Case Study: Building a Strong Financial Foundation with a Self-Directed Real Estate IRA

By: Brianna Avillo

Key Points 

• Jodi was no stranger to real estate as she grew up in a family of realtors. However, leveraging Self-Directed IRAs (SDIRAs) to invest in properties for a possibly secure retirement was a new concept to her.
• With self-storage facilities on the rise, Jodi decided to start by investing in commercial property to diversify her retirement portfolio and earn steady, passive income.
• Its success veered her path into both real estate syndication and private real estate investment trusts (REITs), where she accumulated greater than her expected return.

Real estate is an alternative investment that typically retains over time. As tangible assets, real estate is likely to always possess some level of worth and demand. Self-Directed Real Estate IRAs are supreme vessels for pursuing real estate ventures, allowing account holders to water and bloom their retirement savings through passive income. In conjunction, the real estate market is generally not directly affected by the fluctuations of the stock market. Jodi discovered the benefits of Self-Directed Real Estate IRAs and took a leap of faith that paid off, ten-fold.

The Backdrop

Jodi grew up in Salt Lake City under the guidance of realtor parents. Through observation, Jodi came into adulthood understanding the critical questions to ask while perusing an open house. While this knowledge was advantageous in looking for her forever home, it wasn’t the trajectory of her life. Jodi earned her cosmetology license and became a well-requested makeup artist throughout southwestern Utah. Her small business went viral online in 2018, which motioned consistently booked gigs for weddings, commercial shoots, and fashion events. 

Come 2021, Jodi had garnered a substantial amount of revenue and wanted to do whatever she could to ensure that she was taking the proper steps to cultivate a potentially secure future. Her dream was to ultimately move to Manhattan Beach for retirement. She had visited her late uncle when she was nine and remembered the area and her time fondly. With this goal in mind, Jodi opened a savings account with an acclaimed banking institution. 

Finding Her Way Back to Her Roots

Fve months had passed since the opening of her savings account that was sold with the promise of rewards. Though Jodi kept contributing to her account, she noticed the extra money she would earn from the bank was abysmal – it was merely pennies. As Jodi’s business took a few years to get up and running, time was of the essence. How would she be able to transform her savings into a true nest egg at this rate? Though she understood patience was a virtue regarding saving and budget planning, she was hoping for something just slightly more accelerated. 

She had listened to podcasts praising company stocks. These investments made her feel uneasy as she found them difficult to grasp. It wasn’t until she came across a popular real estate investment site that she connected the dots – the best investment for her had been right in front of her the whole time.  

With her intrinsic knack for real estate and the support of her informed parents, Jodi dove headfirst into real estate research. Being a landlord of a single-family home or apartments was of little interest to Jodi, so she opted to drive down the commercial real estate route. This way, her property could be lent to a business, and a business that was specifically tailored to the type of property she purchased. With the ascension of condominiums and townhomes, storage facilities were surging. This was the journey she fatefully embarked on. 

Self-Directing was the Solution

Jodi wanted to cement this investment as one purely profiting her retirement. Sure, she could buy the property outright, but she wanted to abide by regulations to ensure she kept this promise. She ravenously searched the internet for retirement accounts and was immediately attracted to Self-Directed IRAs (SDIRAs). These investment vehicles not only allowed her to invest in alternative assets like real estate, but they also let her be the sole decision-maker of her account. 

Upon reading that these accounts required a Self-Directed IRA custodian, Jodi read through reviews and reduced her potential candidates. She scheduled a free discovery call with Madison Trust. The Specialist’s compassion and knowledge made her feel instantly heard. Jodi determined Madison Trust was the home for her retirement account. After her account was created, Jodi instructed her Self-Directed Real Estate IRA custodian to send her funds directly to her investment property – a self-storage facility in Saint George, Utah. 

The Future is Limitless

The storage facility wound up being a packed house. With an increasing demand, the prices of the units on her property nearly doubled. Income was rolling into her Self-Directed Real Estate IRA, and she had already made significantly more than what she paid during the purchasing stage. Jodi determined real estate investing was going to be her forte, and she upgraded her account to a Self-Directed Checkbook IRA.

This transformation greatly affected her investing abilities and opened the floor for even more exciting opportunities. Now, she could place multiple investments and perform as many everyday transactions as necessary, without involving her custodian. Which eventually steered her to her next move; enjoying the position of a passive investor, Jodi came across a real estate syndication of numerous multi-family properties.  

After performing due diligence on the Investment Sponsor, she was impressed by his track record. She joined a large pool of investors and shortly after, began accumulating relatively steady funds from this foray. She appreciates her Investment Sponsor’s communication style as she remains in-the-know on the status of their apartment complexes. 

Jodi’s accomplishments and real estate prevailing galvanized her to take further action. Due to her annual income and investment success, she has become an accredited investor. With this status, she recently became a part of a private real estate investment trust (REIT) and is thrilled to see how this investment unfolds. 

Conclusion: Be the Captain of Your Ship

As a new investor, Jodi couldn’t conjure a better support system for her first investing experience. Jodi utilized Madison Trust’s educational resources continuously and finds the webinars and email updates particularly helpful. She also is grateful for the rapid response time she receives from her custodian. Whenever an inquiry or a concern emerges, a quick call to Madison Trust typically makes her feel reassured and more confident in her self-directing decisions. 

Jodi encourages those contemplating opening a Self-Directed IRA to take the plunge. Focusing on your retirement is the act of creating a fulfilling future. Self-love starts with self-focus and concocting a potential safety cushion is one of the best ways to shower yourself with self-preservation. 

Are You Ready to Rumble with Real Estate?

Our Self-Directed IRA Specialists can answer your questions and give you insight into this beloved asset class. If property power isn’t your jam, we’re also rigorously trained on a wide variety of other alternative investments. Schedule a free discovery call today to learn how you can apply a Self-Directed IRA to a possible enriching retirement.