Real estate is a fairly common investment choice for self-directed IRA investors, but it isn’t the only option, nor is it the only way the community can benefit from an investment.
Matt, from Pennsylvania, began investing in the stock market at a young age. Despite some early success, he wasn’t thrilled with his overall strategy or results. When he discovered self-directed IRAs, his goal was to buy and sell homes for a profit.
From Searching for Investments to Filling a Need
Like any savvy investor, though, Matt was adaptable. He was willing to change course for the right opportunity. He found such an opportunity in his local newspaper, of all places. Matt came across a classified ad from a local used-car dealer seeking financing to repave his business’ parking lot.
This is a common plight for many business owners. According to a recent study from the Federal Reserve Bank, half of the businesses that applied for financing reported they received less than half of what was requested. This often leaves a substantial gap in requested funding to cover expenses or expansion plans.
Enter IRA capital.
Deals on Wheels – Helping a Local Business and Building for Retirement
Matt met with the business owner and negotiated a private lending agreement with funds from his self-directed IRA. After the success of this initial loan resulting a newly paved car lot, Matt and the dealership continued their relationship. He now uses his self-directed IRA to provide floor-plan financing to the dealership and other non-franchise dealerships in the area.
This structure provides Matt with an attractive 10-percent return, and also provides the owner of the dealership with financing he was unable to secure from a bank. The dealership secures the loan with car titles and, every time the dealer sells a car, he pays a title exchange fee of $250 (back to Matt’s IRA) and provides a new title to secure the loan.
Filling a Need in the Community
The beauty of this type of private lending is that the need exists in almost every industry.
“For new people who are just getting into self-directed investing, there are a ton of opportunities to do stuff like this,” Matt says. “It doesn’t have to be cars. There are probably safer or better deals out there, but I happen to be comfortable with the dealers I’m working with.”
Matt believes there are many small business owners searching for capital for various reasons, the key is to find and vet the opportunities you come across to determine if it’s the right fit for both parties.
In the end, Matt gave his retirement a boost while helping a local business improve and grow. His experience demonstrates the democratization of capital at work. It’s an example of how self-directed IRAs can help position investors like Matt to profit their retirement beyond the stock market, while also contributing to the well-being of small businesses and local communities.
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The above case study is for educational 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.