800/607.0145 tollfree info@midatlanticira.com

By John “Jack” F. Kiley, CPA, CISP
Managing Partner / MidAtlantic IRA, LLC

 Here’s what you need to know before getting started:

  1. The Wholesaling Process

Wholesaling is the process in which your IRA account takes control of a property, which you have no intentions of holding, to then sell to a new buyer. To do this, you pay the owner a deposit and create a contract that outlines the specific amount you will pay the original owner within a mutually-agreed time allotment. You can then reassign your contract to the buyer for a fee, which would then be added to your Self-Directed IRA to help it grow.

  1. When it’s Logical to Wholesale

Wholesaling can be utilized by both large and small Self-Directed IRAs. If you are already invested in a project but come across an opportunity that you don’t want to pass up or you don’t have a large enough IRA to finance a rehab project, wholesaling could allow your IRA to grow without requiring as much time, energy or money.

  1. The Difference Between Wholesaling and Rehabbing a Property

Wholesaling is cheaper to start with and could have a quicker return rate, but your IRA would not gain as much profit as a rehab project might. Rehabbing costs more to get started and requires additional time and resources, but the potential reward is greater. Simply put, you’re a salesman when wholesaling and a salesman AND flipper when rehabbing.

  1. The Numbers
Taxable Portfolio Traditional IRA
Wholesale Income 20,000 20,000
Tax: 25% Fed. & 7% State 6,400 0
Net Income 13,600 20,00
Accumulation in 10 Years – net of tax 20,808 35,800

 

*The above table includes estimated funds for example purposes only and are not guaranteed outcomes.