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Does anyone have any experience with this? I'm looking at my IRA and thinking about taking a portion of it to buy a share of commercial property that yields 8% ROI. I would not physically own the property, just receive a K-1/partnership status. Since I don't need the money for 30 years I figure 8% is a good safe yield with potential upside with rental increases or if the property gets sold some day.
You lose all the benefits of owning real estate , no depreciation , no special long term capital gain rates , no passing on tax free to heirs.
Difficult to get a mortgage and use leverage and if you need money for repairs it cannot come from outside the ira.
Leverage shouldn't make it more valuable, given the Modigliani-Miller theorem. You get the same benefit by giving up fixed income holdings, and the interest you forgo is usually below a mortgage rate anyway.
Let me clarify further. As a k-1 investor I don't physically own the commercial real estate. i am not responsible for repairs. I just receive a check every quarter with a nice dividend.
Advantages:
I am able to buy into a large piece of commercial real estate which I couldn't normally own. This particular shopping center I am buying into cost 10 million
Good Dividend
Lease Increases every year
Capital Gain if capital partner decides to sell
No renter headaches
Easy tax filing
Disadvantage:
My money is tied up for a long time
I don't have control of the property
Let me clarify further. As a k-1 investor I don't physically own the commercial real estate. i am not responsible for repairs. I just receive a check every quarter with a nice dividend.
Advantages:
I am able to buy into a large piece of commercial real estate which I couldn't normally own. This particular shopping center I am buying into cost 10 million
Good Dividend
Lease Increases every year
Capital Gain if capital partner decides to sell
No renter headaches
Easy tax filing
Disadvantage:
My money is tied up for a long time
I don't have control of the property
My goal is simply to get a better yield.
Your IRA is tied up anyways. There is usually some type of provision to get some of your money out. The grade of the investment really depends on the management team. It it just like buying stock in a company. You really don't want control of the property and don't expect them to ever sell. As far as control of the property, can you comprehend controlling a 10mil property, I'll pass and hire professionals.
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yield with no headache
