Here is an example of what your IRA or 401(k) can accomplish over a 12-year time frame. Let’s assume an IRA or 401(k) has a value of $450,000. And 3 homes are purchased for $140,000 each and then leased to produce income. Let’s also assume that the homes appreciate at the long-term national average of 4% per year.
| Yr | Beginning Value Three $140,000 Homes |
Gross Rent Accumul |
Taxes, Insurance, and Maint. |
Net Rent Accumul |
4% National Appreciation |
Year End Value of IRA or 401(k) |
| 1 | $420,000 | $36,000 | $12,600 | $23,400 | $16,800 | $460,200 |
| 2 | $460,200 | $36,000 | $12,600 | $23,400 | $18,408 | $502,008 |
| 3 | $502,008 | $36,000 | $12,600 | $23,400 | $20,080 | $545,488 |
| 4 | $545,488 | $36,000 | $12,600 | $23,400 | $21,820 | $590,708 |
| 5 | $590,708 | $36,000 | $12,600 | $23,400 | $23,628 | $637,736 |
| 6 | $637,736 | $36,000 | $12,600 | $23,400 | $25,509 | $686,645 |
| 7 | $686,645 | $36,000 | $12,600 | $23,400 | $27,466 | $737,511 |
| 8 | $737,511 | $36,000 | $12,600 | $23,400 | $29,500 | $790,411 |
| 9 | $790,411 | $36,000 | $12,600 | $23,400 | $31,616 | $845,427 |
| 10 | $845,427 | $36,000 | $12,600 | $23,400 | $33,187 | $902,644 |
Keep in mind that this is an extremely conservative approach since $30,000 of the original $450,000 is always on hand to handle maintenance, vacancy or management costs. The chart below illustrates the results.
As you can see, this chart shows the growth of this self-directed IRA to over $1,000,000 in 12 years. Your area may appreciate at greater or less than 4% per year and your rents may be higher or lower than this example. Also note that we did not increase rents or taxes, insurance and maintenance.
Obviously rents would increase over time at least enough to keep up with inflation. Performances will vary and this is an example only.
At Asset Exchange Strategies, LLC we have had conversations with potential self-directed IRA clients many thousands of times and the myths continue to live on after 20 years in the business. Some things like Sasquatch or area 51 seem to perpetuate in people’s minds without any substantial evidence the concept is correct or myth. Let’s […]
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