Self Directed Roth IRA’s

[thescoutranch]

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.

 

[Vaquero]

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.

 

[TXAZ]

If you make certain, not uncommon mistakes, it can be very expensive.
it’s worth paying a fiduciary to advise you.

 

[thescoutranch]

I should have added to my opening post, this is in regards to real estate investing.

 

[msharley]

I should have added to my opening post, this is in regards to real estate investing.

Land. They are not making any more of it..

Florida Land. Have some for sale! Can almost see it!


At.............low tide!

If possible? Make sure you get the mineral rights! (here in Central Pa? One gas well will get you 200,000 cubic feet per year...enough to heat your home....in royalties)

Coal can be "good" or "bad"....(circumstances differ....)

Lumber? Shop around before having property timbered! "Timber (slime guy) Man" tried to give one neighbor $20 grand for his timber. His son made a few calls....got him over $200,000!

Easements? Liens? Title Search is worth the freight!

Utility/RR "right of way"? Some local folk have their taxes paid by the gas co. for a gas "right of way".... Will that "transfer" to a "new owner"? (differs by state/utility)

Access to electricity? Water? What is the "bribe/fee" to the County for a septic? Well? (neighboring county charged a friend over $20,000 in "fees"/bribes to put in his well/septic...then? Three years later? Condemned his well/septic went to "city water"...and hit him for nearly another $10,000 in "hook up" fees! You need to look into this and more...

Hope this helps.

Later, Mark

 

[Fishkiller]

I should have added to my opening post, this is in regards to real estate investing.

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.

 

[mroper]

I would pause on the Reits and real estate right now. The interest rates are causing problems. You can use self directed IRA's for real estate. Some place will walk you through it . I invested with AMC https://www.amcinvestments.com/ but am holding off for the time being

 

[toddnjoyce]

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.

Ask away or send a PM. I’ll answer what I can or defer on what I can’t.

 

[toddnjoyce]

I should have added to my opening post, this is in regards to real estate investing.

That’s a broad question. You can put everything from a rent house to full blown Commercial REITS, whether an index or ETF REIT.

 

[thescoutranch]

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?

 

[BigRed]

Taxation is theft.

 

[thescoutranch]

If you make certain, not uncommon mistakes, it can be very expensive.
it’s worth paying a fiduciary to advise you.

I have an appointment set up with a tax attorney / CPA in late October.

Just trying to get a basic grasp on the whole situation ahead of time.

 

[toddnjoyce]

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?

Mostly except the part about

These moneys in the bank account can float back-and-forth in an out of your IRA

.

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.

 

[thescoutranch]

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 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.

In general, what I think I have determined is your better off running flip houses through a self-directed IRA and keeping the rentals outside of it.

But again, that’s why I’m asking questions.

 

[ATN2]

But are you wanting information about Roth IRA's or about real estate? 2 completely different topics.

 

[toddnjoyce]

But are you wanting information about Roth IRA's or about real estate? 2 completely different topics.

His question is how RIRAs can be used to hold real estate.

 

[Darkpriest667]

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 professionals and investment firms typically don't beat the index earnings. Best to invest in the Index funds yourself and let the professionals rot. My ROTH IRA is almost entirely made up of INDEX funds.


EDIT -- looks like he cares about real estate investment, no comment.

 

[toddnjoyce]

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….

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.

… 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…

The IRA (not the LLC and definitely not you) has to own the property, so the IRA has to pay all the expenses for the flip from purchase to upgrade to marketing to taxes. In short the IRA would purchase the property in cash and “hire” the LLC to do the work. Flip expenses and taxes come out of the IRA and flow directly to the LLC. When the house sells, it’s the IRA selling the property, not the LLC and the profits are retained in the IRA for another investment.

Here’s the best, easiest read on the topic that I’m aware of.

Using Your IRA to Buy Real Estate

Using an IRA account to buy real estate is not for those who lack the time and expertise to manage such an investment.

www.investopedia.com

 

[thescoutranch]

But are you wanting information about Roth IRA's or about real estate? 2 completely different topics.

In this question, they are one in the same

 

[thescoutranch]

This is what I had read, referring to the checkbook IRA

Self-Directed IRA For Real Estate | Buy Real Estate With IRA | IRAR

Yes! Real estate investing with an IRA can be a smart way to make your savings work for you. Invest in residential, commercial properties, mortgage notes, land, and more!

www.iraresources.com

“Another way to substantially save on fees is to open a self directed IRA LLC. Often called a Checkbook IRA , an IRA LLC is considered one asset with IRAR, meaning you're charged for a single asset, regardless of how many assets are within the LLC itself. The LLC holds multiple investments, while IRAR holds your LLC as one IRA investment.”