HOW TO BUILD A PORTFOLIO OF RENTALS WITHOUT NEEDING A BANK JIM INGERSOLL
Last summer, in my own market of Richmond, VA,
If we sell the house in 5 years for today’s tax
I put a house under contract for $25,000.
This
assessment of $115,000, our upside gross equity
It needed
on the $45,000 investment will be $70,000. This is
about $18,000 of repairs and then we rented for
split 50/50 and is another payday of $35,000 for
$950 per month. This home also has a current tax
each party in the joint venture.
house last sold in 1968 for $9,900.
assessment of $115,000.
Both sides of the joint venture will
To buy this home without needing a bank, I
received the same profit:
structured a joint venture. In this case my private
lender is a self-directed IRA from Quest IRA. The
IRA will fund the entire acquisition, closing costs
$24,900 in rental income (assuming no repairs and
full occupancy for this case study purposes only).
and repairs for a total funding of approximately
$45,000.
My side of the joint venture includes
$35,000 upside equity
doing all the work of finding the house, negotiating,
completing all repairs and then managing the
house for the next 5 – 10 years.
$59,900
With this joint venture, we are splitting all net
income and future upside equity 50/50. The rental
income is $950 per month, taking out taxes and
insurance this will net at approximately $830 per
month. The $830 per month is then split 50/50. I
retain $415 per month and send the other $415 per
month to the self-directed IRA.
Total profit for each party in the joint venture:
If we keep this
property for 5 years and it is fully occupied, both
the IRA and I will receive 60 payments of $415 per
The real estate investor gets to buy and hold a
rental property using none of his own money, in
exchange for doing all of the work. The private
lender self-directed IRA gets a great return, while
investing in local real estate with a first position
lien, using a joint venture agreement. The private
lender
also enjoys
investing
in real estate
completely passively without having to give any
time, or dealing with any tenants or toilets.
month for a total rental income of $24,900.
That is the goal of a well-structured joint venture.
Both parties achieve their goals and work to
protect one another’s best interest.
Given the nature of the joint venture being a 50/50
deal, every second acquisition is the equivalent of
one free and clear house, from a cash flow
perspective.
How many of these deals do you
need to be able to live just off of the monthly rental