How I Turned $500 into a Real Estate Fortune

Published by Think Realty | February 16, 2024

Focusing on quarter-acre vacant lots in resort communities was the game-changer.

Vacant lots in planned fast-growing resort communities are one of the safest and most profitable investments. I was able to grow my portfolio substantially quickly and become a passive income earner every month tax-free—and I didn’t need a fortune to start building wealth through real estate.

Here are the details of how I made this strategy work.

I called sellers of vacant lots worth below $10,000 that were in cheap, newer resort communities with lakes, golf courses, and other amenities. The subdivisions were about 5% built out. In other words, about 5% of the homes were already completed.

When I called the sellers, I offered to buy their lot for $5,000 with a down payment of $500 and pay them the difference (the $4,500) over five years. When a seller hears that, the first thing they say is, “No, I need to have all my money right now, up front.” They all say that, and that’s OK. But the truth is not all of them need the money “right now” because they’re already successful and wealthy. They can take payments.

After calling 10 or 12 sellers, I found one willing to sell the lot on terms, meaning I was able to buy a lot for $5,000 with a $500 down payment and owing the seller $4,500 for five years. I paid the seller around $200 a month, essentially with the seller as my bank. I used my self-directed Roth IRA with an administrator that allows for real estate investments, which is called a self-directed real estate IRA.

By doing this, I was able to control $5,000 with only $500 of my own money. Five years later, that vacant lot doubled to $10,000. So, I was controlling $10,000 with only a $500 down payment. I made my payment on time every month. When I sold the lot for $10,000, five years later, I had averaged about 20% per year in profit. Obviously, if you double your money in five years, that’s approximately 20% a year.

I put the lot up for sale for $10,000 using some enticing sales techniques. I would say, “Quarter-acre buildable lot for sale, zero down payment, 100% financing, no credit check. Everyone approved.”

I got 80 phone calls in three weeks because everybody who saw that ad that wanted to own a piece of land, but they did not have a down payment or good credit. But they could still buy my lot.

I realized that I had no risk. What happens if I sold my lot for $10,000 and someone made $400 monthly payments into my Roth IRA tax free? What if they defaulted? What is my risk? I didn’t have any because I still owned the land.

I don’t give up the deed until they make their last payment. It’s no different from an automobile loan. When you buy a car and you put down five grand, you owe the bank for the rest of the loan. You don’t get the title to the car until you make your last payment. It’s the same thing with a piece of land. When I finished making my last payment on my lot (for $ 5,000), that’s when I got the deed. When my buyer at $10,000 finished making their last payment, I transferred the deed to them. Not only did I double my money from the appreciation (100% return), I also made 10% interest for five years—10% interest every year for five years. So, I got paid twice. You can’t beat that.

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