knowbuddy the example you originally posted about is common with many investment clubs. They have them pretty much all over the country in many cities. Understand that it is difficult, and I think impossible to have a self directed IRA and finance a purchase of a property. If you know of a lender that will finance a property that is held by a self directed IRA shoot me that lenders name! What you can do though it buy the property for cash using the IRA. Of course the property including all of the income it generates along with all of the bills must be paid by the IRA.
I have been looking into that as well and have checked out several organizations that provide self directed IRA’s but man they nickel and dime you to death on fees….
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The example you posed above is common for private clubs, investment groups etc that purchase complexes for groups of investors. The pools usually have a minimum of 50k, it all varies. There are two types of investment strategies for these types, value and rehab. The value play is usually done on complexes where rents are below market. The play is that with a minimal rehab, maybe a few thousand per door, you can get rents up and improve vacancy level. Thus you will see a nice yield on your investment. The rehab is more of what you were describing, maybe 5 figures per door, then over the next few years you improve vacancy and stabilize the property. the improved rents will get you a different cap rate and you should be able to flip the property at a significant gain.
Each individual investment is generally run by a lead investor. That lead will get a percentage of income and equity on the flip. These amounts vary by 10-20%. The investors split the rest. Commercial financing is obtained with a 10 year note. Finding assumable notes is possible as well…. The lead also sets the entire project up including how it is run. It is all set forth to the investors prior to them investing.
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I have looked into a few of these clubs, especially in the midwest. The cash flow to investors is alot better then on the west coast but have not done anything yet. Honestly this is pretty bubble like. The apartment sector has been heating up and the refinance issue troubles me down the road. (Many of these projects intend to cash out equity within a short period of time to return equity back to the investors) Prepayment on commercial 10 year notes is an entirely different beast and the investments never quite spell out those costs when they show you their fantastic returns you can get.
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It is all fairly enticing however we have held off and are sticking with what we know which are single family stuff, 4 plexes and under. That way we can commercially finance them. We are also still looking at using ira money for a property but have not yet done so.
