Roth IRA Questions - Posted by New investor

Real Estate Investing Real Estate Financing
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Posted by John Merchant on June 19, 2005 at 22:00:09:

Right. Just get the right application to the co. of your choice with your money and you’re in business.

As a matter of fact I’d go ahead and get the account opened long before you want to make an investment as these guys are loaded with business and can’t jump through any instant hoops for any customer.

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Roth IRA Questions - Posted by New investor

Posted by New investor on June 19, 2005 at 12:04:35:

Im 23, still in college and and working a part time job currently. I am wanting to start a Roth IRA to invest with, but I have a few basic questions that Im unsure about.

  1. Do I need to be employed to open one? What if for any period of time Im not working?
  2. I have read posts about ‘earning 25% with your Roth through Lonnie deals’. - Im not sure what this means. As I understand it, the maximum you can contribute annually is 4k, so if I were to take 4k out to do a deal, the most that I could put back in would be 4k correct? Where does the 25% come in at?
  3. What is the actual rate of return for a Roth IRA? Assuming I put the maximum in my account each year until I was 65, what would my retirement funds look like> Or am I looking at this all wrong?

Sorry for the simple questions, Im just a little confused by it all. Ive read through the archives, but didnt find a whole lot, just alot of suggested books to buy,etc. Im a little short on cash at the momment, so any free help would be appreciated. Also any links sto articles. I saw that there used to be one by Ernest Tew, but it said ‘page not found’ when I entered the URL.
Thanks and happy father’s day to all the dads out there!

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Re: Roth IRA Questions - Posted by John Merchant

Posted by John Merchant on June 19, 2005 at 15:28:35:

Entrust is one of the big 3 self directed custodian companies for using one’s IRA to invest in RE.

They have a terrific website with all these questions answered in some detail.

Also look at Equity Trust and Pensco’s websites as they all contain lots of good free info on using a SDIRA in REI.

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Re: Roth IRA Questions - Posted by Tom (WA)

Posted by Tom (WA) on June 19, 2005 at 12:58:52:

  1. You can only make a contribution to a Roth IRA with earned income. This can mean a job or salary paid by your company to you for work done. That opens the door to being very creative which I won’t cover here but if you have some funds, you should be able to put it into a Roth. Does not matter if you are not working part of the time. As long as you show the income for the year you can make a contribution and you can do it NOW for this year.

  2. 25% profits?? Easily accomplished with Lonnie deals. You place your Roth IRA with a company which administers pension programs (including IRA’s) A few are “self directed” which means that you invest the money as you see fit. So, at your direction, your IRA buys a mobile home, re-sells it ala “Lonnie.” The IRA gets all the money (down payment and monthly payments). The confusion here is that you do not take money “out” to do a deal, the IRA, itself, does the deal so all profits belong to the IRA.

  3. There is no “official or actual rate of return” for a Roth IRA, it’s whatever your deals generate - again, easily 25% or more.

  4. Roth IRA’s are an incredible opportunity!!! If you fund the plan every year beginning at 23 years old and make a good return, you will retire very wealthy. Do it, do it, do it.

I realize funds are short for students. Beg, borrow, or something to find the little money needed to buy Lonnie’s books. They are very cheap relative to the knowledge inside them.

Again, find a way to set up a Roth IRA and do it soon.

Good luck.
Tom

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Re: Roth IRA Questions - Posted by Sterling

Posted by Sterling on June 20, 2005 at 03:01:48:

I probably don’t have this right but from what I’ve been reading:

(1) Lonnie deals constitute a business.
(2) The maximum your IRA can invest in a business is 49% of the net
worth of the business.
(3) The other 51% of the business must be held by one or more other
investors whose investment is not an IRA.
(4) The running of the business must be done by the other partners,
not by you.
(5) Meaning that in order for your IRA to do Lonnie deals you must
partner with another Lonnie dealer who owns 51% of the business and
who makes all the decisions.

Right? Wrong? Misinformed? What?

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Re: Roth IRA Questions - Posted by New Investor

Posted by New Investor on June 19, 2005 at 19:00:23:

Thanks for the websites John. I looked through all of the info they had. So all I need to do to start a DSIRA is to print out the forms on the website right? I dont need to go to any offices or anything?

Thanks again

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Re: Roth IRA Questions - Posted by New Investor

Posted by New Investor on June 19, 2005 at 14:06:09:

Thanks Tom!

Those were the answers I was looking for. One thing though - what is this about having a max of 4k to contribute every year? Is this why the other company is needed? Otherwise couldnt I (or anyone) just say - ‘Here’s another 10k I wanna add, this is from a real estate deal I just did.’ I guess you have to work through the company that administers pension programs right? I think I get everything else though. What companies do you reccommend to open it?

And what would my process be? I go to a specific company to open the Roth IRA. Then I go to the type of place you mentioned that administers pension plans, and have my Roth set up with them as self-directed? Then I can work Lonnies from there? I hope that all made sense, it feels like Im rambling. Anyway, thanks again for the help/advice.

Btw - Ive already read several books, including both of Lonnies. I have yet to do my first deal though, I wanted to learn about this sort of stuff first to help avoid being taxed so hard on my earnings.
Take Care