TN Transplant - We love living in TX
- Mar 5, 2020
Land. They are not making any more of it..
Are you looking at a REIT or purchasing property? Big difference. My brother owns a couple of houses and some condos. As long as they are rented he is god. But one bad tenant took him 2 years to recover from. There are a lot of REITs out there, but finding one that is good is the catch. It is a lot like buying stocks and mutual funds. I tried it on my own, lost more than I made. Now the financial advisor makes money for me.
Just curious, if anyone on here is knowledgeable on these?
Not looking for legal or tax advice, just have a bunch of questions I would love to be able to ask somebody more knowledgeable on the subject, than me.
Starting at a high level,Ask away or send a PM. I’ll answer what I can or defer on what I can’t.
Starting at a high level,
You would need to create an LLC to run all your transactions through.
This LLC will open up a bank account in the LLC’s name
The manager or management company for your self directed IRA will transfer money from your IRA into this LLC’s bank account
You will make your real estate purchases from this bank account and will need to put the properties you purchase in the LLC’s name.
When you flip/sell, the property, the monies will be deposited into the LLCs bank account.
These moneys in the bank account can float back-and-forth in an out of your IRA
If you set this up as a self-directed, Roth IRA, then all profits would be deposited into the LLCs bank account and can be transferred back to the Roth IRA, tax free.
If you are above age 59 1/2, you can then take a distribution to yourself of these tax free profits.
Is this correct?
.These moneys in the bank account can float back-and-forth in an out of your IRA
I think the difference here is, I would not be putting any monies into my Roth IRA, the LLC would be doing that, through profits.Mostly except the part about .
I’m almost 100% certain you will be limited when putting money into the IRA. Generally speaking, the IRS limits IRA contributions to the lesser of your annual contribution limit OR your AGI and you have to have taxable income to make the contribution.
I seem to recall disposing of the real estate is also generally done in a 1031 exchange to limit capital gains taxes.
This is a use case of there being no such thing as a free lunch. Most times, I see folks put paid off rent houses in there and use the rent as distributions for cash flow.
I thought I knew the market well enough back in the early 90s.
I'm the guy who lost money on Walmart stock.
Just leave it to the professionals.
The challenge, I *think* is managing the cash reserves in the IRA. Even though self-directed, you’ll still need a custodian doing the back office work, reporting IRS expenses, etc. This means the SDIRA has to start with a fairly large cash balance.I think the difference here is, I would not be putting any monies into my Roth IRA, the LLC would be doing that, through profits….
… It was my understanding (from reading on the Internet of coarse), that since all of these transactions flow through your LLC, your Roth Ira is “investing” into that LLC. Both by providing capital to the LLC and reaping the profits of the LLC…