My IRA is growing with RE

Thanks for the clarification Floyd... I mis-stated what I meant. I meant to say pull the money out of the (lackluster) mutual funds in my SEP account and put them into real estate.

It's good to know of your experience with Entrust, I've talked with them a couple of times at NAR.

Just mentioned this to my wife, who really likes the idea. Lisa is always pushing to get more real estate (isn't that great?)

This is all good info...can we get more details ??? It really is a RE 101 all of us need to know more about- both personally and in business. Thanks

I have almost done it a couple of times, but what keeps me from pulling the trigger is that I can't manage the property myself, and neither can my son nor any relative.  The part of rural Kansas he lives in has some well priced property, but it is too far away unless he can manage it for me.  There are lots of rules that must be followed in order for it to work.

Thanks Floyd, that helps!  I am not much into flipping properties as my market is just too expensive to do it and make any money in the short term.

Thanks, Great Post!

Floyd, I joined your group because I "sell" this concept to my clients. I don't like Entrust however because they want a percentage of assets as their fee. I use a company in Albuquerque that charges a flat fee for being the custodian and a small additional fee for addtional properties.

You are right about getting "advice" from most CPAs. They either don't know or don't want to know about investing in real estate. Maybe it's more work for them or the Financial Planner is a friend.

How do you feel about rolling over the IRA into a Roth before starting in real estate investments?

Bill Roberts

P.S. I have a post about using a self-directed IRA to buy land.

Hi Floyd, It is my understanding that the percentages are locked in at the time of purchase. In your example 70% would be taxable. The best way to handle the IRA is for the IRA to "own" a special LLC that then owns the actual real estate. This simplifies the issue of "business income" reporting. It also serves to insulate the IRA from liability lawsuits on the operation of the property.

I got introduced to this concept by a company here that sells TIC interests in raw land to self-directed IRAs.

Most of their land is in the Mojave Desert. It is "in the path of progress" and relatively inexpensive right now.

They use a 10 year time frame for investment. Most people saving for retirement are at least 10 years out.

As for waiting to convert, I think that it makes sense to do it asap. The unrestricted conversion in 2010 is nice, but I think that the sooner you get your assets growing in a Roth the better.

List some land and put it on my group. Maybe somebody here (California) would want to "bank" it.

As for the Mojave desert land parcels, people told my grandfather 20 years ago "it was in the path of progess".  Since then, the desert has remained dry, and has grown very little.  The airport they said they were putting in never started.  Now the Mojave Desert is becoming notorious for very cheap property, which is attracting poverty stricken families whose kids are in gangs, and druglords.  The people who want to sell this land, call it "the pathway to progress".  The people who know the land, are calling it the drug Meth capital of the world.  Last note:  A few months ago, a bus driver for the high school was beaten to death on his bus by high school gangmembers.  Yeh, great place!!  Whatever happened to...  Location, Location, Location?  Rather than...  Gee, this desert property with no water and an average temperature of 104% sure looks like a great buy!!

 

 

 

This is interesting.  One person is saying "If a loan is taken when the property is purchased, then the property sold, profit is made and the loan paid off, then you are taxed on the percentage at purchase that the loan was.  The other person is saying "if you pay off the loan whether it is in one year or 15, and there is no loan to be paid off when the property is sold, then there is no tax, as in 'it's looked at as if there were never a loan'. 

So one person is saying your taxation is based on how & when you purchase, the other person is saying your taxation is based on how & when the property is sold.

Who knows the answer?

A question that just keeps popping into my mind, is that with a Roth IRA, if you try and withdraw any money before you are 59 1/2 years old, then you pay income tax on any gains 'AND' a 10% penalty.

So using your IRA to flip houses could save you a lot on taxes, but if you make a million dollars flipping, you can't simply retire at 49, you have to wait until you're 59 1/2, because you can't touch the money.

Is that the case??

 

Also, Let's say you started a Roth IRA with $4,000.  I guess that would be your basis.  If you invested the $4,000 wisely and turned it into $45,000.  Could you withdraw your initial $4,000 without tax or penalty??

Finally, aren't there some exceptions to the 59 1/2 rule?  Such as, if you're terminally ill, or sending a kid to college, or a major emergency happens, can you access any of your IRA without tax and penalty??

 

This all looks great.  I am currently using my IRA as well, I have been flipping and I just built a new home and it is currently for sale.  I am using Equity Trust,  It has been easy and the fees are very low.  Right I can't get the money for a while but I still think its great!  I found out about this when I helped a client buy an investment here in Tulsa, OKlahoma.  What I like is the freedom of the investments, I can build, flip, pay the rehab guys, invest in past due taxes, loan the money to other investors, and the list goes on.  I know several investors that area borrowing other peoples IRA money and investing and paying a 10-12% interest rate, backed by the investment.  Have any of you done anything like this?  I am only limited by the money I have.  This would be great.

This is a really good blog.  I still would like to get some exact answers to my questions above if possible.  It would greatly help me.  See,  I have my securities license.  I sell IRA's and much more.  I'm very very good in the stock market (which is why I went ahead and got my securities license a while back), and have been averaging over 35% every year in the market.  I use a buy low and sell high technique (finding stocks through 'caps' playground on MSN money, and backed by some great 'active software' for $39 a month, that tells me if there is 'upward' pressure in buying a mutual fund forcing the price to rise, or pressure to the downside meaning some big players are selling off.  I don't trust individual stocks (Enron, Martha Stewart - Enough said).  I only like to trade mutual funds or ETF's in order to reduce any possible risk exposure.  I also use an 'automatic stop loss' which immediately will sell anything in my portfolio if it dips 12% or greater in it's value.  I also NEVER have more than 10% of my portfolio in any one fund.  The only exception I ever had with this was after the terrible trajedy of September 11th.  If you remember the stock market crashed almost just like the planes did.  Marriot Hotel shares had been near the $80 mark for a long time.  After 9-11 the stock actually dropped to about $20 a share.  I took a bunch of money out of my house and bought it up.  As much as I could get.  Marriot wasn't going anywhere, It's all backed by hotels and real estate.  And besides, they had just entered the vacation timeshare sales industry which is nothing but huge giant profits.  Timeshares is just absolutely nothing but profit on top of more profit.  I made a small fortune on that bet.  Sold it once it hit $72 a share a year later.  But after that,  I've kept to my 'no more than 10% rule.  Anyway, I realize I've babbled (sorry), but I was thinking if I study these self-directed IRA's more.  I should be able to sell the fire out of them to investors everywhere.  Realtors and Mortgage guys too.  I just wonder if I would have to 'hook up' with one of the administrator companies and sell 'THEIR' IRA accounts.  Or If I can just sell IRA's through like ING and then just 'hook up' the client to an administrative company.  Does anyone have any ideas on that?  I will be doing a ton of IRA research this week.  I can feel that coming!!  I also have a desk at a real estate office next to a guy who takes dozens of Bank Owned Foreclosure listings.  I found a property today for $75,000 under market.  Just an absolute steal.  I was thinking about getting some people off to a running start with these IRA's, and then (since I have my r.e. brokers license too), I could sell them some of these repos. 

BTW,  If anyone wants to sell IRA's.  I work with a nationwide firm that will train anyone (as long as their honest) to sell IRA's and/or mutual funds and such and earn a commission.  My average commission from a typical IRA or mutual fund sale is about $2,000.  That's an average.  Last month I did a $300,000 mutual fund sale.  So that's a big commission.  Which offsets the many dinky little transactions.  I work at my leisure from my home.  I will be getting with them tommorow to talk about this r.e. IRA subject. 

Lastly though...  I wouldn't lend money out of an IRA at 12%.  I know a money management firm that gets people over 18% consistently year over year in the market.  They have some big accounts with like sports stars and movie actors and stuff.  Their one of the best money management firms in the world.  Minimum account is $250,000.  BUT...  through a special agreement, because my nationwide firm has about a hundred thousand clients (which is volume), for our clients the minimum is only $30,000 for top notch money management.  We had to fight to get that.  Believe me.         

For those of you who are looking for a turnkey IRA/Investment Plan.  Check out Guidant Financial.com  SelfDirected IRA with check book control.  They also have another plan that will allow you to buy your own business or franchise using your IRA funds.  The newest additon is the Roth solo 401K plan.  Your IRA is set up under a LLC Corporation.  Note! I am a Real Estate Investment Advisor specializing in buying, selling, and exchanging  Real Esate in your IRA.I have personally been investing my IRA/401K funds in Real Estate since the early 80's.  For TIC commercial investments for your IRA and/or 1031 exchange. See S-net-invest.com and Sun 1031.com.  Lots of free advice and how to information.    Great site!  Thanks for letting me join in.

Floyd-

Have you helped any of your clients do this? I'm interested in taking it that next step.

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