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Self Directed IRA and RE investing - Does anyone have any experience?

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  • Self Directed IRA and RE investing - Does anyone have any experience?

    Just checking to see if anyone has an experience with self directed IRA (rocket dollar for example) and has successfully used it for real estate investing(syndicates/funds). Seems like a really great idea to save no taxes if dividends are tax inefficient. Just wanted to see how many people are doing something like this and the ease of the process.

  • #2
    https://www.google.com/search?sitese...self+directed+

    Just in case you haven't checked BogleHeads. I would postulate not many hear have dabbled in self-directed IRAs.
    $1 saved = >$1 earned. ✓

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    • #3
      don003 To be upfront, I am a real estate guy, not a CPA or Tax Attorney but I do have several clients that have used their IRA's to invest in my deals. Many people have significant amounts of capital in their IRAs and it becomes a good source. Something to watch out for is the tax structure of the deals as IRA's don't generally get to deduct the taxable loses that value add/leveraged real estate deals often provide. You also have to watch out for UBIT on debt financed real estate and the IRA may have to file a 990-t tax return. Different products may be more income based and better for an IRA tax wise. I can provide some specifics and connect your to any of the self directed IRA advisors I work with if you want to private message me.
      Noah Swank, Real Estate Investment Advisor
      n[email protected]

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      • #4
        I have had a SDIRA since 2006 that I have used to purchase multifamily and single family rental assets. Some people discourage directly owning rentals because you don't have as powerful tax savings as owning outside of an IRA but it has been valuable for me as it allowed me to diversify the retirement $ out of the stock market. There are IRS rules you have to follow but that isn't difficult. A lot is made of the UDFI taxes but I haven't found them to be onerous as you can still use depreciation on the directly owned real estate to lower the net income. There are a whole host of sources to read about SDIRAs.

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        • #5
          I set up an SDIRA to purchase a property (15 acres of land) around 2 years ago. The property was in the 400k range. I left 40k in the IRA to fund maintenance and rates for the next 5 years, but I may have to top it up.

          If you do use SDIRA to buy property, make sure you get legal and accounting advice about structuring.
          Last edited by Dont_know_mind; 07-01-2020, 04:38 AM.

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          • #6
            The main drawback to this is simple. Why would you want to put an investment that is the most tax advantage asset class there is into an IRA? Unless this is the only way to source the necessary capital for a deal, it really doesn't make sense.

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            • #7
              Originally posted by CREGuy View Post
              The main drawback to this is simple. Why would you want to put an investment that is the most tax advantage asset class there is into an IRA? Unless this is the only way to source the necessary capital for a deal, it really doesn't make sense.
              Well for me it’s vacant land which has no yield/income, so there is no tax advantage in taxable. Which is why I bought it in retirement space and left 40k in cash to fund expenses for 5-10 years.

              This works for me if the land appreciates by 100-200% over that period. My CGT will be much less in this structure. It only works out with land if you think there is a high probability of a large capital gain.

              The property was last transacted in 2012 for 3.6M. I bought it from a distressed developer last year for 400k. I am hoping to sell it for 2M in 5 years.

              I hadn’t heard of anyone doing this, so I had a tax lawyer look at it before buying.

              I don’t know if will pan out or not.

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              • #8
                Originally posted by dennis View Post
                I have had a SDIRA since 2006 that I have used to purchase multifamily and single family rental assets. Some people discourage directly owning rentals because you don't have as powerful tax savings as owning outside of an IRA but it has been valuable for me as it allowed me to diversify the retirement $ out of the stock market. There are IRS rules you have to follow but that isn't difficult. A lot is made of the UDFI taxes but I haven't found them to be onerous as you can still use depreciation on the directly owned real estate to lower the net income. There are a whole host of sources to read about SDIRAs.
                I appreciate hearing your experience. In my reading I seem to be steered away from SDIRA investments in real estate because of the fear of the UBIT, but I just don’t see many posts for the actual experience people have encountered .

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                • #9
                  Just be sure you have a CPA that can do the 990-T form for the IRS for you.

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                  • #10
                    Thank you. I will.

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                    • #11
                      One thing to consider about real estate investment in and out of SDIRAs. The potential QBI deduction of a taxable real estate reduces the value of the tax deferral.

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