Greetings, how does it work when you have proceeds from a flip or rental income? Do you just pay it back into the ira, so that the proceeds aren’t hit with taxes? Thank you
I'm on the board of a nonprofit that does shared housing and every house they purchase is done with private money from people using mostly self-directed retirement accounts. It's a very popular and lucrative method of investing. I would consider it one of the least risky methods of investing when secured by real estate, too. Great episode!
Yes, tax liens often have low acquisition cost. There is some real bookkeeping involved, however, so if you wish to invest in a large number of tax liens, an IRA-Owned LLC may be the way to go. In this way, you will save on account/transaction fees.
@@images09 Every state has their own process. Here in Arizona, the tax liens are sold at an auction in February to whoever is willing to accept the lowest interest rate, starting at 16% by default. The cost will depend on the value of the property and how far they are behind.
If you're still working at the employer you cannot simply withdraw money out of a 401k until you separate. Each 401k is unique based on the employer, I'm exploring utilizing a loan feature in my 401k to borrow funds to get into real estate
If you are still working for an employer, you can ask the Plan Administrator if the plan allows for an in-service transfer. If so, it is possible to rollover 401(k) funds to a SDRIA.
I would like to know what is meant by personal benefits; assuming making money (cash flow) is not a personal benefit? and secondly I dont think Dave's question about refinancing the property and paying the money back to your IRA was fully answered.
This was a great episode. I actually used this strategy to fund my first investment which I now house hack. Do it is possible to get into real estate no excuses.
Clearly, since you have to give up so much money (high percentage) toward a down payment if using the IRA, it’s really not a vehicle that is going to get you ahead.
Fun fact: David’s beanie baby would be a rare Greene polar bear, with a build like a spartan (unlike Care bear) they are more dominant than grizzly bears. Comparing to Dana White being in control of other MMA fighters. I agree with D Double REI’s comment in that Henry would also be a rare African Manticore with a big W between the ears.✌️
This episode was too choppy. I’m still not sure how someone can purchase real estate using their IRA. The episode was lacking actionable steps one could take if they desire to go that route.
My question would be is how do you handle the cashflow. Does it have to stay in the ira and if so what type of account do you use so it’s still an ira and accessible to use to fund more deals.
A way to do the short term rental inside a self directed IRA (ROTH) is thru an IRA 100% owned C-corp. so the c-corp pays the regular 20% corporate tax and the rest flows thru to the IRA and grows tax free in perpetuity. 20% is nothing compared to the additional income from STR compared to a LTR
Can I convert my existing Roth IRA or Traditional IRA with Vanguard into this Self Directed IRA? These are my own IRAs, they are not tied to a W2 company.
@19:50 I believe it's very unusual to be able to move 401(k) funds out of one's *current* employer. I've been able to do so only with funds that I had rolled over from a previous employer into my current one, but not any contributions I made since I joined. I'm not even sure how common that is; I know at least some plans don't allow that. But you can certainly roll over funds from a 401(k) with a *previous* employer into a SDIRA.
First episode where I left thinking this is a big mistake if anybody thinks this is a good idea. There should have been a recommendation that only turnkey properties built less than 10 years ago with a low cap rate should be the buy box for this instrument.
I’ve seen nightmares unfold for IRAs with B & C properties. I was shocked that someone thought it was a good idea. Even if I were to lend, it would probably have to be new construction only.
Why should 90 % of funds come from SDIRA, how is this different from financing an investment property where more than 10 % can come from a mortgage lender ?
If your self-directed retirement account owns the rental property, then yes. The IRA can pay off any debt on that property. Otherwise, if the property is outside of a retirement account, the only way to pay off the rental property is by taking a withdrawal. Then you may also be looking at penalties if you are under 59.5 years old.
Small taxes can affect investment decisions such as whether to choose tax-free municipal bonds over taxable bonds or do a Roth IRA conversion. I’ve been sitting on over $745K equity from a home sale and I want to invest on the stock market, how do I achieve this without being taxed twice?
There’s more benefit to holding fixed-income assets in tax-deferred retirement accounts as opposed to taxable accounts. If you're not who understands strategies to invest in the market, seek a Financial advisor to guide you.
Having an investment adviser is the best way to go about the stock market right now, especially for near retirees, I've been in touch with a coach for awhile now mostly and I made over $800K within a short time
Definitely! All of this happened in less than a year after Camille Alicia Garcia told me what to do. I started with less than $200,000, and now I'm about 17,000 short of having a quarter million dollars.
real estate is fairly tax advantaged, so it seems best for not putting in 401k or IRA. Maybe REITs since it's simpler and easier plus then the ordinary income can be deferred / avoided.
You are correct. It's good to know you CAN invest in real estate using an IRA. You can also lend your IRA funds to someone else so THEY can invest in real estate.
David, I think the answer to the Beanie Baby question is clear. Instead of thinking should I be the owl or the bear, you should be asking how to be both the owl and the bear. Claim the mighty Owlbear as your Beanie Baby, and rule the Beanie Baby world!!
Having an investment adviser is the best way to go about the market right now, especially for near retirees, I've been in touch with a coach for awhile now mostly cause I lack the depth knowledge and mental fortitude to deal with these recurring market conditions, I netted over $220K during this dip, that made it clear there's more to the market that we just don't know
I'm currently employed, I have about 130K+ in my 401K in which I rolled over 100K from my previous employer... My question is, how much of a percentage I can or need to take from my 401K (after rolling it over to a Self Directed IRA) in order to purchase my first rental? Can I just take the 20% of the agreed price from the Self Directed IRA to purchase a property? Also, mentioned about avoiding Prohibited Transaction, what would it happen if you or a family member do in fact live in this property? What would the consequences be? Thank you.
My self-directed ira buys a house for 100k. It appreciates and appraises for 200k. Can I personally buy the house from my SDIra at wholesale for 150k and sell it for 200k and pocket the 50k profit?
Marq - What you can do is get an appraisal and withdraw the property from your SDIRA as a taxable event. You cannot personally purchase an asset from your retirement account.
Because the self-directed retirement account is tax-protected, no, you would not take deductions like you do for the properties you purchase personally.
The only taxes a self-directed IRA property would generate would be on a separately filed Form 990-T, nothing would ever hit your 1040 besides a distribution from the IRA
What about using a standard Roth IRA to simply withdraw from to fund a first-time home purchase? Can your basis in a Roth IRA be withdrawn at any time without penalties or income taxes?
You are correct and that would work. The purpose of a SDIRA is to invest for your retirement future. You can do that when your Roth buys the house and the renters pay the rent to the Roth account (or Traditional, SEP, SIMPLE or Solo(k)
If you wish to use IRA funds for personal use you can take a 60-day withdrawal once in a 12-month period. If you cannot pay back the "loan" then you will receive a 1099 and will have to pay tax on the amount withdrawn.
You cannot borrow from an IRA except for 60 days once in a 12-month period. The way a SDIRA works is that it purchases the property. If you have enough savings you can purchase the property free and clear. If you do not have enough savings you can partner with others or take on non-recourse debt.
I used my ira for my first deal! I opened it when I was 18yrs old. I put away around $25-$50 a month. Painless 💥
That's fantastic!! Way to go!
that is awesome
Greetings, how does it work when you have proceeds from a flip or rental income? Do you just pay it back into the ira, so that the proceeds aren’t hit with taxes? Thank you
I'm on the board of a nonprofit that does shared housing and every house they purchase is done with private money from people using mostly self-directed retirement accounts. It's a very popular and lucrative method of investing. I would consider it one of the least risky methods of investing when secured by real estate, too. Great episode!
For smaller retirement accounts, I think buying tax liens is a great strategy assuming the property is actually worth owning.
How do you do this and generally how much does it cost?
Yes, tax liens often have low acquisition cost. There is some real bookkeeping involved, however, so if you wish to invest in a large number of tax liens, an IRA-Owned LLC may be the way to go. In this way, you will save on account/transaction fees.
@@images09 Every state has their own process. Here in Arizona, the tax liens are sold at an auction in February to whoever is willing to accept the lowest interest rate, starting at 16% by default. The cost will depend on the value of the property and how far they are behind.
If you're still working at the employer you cannot simply withdraw money out of a 401k until you separate. Each 401k is unique based on the employer, I'm exploring utilizing a loan feature in my 401k to borrow funds to get into real estate
If you are still working for an employer, you can ask the Plan Administrator if the plan allows for an in-service transfer. If so, it is possible to rollover 401(k) funds to a SDRIA.
Or just open up a SDIRA in addition to your 401K. You can still roll it in there once you are allowed (no longer employed there or retired).
I would like to know what is meant by personal benefits; assuming making money (cash flow) is not a personal benefit? and secondly I dont think Dave's question about refinancing the property and paying the money back to your IRA was fully answered.
This is a very thorough explanation of SDIRAs. Thank you. Great to know some of the applications. Thank you.
This was a great episode. I actually used this strategy to fund my first investment which I now house hack. Do it is possible to get into real estate no excuses.
As long as you receive no "personal benefit" from your self-directed investment you're okay. The trick is to avoid Prohibited Transactions.
Accept the owl it's a symbol of wisdom and teaching.
The owls are not what they seem.
Clearly, since you have to give up so much money (high percentage) toward a down payment if using the IRA, it’s really not a vehicle that is going to get you ahead.
Fun fact: David’s beanie baby would be a rare Greene polar bear, with a build like a spartan (unlike Care bear) they are more dominant than grizzly bears. Comparing to Dana White being in control of other MMA fighters. I agree with D Double REI’s comment in that Henry would also be a rare African Manticore with a big W between the ears.✌️
This episode was too choppy. I’m still not sure how someone can purchase real estate using their IRA. The episode was lacking actionable steps one could take if they desire to go that route.
I agree
My question would be is how do you handle the cashflow. Does it have to stay in the ira and if so what type of account do you use so it’s still an ira and accessible to use to fund more deals.
The cashflow must go back into the retirement account. You can self-direct a Traditional, Roth, SEP, SIMPLE, Inherited IRA or a Solo 401(k)
A way to do the short term rental inside a self directed IRA (ROTH) is thru an IRA 100% owned C-corp. so the c-corp pays the regular 20% corporate tax and the rest flows thru to the IRA and grows tax free in perpetuity. 20% is nothing compared to the additional income from STR compared to a LTR
This "C-Corp" strategy is called "The ROBS Model". Rollover Business Start-Up.
C-Corp Blocker
Awesome episode and amazing insight from Kaaren Hall!!
Thanks Amanda!!
@@KaarenEHall if I have an IRA with Vanguard, would have to change it into a self-directed IRA to purchase property?
This was very difficult for me to understand.
Thank you for sharing
Can I convert my existing Roth IRA or Traditional IRA with Vanguard into this Self Directed IRA? These are my own IRAs, they are not tied to a W2 company.
Good video and we’re definitely going to need that book 👀
Henry, why don’t you work with an architect!?
@19:50 I believe it's very unusual to be able to move 401(k) funds out of one's *current* employer. I've been able to do so only with funds that I had rolled over from a previous employer into my current one, but not any contributions I made since I joined. I'm not even sure how common that is; I know at least some plans don't allow that. But you can certainly roll over funds from a 401(k) with a *previous* employer into a SDIRA.
You are correct. You may be able to obtain an "in-service transfer" from a current employer's plan administrator, however. Worth asking about.
looking to buy my first 3 rental properties in my Roth IRA by the end of the year
@sheritacotten5293 If I have a Roth that currently invested in mutual funds via Schwab; do I sell those positions then buy RE or keep the mutuals?
First episode where I left thinking this is a big mistake if anybody thinks this is a good idea. There should have been a recommendation that only turnkey properties built less than 10 years ago with a low cap rate should be the buy box for this instrument.
If purchasing real estate with a retirement account is not for you, your self-directed account could also lend to others for their projects.
I’ve seen nightmares unfold for IRAs with B & C properties. I was shocked that someone thought it was a good idea. Even if I were to lend, it would probably have to be new construction only.
Why should 90 % of funds come from SDIRA, how is this different from financing an investment property where more than 10 % can come from a mortgage lender ?
Do you have to use a non-recourse loan if you use IRA money AFTER 62 where disbursements are no longer penalized?
Good topic!
I don't know how anyone stays in the black taking on negative cash flowing deals. I'll keep shooting my low offer arrows until one finds the target.
I Have several discounted turnkey rentals, no repairs, across the country available for purchase. Priced at 80% ARV
Great info! 🎉🎉🎉
Great episode - can I pay off a rental property mortgage with funds from a self directed IRA, penalty and tax free?
If your self-directed retirement account owns the rental property, then yes. The IRA can pay off any debt on that property. Otherwise, if the property is outside of a retirement account, the only way to pay off the rental property is by taking a withdrawal. Then you may also be looking at penalties if you are under 59.5 years old.
@@uDirectIRA thank you so much for the quick reply and for all the info you shared!
This is great. Now we just need a better market for deals. Ha!
It's not just real estate. Your SDIRA can invest in private equity, performing and non-performing debt, precious metals and more.
Small taxes can affect investment decisions such as whether to choose tax-free municipal bonds over taxable bonds or do a Roth IRA conversion. I’ve been sitting on over $745K equity from a home sale and I want to invest on the stock market, how do I achieve this without being taxed twice?
There’s more benefit to holding fixed-income assets in tax-deferred retirement accounts as opposed to taxable accounts. If you're not who understands strategies to invest in the market, seek a Financial advisor to guide you.
Having an investment adviser is the best way to go about the stock market right now, especially for near retirees, I've been in touch with a coach for awhile now mostly and I made over $800K within a short time
*@donaldsimeon8606* How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings
Definitely! All of this happened in less than a year after Camille Alicia Garcia told me what to do. I started with less than $200,000, and now I'm about 17,000 short of having a quarter million dollars.
She appears to be well-educated and well-read. I just ran a Google search for her name and came across her website; thank you for sharing.
You can use self directed 401k to buy real estate but you cannot live in it.
Interesting..but confusing.
real estate is fairly tax advantaged, so it seems best for not putting in 401k or IRA. Maybe REITs since it's simpler and easier plus then the ordinary income can be deferred / avoided.
You are correct. It's good to know you CAN invest in real estate using an IRA. You can also lend your IRA funds to someone else so THEY can invest in real estate.
REITS also make great assets for SDIRAs
David, I think the answer to the Beanie Baby question is clear. Instead of thinking should I be the owl or the bear, you should be asking how to be both the owl and the bear. Claim the mighty Owlbear as your Beanie Baby, and rule the Beanie Baby world!!
If you are not investing in AM2023X now, you are making a huge mistake......BUY BUY BUY ASAP!
Having an investment adviser is the best way to go about the market right now, especially for near retirees, I've been in touch with a coach for awhile now mostly cause I lack the depth knowledge and mental fortitude to deal with these recurring market conditions, I netted over $220K during this dip, that made it clear there's more to the market that we just don't know
😂
HELP - LOOSING INTEREST😢
I'm currently employed, I have about 130K+ in my 401K in which I rolled over 100K from my previous employer... My question is, how much of a percentage I can or need to take from my 401K (after rolling it over to a Self Directed IRA) in order to purchase my first rental? Can I just take the 20% of the agreed price from the Self Directed IRA to purchase a property? Also, mentioned about avoiding Prohibited Transaction, what would it happen if you or a family member do in fact live in this property? What would the consequences be? Thank you.
Love the laugh ❤
I've got 20k in 401k. Guess I'm not getting a house with that.
My self-directed ira buys a house for 100k. It appreciates and appraises for 200k. Can I personally buy the house from my SDIra at wholesale for 150k and sell it for 200k and pocket the 50k profit?
No. You can't buy or sell to or from yourself, ancestors, descendants or spouses of any of those.
Marq - What you can do is get an appraisal and withdraw the property from your SDIRA as a taxable event. You cannot personally purchase an asset from your retirement account.
@@uDirectIRA ok, thanks!
Can you purchase farm or ranch land with the Ira then lease it back to family ?
As long as you receive no "personal benefit" from your self-directed investment you're okay. The trick is to avoid Prohibited Transactions.
Who are the members of the "family"? My understanding is the prohibited transaction rules prohibit IRA transactions with your parents or your kids.
@@mikebarnes2294 Disallowed people are ascendents and decedents, yourself and your spouse, a 50/05 business partner or a fiduciary to the deal.
@@uDirectIRA Thanks for the amplification to my answer. I had been going off of memory and had not looked up the exact, specific details.
can you claim it on taxes if you used it the normal way for home investment
Because the self-directed retirement account is tax-protected, no, you would not take deductions like you do for the properties you purchase personally.
The only taxes a self-directed IRA property would generate would be on a separately filed Form 990-T, nothing would ever hit your 1040 besides a distribution from the IRA
David is a walrus beanie baby 100%
can I pay the principle of my mortgage on simple IRA?
If your mortgage is on a house owned by your SIMPLE IRA, then yes. If the mortgage is on a house you live in then no.
I think a male manticore for Henry’s beenie baby. See onward for female example
The almighty owl has spoken!
Tried to tell my mom about this and she didn’t want to do it. Lol
Send her this video
She’s smart
She’s smart. This is not a good idea.
Great episode, good to know about using a nonrecourse loan for the deal.
Be CC
lol lol David
Too many people trying to do real estate, too many real estate influencers. Everyone cant do it. Hundreds of youtube channels talking about it
You have to know what you are doing and that is a learning curve. Just like anyone, you can do it, you just have to be willing to learn it.
If you guys want to have tax free capital you can get it from your whole life policy with an IUL.
I would marry you David
😂 he probably is rich and has better options….😂
What about using a standard Roth IRA to simply withdraw from to fund a first-time home purchase? Can your basis in a Roth IRA be withdrawn at any time without penalties or income taxes?
You are correct and that would work. The purpose of a SDIRA is to invest for your retirement future. You can do that when your Roth buys the house and the renters pay the rent to the Roth account (or Traditional, SEP, SIMPLE or Solo(k)
If you wish to use IRA funds for personal use you can take a 60-day withdrawal once in a 12-month period. If you cannot pay back the "loan" then you will receive a 1099 and will have to pay tax on the amount withdrawn.
@uDirectIRA if I take $100k from SDIRA, how would the SDIRA be paid back And when would I get the property free and clear?
You cannot borrow from an IRA except for 60 days once in a 12-month period. The way a SDIRA works is that it purchases the property. If you have enough savings you can purchase the property free and clear. If you do not have enough savings you can partner with others or take on non-recourse debt.