HE USED HIS IRA

On the fourth floor of the Amoco building I was sitting at my desk, when a fellow employee came into my office. He said he had seen me smiling a lot lately. This was in 1986 when Houston was really bad off and in an economic slump. I said yes, I had made some really good money on the weekends buying and selling houses. He asked if I went to real estate school and I said “No. I found some people that were already making money and just followed what they were doing.” He said he knew that I was making a lot of extra money on the weekends, and was there a way for him to do the same. I thought about it and realized well not quickly because I spent a lot of time studying I spent a lot of time preparing to buy my very own first house. Sam didn’t want to wait that long. I was also at a point where I didn’t have time to teach Sam. I didn’t think much of it just realized that Sam had a problem. Within two weeks I was at a small meeting where a man walked in with a stack of papers. He was just a little bit late and he had to do the presentation. He handed out the stapled papers very quickly. He had excitement in his voice as he stood in front of us and said he had just found how to do something new. He had actually just done it. That was very exciting. The excitement in the air got us all perked up ready to listen. He said that he had found a bank of east Tennessee that had truly self directed our IRAs now. I at that point I thought IRAs? … I’m not interested in IRA, I’m interested in real estate. All of a sudden he proclaimed that you can actually, buy real estate with your IRA. You were not limited to buy stocks, bonds, or mutual funds or any other such product. Now my ears perked up. Ray explained that if a person put their money in an IRA they could direct their trustee to use their money to buy real estate being held in the IRA instead stocks, bonds, mutual funds. Ray went on to say that his intension was to take that house, fix it up and sell it for a profit inside an IRA. Boy did my ears perk up at that minute. I went home and looked over the paper work looked at the numbers, until I understood what had happened. Quickly it was apparent that, what actually had happened was not in the numbers it was in, what you call things. One key point was the IRA trustee and the communication back and forth between Ray and his trustee. That was what I needed to learn. As soon as I had that understood, the next time I saw Sam at work I said Sam I just learned something new, come to my office when you take a break. Let me tell you what I learned. I explained to Sam how he could transfer his IRA account to the Bank of East Tennessee and that there would be paper work involved, once the money was transferred electronically, it would only take two to three days to become a self directed IRA. In the meantime I could start to find a house that would make sense for us to flip. You see, I would do a joint venture agreement with Sam [actually Sam’s IRA]. What we actually did was, we bought an old house that needed a lot of repairs. Teenage kids had vandalized it. We put the title to the house in this self directed IRA account that Sam owned. When we went to the title company, to buy the house, the deed was made out to: Sam Harold IRA in trust of East Bank of Tennessee. His trustee would be the only one that could sign that deed, when we sold. Sam’s trustee was the one that signed the joint venture agreement with me. The joint venture agreement had provisions in it as to what the IRA responsibilities were. Basically it’s only function was to fund the whole operation. My primary responsibility was to get that house fixed and sold as fast as I could. It had provisions such as if something happened to Sam’s IRA and it had provisions for what to do should I die. It had provisions on taxing and accountability in that arena. We had gone to an attorney to get this joint venture agreement drawn up. Doing it by yourself, you could overlook things. As soon as we got the joint venture agreement signed and the house purchased, I went to work. The neighborhood kids vandalized it. It looked awful and they tore up some sheetrock but its only dry wall they did not do anything with the foundation had not done anything to the roof. Believe it or not but the kitchen cabinets were in good shape they just needed some repair. So with some new dry wall, some kilts sprayed onto the walls and then painted to cover kids paint things went quickly. When you have the right spray equipment that goes very rapidly. They got new carpet for the place. We had to fix a couple of windows the glass company did that.

That’s another thing that I figured out earlier on. If I were to try to fixing a window even with glass is very cheap to buy, and you get cut doing any installation, your doctors bill could be huge. If it is anything more than eight inches by eight inches I figured that there was a chance of glass breaking and a chance of I could get cut. One trip to the emergency room would pay for a lot of work done by a glass company. We always hired that done. still think to this day that that’s the best solution to the broken glass problem. With a good glass company, their employees come out with the right equipment and the right training. I talked to several of these guys and even they get cut. The difference is, they know how to prevent the majority of it. And I figure with their knowledge and the chance of them getting cut the odds of me getting cut are extremely high. I don’t even play with glass even thought it sounds like a place where you can save money. In the long hall a bunch of stitches are very expensive. Stay away from that one.

The house I picked had lots of damage, due to teenage kids having wild parties in the house. They spray-painted everything. They had torn out a lot of the sheetrock. The rest of the house wasn’t too damaged. Both the plumbing and the electrical systems were not in too bad a shape. The yard was a mess, but a lawn mower could help that, along with picking up beer bottles. One of the problems was spray paint on the bricks. Spray paint was on the side of the house where you didn’t see it from the front, but it needed to look right. Not like kids had sprayed graffiti on it.

I tried to brush it off. We tried paint remover. Nothing worked. Some bricklayer friends of ours said to take an old brick and rub the brick over the bricks with the spray paint to get it off. Well that didn’t work either. I went to my favorite paint store. They said at that time they didn’t have any product that would get this spray paint off porous brick.

I made up my mind and thought, “This spray paint isn’t going to get the best of me.” I looked at those bricks one more time. That’s when I decided to fix the problem, with the problem. I went back to the paint store and bought a high grade paint that would stick to brick and spray paint. I bought the color of the mortar and the color the bricks were, before the graffiti. First I started with the mortar. A small paint brush helped out. It didn’t look too bad. Next, I tackled the bricks. Bricks have several colors in the surface so I had to play artist to make it work.

By the time an appraiser came to give a value to the house, he never saw the painted bricks.

I got the house all fixed and in a short time found a buyer. Now Sam was excited mostly because I gave him the day to day blow of what was happening. Sam was a geologist and I worked on the geophysics end of things. You would think the jobs were similar .They are really opposites. We did talk frequently, and our project did over lap. The day came for closing Sam wanted to know if he could go. I said: “Sure Sam that would be fun.” He got all excited but then I reminded him that there would be nothing for him to do. We already send the paper work off directing his trustee to sign the deed to the house over to the new buyer. Sam said yes but I want to see it anyways it will be fun and I agreed. The funniest thing was, when Sam got walked into the title company the girl at the front desk recognized his name and said. Welcome Mr. Ira to First American Title. You see the first time she would see his name was with the IRA at the end and Ira was the only way she knew how to enunciate that name. Well Sam went back into the closing room with me our buyer for the very first time sat at the table with the closing officer. There was nothing for me so sign either so I sat by Sam kind of guiding him through what was happening.

We both had fun that day because we split a real nice check. Sam’s money had to go back to his IRA and mine into my bank account. Sam did that with me several more times. He eventually started his own oil company. You see as a small oil company he could take advantage of the small oil reserves where he knew where they were around southern part of Texas. Last I heard he had bought his sailboat I think he severed ties with the main land and I haven’t heard from Sam since. I suspect that he is out there living a good life going from one island to the other hopefully he has great memories of the houses that we flipped together in his IRA solving his problem and definitely solving mine.

After three years I have gone back to see how it looks and it looks just fine. The lady I sold that house to is still very happy with her new home.

Sam and I partnered on several house after that and are still good friends.