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Old 06-18-2019, 06:02 PM
 
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Quote:
Originally Posted by H'ton View Post
As one of my options, I could transfer what I already have in my ROTH IRA (mutual funds) so it could be a cash transfer from my ROTH.... or very close to it.

I'm asking because I'm looking at buying a small lot to build a duplex, or 2 townhomes, or whatever you want to call it.

1/2 of the deal would be paid for with non-retirement funds. I would live in that unit as my primary residence. The other half would be built and managed as my ROTH as a rental property. This way, I can split the costs of land acquisition and construction down the middle.

This idea allows me to get a bigger lot than what I could if I wanted to build a small house. And I would ultimately own both units.

Again, I'm just in the brainstorming stage so I really appreciate your feedback!
i don't think you can use it yourself at all , it can only be 100% rental . i don't know if you can split it , but i am not versed in this at all so check it out with a pro
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Old 06-19-2019, 12:33 AM
 
6,943 posts, read 3,855,193 times
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Quote:
Originally Posted by mathjak107 View Post
much of the benefits of real estate are lost ...no depreciation allowance , no long term capital gains or zero tax bracket . no write offs , you cannot add money to pay for things that go wrong . you cant get a mortgage, it can be very very hard ....Only non-recourse financing is allowed. In other words, the IRA holder cannot personally guarantee a loan made to his or her IRA. As a result, in the case of a Self-Directed IRA, one could not use a standard loan or mortgage loan as part of an IRA transaction since that would trigger a prohibited transaction pursuant to Code Section 4975.

bet you did not realize all this stuff .
Do all these caveats continue to be valid if the property or properties are part of a REIT set up specifically to be owned by the Roth IRA? No depreciation for instance?
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Old 06-19-2019, 01:34 AM
 
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Quote:
Originally Posted by kokonutty View Post
Do all these caveats continue to be valid if the property or properties are part of a REIT set up specifically to be owned by the Roth IRA? No depreciation for instance?
i would think so ...
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Old 06-19-2019, 01:39 AM
 
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Quote:
Originally Posted by aslowdodge View Post
While there is no depreciation allowance , no long term capital gains or zero tax bracket, if it is in a roth I don't think there are any taxes because it is a roth account so cap gains and zero tax bracket don't apply . As far as write offs I believe all the standard ones apply against the revenues for book keeping purposes, but no depreciation.
actually yes , there were taxes on the money going in to that roth account so there are taxes paid and future gains are less by the tax bracket amount then say a traditional .

to get 5k in a roth takes 6400 in pretax dollars in the 22% bracket ... if that 5k doubles you got 10k

6400 in the traditional doubling is 12,800 in the traditional. if we use the same 22% bracket and pay the taxes it is the same 10k
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Old 06-19-2019, 11:01 AM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
5,434 posts, read 4,083,759 times
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Quote:
Originally Posted by H'ton View Post
As one of my options, I could transfer what I already have in my ROTH IRA (mutual funds) so it could be a cash transfer from my ROTH.... or very close to it.

I'm asking because I'm looking at buying a small lot to build a duplex, or 2 townhomes, or whatever you want to call it.

1/2 of the deal would be paid for with non-retirement funds. I would live in that unit as my primary residence. The other half would be built and managed as my ROTH as a rental property. This way, I can split the costs of land acquisition and construction down the middle.

This idea allows me to get a bigger lot than what I could if I wanted to build a small house. And I would ultimately own both units.

Again, I'm just in the brainstorming stage so I really appreciate your feedback!
Canít say for sure, but the deal sounds like a no go to me. No commingling
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Old 06-19-2019, 11:11 AM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
5,434 posts, read 4,083,759 times
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Quote:
Originally Posted by mathjak107 View Post
actually yes , there were taxes on the money going in to that roth account so there are taxes paid and future gains are less by the tax bracket amount then say a traditional .

to get 5k in a roth takes 6400 in pretax dollars in the 22% bracket ... if that 5k doubles you got 10k

6400 in the traditional doubling is 12,800 in the traditional. if we use the same 22% bracket and pay the taxes it is the same 10k
If the Roth is 5k and you pay taxes of 1400 when you contribute it thatís tax you pay because there is no tax defferered. But if Roth goes up to 10 k from appreciation or cash flow when you withdraw that 10 k there is no tax taken on it.
Roth has paid total of 11 percent on that 10k
The traditional is 22 percent as you say.
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Old 06-19-2019, 11:43 AM
 
485 posts, read 659,196 times
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Quote:
Originally Posted by aslowdodge View Post
Can’t say for sure, but the deal sounds like a no go to me. No commingling
It wouldn't be commingling, I'll draw up the deed and the land purchase and construction to be two separate properties. They would share a demising wall but the property line would go through the center line. I'd keep all costs associated with 'Unit A' in one bucket and all costs associated with 'Unit B' in another.
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Old 06-19-2019, 11:51 AM
 
485 posts, read 659,196 times
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Quote:
Originally Posted by mathjak107 View Post
much of the benefits of real estate are lost ...no depreciation allowance , no long term capital gains or zero tax bracket . no write offs , you cannot add money to pay for things that go wrong . you cant get a mortgage, it can be very very hard ....Only non-recourse financing is allowed. In other words, the IRA holder cannot personally guarantee a loan made to his or her IRA. As a result, in the case of a Self-Directed IRA, one could not use a standard loan or mortgage loan as part of an IRA transaction since that would trigger a prohibited transaction pursuant to Code Section 4975.

bet you did not realize all this stuff .
I'll answer you concerns here:

much of the benefits of real estate are lost ...(A)no depreciation allowance , (B)no long term capital gains or (C)zero tax bracket . no write offs , (D)you cannot add money to pay for things that go wrong .

A) Ideally, I'll pay for the property with money already in my ROTH IRA so my ROTH will own the property PLUS, the rental income generated from the property would be reinvested and the growth would be TAX FREE as per the rules of a ROTH IRA investment.

B) There will be capital gains but the growth in the value of the Real Estate, if/when I were to sell, wold be tax free.

C) Again, this is a ROTH IRA. The investment will be contained within the ROTH IRA umbrella investment.

D) The money left in the ROTH IRA wold be used for maintenance items. The profit will be reinvested. For large items, i will have insurance or again, the maintenance costs could be withdrawn to maintain the ROTH IRA investment.
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Old 06-19-2019, 11:59 AM
 
71,463 posts, read 71,652,652 times
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Quote:
Originally Posted by aslowdodge View Post
If the Roth is 5k and you pay taxes of 1400 when you contribute it that’s tax you pay because there is no tax defferered. But if Roth goes up to 10 k from appreciation or cash flow when you withdraw that 10 k there is no tax taken on it.
Roth has paid total of 11 percent on that 10k
The traditional is 22 percent as you say.
Either way balances net out the same..kind of like the old double the price and give a 50% discount ...they net out to the old price with no discount
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Old 06-19-2019, 12:32 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
5,434 posts, read 4,083,759 times
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Quote:
Originally Posted by mathjak107 View Post
Either way balances net out the same..kind of like the old double the price and give a 50% discount ...they net out to the old price with no discount
No they donít. Not when you factor in real estate into having a Roth over traditional IRAs.
If in year one you earn 6400 and invest in a traditional account you would put in 6400 total deferring income tax. If in 3 years it quadrupled you would have 25600. Withdraw it all and you pay the 22% tax which is now a total to you of 19968. Then itís gone.
In the case of the Roth itís 20,000 so itís a few dollars more. In the case of the asset going up an equal amount you are close enough.
In the case of real estate the difference is the cash flow every year that would be tax free. In my case I paid to purchase the real estate and paid the tax up front. But because it produces 24k every year tax free that is where you get the advantage of combining it with the Roth. This is on top of any appreciation and cash flow that accumulated during the years prior to taking withdrawals out after 59 and a half.
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