Bloomberg reports Marilyn Cotterman of Brownsburg, Ind. put $40,000 in a self-directed IRA that allowed her to invest in manufactured housing, earning a multiple of the original investment in three years. As a Roth Ira, gains and income accrue tax free providing you do not benefit in any financial way outside the IRA, and you do not take money out before 59 1/2. All repairs, property taxes, management and other expenses must be paid from the account. Sweat equity is not allowed. Neither you nor any immediate family member can rent the manufactured home (or other real estate) or receive income from the property. Cotterman sells the homes she restores using a promissory note, in effect becoming the mortgage lender. “Buyers don’t care about the interest rate, just the total monthly payment,” she says. If the home buyer wants to site the home in an MHC, the community management does screening of would be residents, saving her a step. If the buyer defaults, she gets the home back and resells it. On one $10,000 promissory note she earned 15 percent after costs. Companies that offer self-directed IRAs do not check the legitimacy of where you invest, which opens the door to ponzi-type scams. As MHProNews has learned, compliance issues of Dodd-Frank and the SAFE Act should also be considered when making such investments.
