There’s a guy (let’s call him Steve) who found a house for sale by owner that seemed like a good deal. The owner (let’s call him Rick) was selling his house for $80,000. Steve felt like the house was worth considerably more; however, he did not want to tie up all of his funds with this one deal--so he executed a lease option with Rick. The basics of the deal were as follows:
• Steve’s IRA gave Rick $10 for the option to buy Rick’s house for $80,000, full price, if he would lease it to Steve’s IRA for a year at $700 a month, about the actual rent value.
• Steve’s IRA decided he would put a tenant buyer in there to rent the place out for $700 a month.
• The buyer wanted to be a homeowner but he had some recent dings on his credit and he needed time to get those repaired.
• After a year passed, Steve’s IRA exercised his option from Rick, the homeowner, to purchase the house for $80,000 and immediately sold it to his tenant buyer for $100,000.
It was a win-win-win. Rick got rid of a house that he no longer wanted, Steve’s IRA made a $19,990 return (199,900 %!) on his $10 (all TAX FREE because it was a Roth IRA), and the tenant got his dream house because he had found someone to work with his situation.
Steve is currently searching for his next $10 house to buy with his IRA.
-- TIME IS A TERRIBLE THING TO WASTE, SO STOP WASTING IT --