Posted by dennis on November 16, 2010 at 15:23:25:
That is almost completely correct. The income is taxable to the extent they are leveraged. If 75% LTV then 75% of the net income after depreciation, if any, would be taxable. The same goes for capital gains, unless the loan is paid off for 13 months before sold, then it is completely free of capital gains. It works well if you can get the nonrecourse loan to purchase. I have two cash flowing apartments in a self directed IRA now.
IRA or 401k investing - Posted by Scott Ruffrage
Posted by Scott Ruffrage on October 18, 2010 at 07:20:18:
Can I remove $ from my 401k or IRA to invest in a rental property?
Scott
Re: IRA or 401k investing - Posted by Mark
Posted by Mark on December 10, 2010 at 12:22:32:
I am also interested in using my retirement account to invest in real estate. Has anybody used Guidant Financial? I ordered their free kit (guidantfinancial.offersignupserver.com), but am interested in hearing about anyone else’s experience.
No removal…move to SDIRA - Posted by John Merchant
Posted by John Merchant on October 19, 2010 at 09:01:48:
Your SDIRA can invest in anything you tell it, other than the illegal no-nos enumerated in IRC rules such as gold, collectibles, etc.
So you’d just transfer the funds from IRA Custodian A (where $$$ is now) to IRAC B, your new SDIRA custodian and then tell them what to invest in.
I generally prefer to have my clients go the extra step of having the SDIRA buy the units of a new LLC of which you are the manager, then you have the $$$ moved to a new LLC bank acct, which you control, and you basically manage the $$$ and use it to have that LLC buy whatever you want.
If the funds are currently in 401k you might need to “rollover” into new SDIRA ass it has more leeway than does a 401k.
But for a Sr sometimes a 401k being kept makes a lot of sense as it can sometimes put away a lot more money in the course of a year than can an IRA.
Re: IRA or 401k investing - Posted by Colin Bochicchio
Posted by Colin Bochicchio on October 18, 2010 at 08:08:02:
Scott,
You should be able to that when you create a self-directed IRA and I wish to do this as well.
Make sure you use a good company I.E Entrust among others do your research to convert it over so get a company with the experience who has done many of these type transactions.
Guidant’s a pricey option - Posted by blugras
Posted by blugras on December 13, 2010 at 12:00:45:
For the services that an IRA Trustee offers (very few unless you want to be on their list for future investments)I recommend you shop for a trustee and use one of the less expensive one.
GF has tried hard to persuade the investor world that its SDiRA is somehow better but I’ve not found it so and I recommend one of the many others at a far lesser cost.
Re: No removal…move to SDIRA - Posted by Scott Ruffrage
Posted by Scott Ruffrage on October 19, 2010 at 16:36:23:
John,
What does “buy the units of a new LLC” mean exactly? If I buy property from a SDIRA are the tax benefits the same? Are profits returned to the SDIRA to be received as income when I retire?
Scott
Re: Guidant’s a pricey option - Posted by Mark
Posted by Mark on December 13, 2010 at 12:28:04:
Thanks, Blugras. I had a good conversation with Guidant on the phone last Friday, but as you suggest, it is always good to shop around. I will do some more homework and post a follow-up on who I decide to sign up with.
Re: No removal…move to SDIRA - Posted by John Merchant
Posted by John Merchant on October 19, 2010 at 18:34:45:
Step one: You have the SDIRA Custodian (where you’ve just put the roll-over money-Entrust, Viking Bank, etc.-buy the LLC units (LLC has units not shares)and that SDIRAC writes its check to the Sec of State of whatever state you want to form the LLC in and that SOS issues the new LLC naming the SDIRA as its owner and you as the LLC Manager & Pres.
Step Two: You take those new LLC docs with the new LLC’s Operating Agreement (find the Op Agremt form online or ask the bank to give you a “whited out” one they like so you can copy it)and the SDIRAC’s check to the bank and open a new LLC account with you as the signer on the checks.
Step Three: That LLC’s manager (you) decides what the LLC is going to invest in and the LLC issues its check to do so and the title to that RE (if its RE that the LLC is buying)is then in the LLC.
Step Four: Somewhere between your age 59 1/2 & 70 1/2 that LLC starts issuing you annual (or more often if you prefer)dividends sufficient to constitute a legal “distribution” of the accumulated IRA funds.
Look on the IRS’ website and pull down and print if you like, its publication on IRAs and SDIRAs…Pub.# 194 as I recall…which is published annually, free from “your gummint working for you” as that booklet contains the latest law and regs on IRAs.
If you do this you’re not engaged in “buy prop from a SDIRA” but the SDIRA is buying prop for you as per law.
What’s it bought for you? The units of that LLC…but the funds have never really left the SDIRA and the SDIRA’s LLC has bought and sold various properties over the years, always as the owner, in its name, w/o income tax on the gains and always tax deferred.