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Old 06-18-2019, 11:56 AM
 
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Anyone here have experience using their Roth IRA to invest in real estate property?

If so, what steps did you have to take (lawyer, accountant?)

Also, say if it was a rental property, how did you document the annual "cost" (taxes, maintenance, mortgage, etc.) from the ROTH Real Estate to the left over profit (left over money from the rent you charged)?

Or if you used your entire ROTH to "invest" in the Real Estate, in cash...how did that work out?

I am considering this option but am just getting started to explore this route.
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Old 06-18-2019, 01:01 PM
 
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It’s not a easy process and you remove the ability to deduct a number of things from your income taxes that are typically associated with real estate investing
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Old 06-18-2019, 01:27 PM
 
574 posts, read 652,730 times
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Quote:
Originally Posted by H'ton View Post
Anyone here have experience using their Roth IRA to invest in real estate property?

If so, what steps did you have to take (lawyer, accountant?)

Also, say if it was a rental property, how did you document the annual "cost" (taxes, maintenance, mortgage, etc.) from the ROTH Real Estate to the left over profit (left over money from the rent you charged)?

Or if you used your entire ROTH to "invest" in the Real Estate, in cash...how did that work out?

I am considering this option but am just getting started to explore this route.
What you are talking about is a self-directed Roth IRA. Find a good CPA to help you get started. Why? You will have setup costs including finding an account custodian willing to handle—and experienced in the rules covering—real-estate purchases.

You can't buy real estate and place it into a Roth IRA or other retirement account. You have to already have the money in your retirement account and purchase real estate from your account.

You may want to take a look at REIT.

For real estate investing, nothing beats 100% ownership of the property yourself and hire a company to manage the property.
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Old 06-18-2019, 01:31 PM
 
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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 .

Last edited by mathjak107; 06-18-2019 at 01:45 PM..
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Old 06-18-2019, 02:15 PM
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,384 posts, read 2,003,737 times
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Quote:
Originally Posted by H'ton View Post
Anyone here have experience using their Roth IRA to invest in real estate property?

If so, what steps did you have to take (lawyer, accountant?)

Also, say if it was a rental property, how did you document the annual "cost" (taxes, maintenance, mortgage, etc.) from the ROTH Real Estate to the left over profit (left over money from the rent you charged)?

Or if you used your entire ROTH to "invest" in the Real Estate, in cash...how did that work out?

I am considering this option but am just getting started to explore this route.
Pretty siimple. We checked the box for full liquidation on the downloaded distribution form with money to be direct deposit to a previously setup checking account. We used the proceeds as a down payment for our condo, initially as a short-term rental and now our permanent residence.

I have no idea why you would need a lawyer, accountant, or financial advisor to make this transaction.
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Old 06-18-2019, 02:26 PM
 
72,940 posts, read 72,772,553 times
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Quote:
Originally Posted by leastprime View Post
Pretty siimple. We checked the box for full liquidation on the downloaded distribution form with money to be direct deposit to a previously setup checking account. We used the proceeds as a down payment for our condo, initially as a short-term rental and now our permanent residence.

I have no idea why you would need a lawyer, accountant, or financial advisor to make this transaction.
Why . Because he is talking a self directed ira with investment real estate not cashing out the ira ...two totally different things..

You have totally different rules and tax implications..

by making your condo a rental first , if you did this after 2007 then you do not get the full exclusion for it being your primary if you sell later .

The 250k or 500k tax free profits get prorated over the total ownership time .... plus all depreciation has to be paid back when you converted to a primary
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Old 06-18-2019, 03:13 PM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,896 posts, read 40,396,463 times
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I use an LLC within one of my self directed IRA's to own RE.

Works very well for this particular segment of my investment portfolio.

Lots of rules to get started, but pretty simple to maintain.
NO co-mingling funds,
NO personal use / benefit from IRA owned assets.
NO deductions (choose your properties wisely for this type of investment)

You need a fiduciary

This one was good, but keep raising fees (~ $200/ yr per entity (which my LLC is ONE entity, but can own multiple props))
https://www.iraservices.com/
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Old 06-18-2019, 04:21 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
5,678 posts, read 4,214,904 times
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I have done it and used the services of a company to help me set it up.
I used 150K I think. Bought real estate. No write offs except for hard expenses like repairs, fees, taxes, but despite that it will generate an income of about $26K a year tax free from the rents collected after expenses.
You also cannot manage the properties on day to day operations, a property manager has to do it. That's not to say you don't have a say in decisions.
Along with the cash flow the properties have gone up about 40% in value over the last 4 years.
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Old 06-18-2019, 04:27 PM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
5,678 posts, read 4,214,904 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 .
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.
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Old 06-18-2019, 05:21 PM
 
490 posts, read 666,538 times
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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!
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