayne has been successful at creating this additional income by flipping the traditional wealth-building model on its head.

“I think it’s really interesting coming from a traditional financial services background,” he says. “The whole model for investing for retirement was that you would have 70 percent in stocks and 30 percent in bonds until you reached a certain age, and then you started to flop that over to where maybe when you retire at 70, it’s 30 percent stocks and 70 percent bonds. It’s interesting to me that nobody in that ‘traditional’ form of investing has ever talked about real estate or what you might be able to do with that.”

“Everybody knows that we’re not building any more land, you’ve heard that a million times, but yet nobody has a model (other than maybe a mutual fund that invests in real estate). There isn’t really anything out there other than [self-directed real estate investing] that I’ve found that works as well as this does.”

Real estate is an asset class that’s accessible to nearly any investor, Wayne adds.

“Yes, my wife is a real estate broker,” he acknowledges, “but everybody knows a real estate agent. Everybody knows a real estate broker, they know somebody in the real estate business that can help them find properties that are of value. I don’t care whether the market is hot, whether it’s cold, there’s always real estate that’s trading and it’s of value. And so, I think it needs to be part of a mix.”

Putting diversification into practice in his own portfolio was the catalyst Wayne needed.

“I’ve always believed in diversification,” he says, “but with my own IRA, I was pretty frustrated with the returns I was getting and didn’t have the ability to see some growth that could make a difference in my income when I was ready to retire.”

Case studies are provided for illustrative purposes only. Past performance is not indicative of future results. Investing involves risk including possible loss of principal. Information included in the above case study was provided by the investor and included with permission. Equity Trust Company does not independently verify all information provided by third parties.

Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.

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