Leverage $70K in my ROTH IRA to Buy Real Estate Investments

5 Replies

Hi Everyone! I'm new to BiggerPockets.com and am learning so much. I need to brainstorm ideas with regarding my situation so let me know what your thoughts are! 

My goal is to leverage my money, I have saved in my ROTH IRA ($70,000), to purchase a multi unit building or multiple properties to generate income for retirement.

My Current situation: I'm an Independent Contractor, not making very much per year. I have Perfect Credit but do not have money to put down other then what I have in my ROTH IRA.

I've thought of a few options:

1. Pull out what I've contributed, get a non transitional loan at a higher interest rate with 30-40% down on a property. 

2. Put it into a Self-Directing IRA and use the money as a down payment or multiple down payments.

3. Start a S-Corp LLC, start a 401k sponsored by the S-Corp LLC, do a reverse tool over from my IRA to 401k and then take a loan to myself out of the 401k and buy real estate.

4. Find an owner willing to do a land contract with only $10,000 down, so I don't have to touch the ROTH IRA... I don't see this done in Miami... maybe I should go door knocking?

Any other ideas? Thoughts? 

@Kathleen R.

There are certainly a lot of ways you could approach getting started in real estate. If you are looking at the Roth IRA money, your best option will be to establish a self directed IRA and use the capital you have to acquire properties.

Such an IRA can use leverage such as a bank mortgage or owner financing. The financing must be non-recourse and there is a tax implication on the income derived from the borrowed funds (UDFI), but this can be a very powerful means to invest using leverage and achieve a higher cash-on-cash return for your IRA dollars as a result.

You cannot rollover Roth IRA funds into a Solo 401k, although such a vehicle may be of interest to you going forward since you are self-employed.

@Kathleen R.

since you need income for retirement I would not recommend pulling money out of your retirement account, since you have a Roth IRA the big advantage for you is that you can invest and later take distributions tax free.

If you are to use your Roth IRA you also should consider other investment options such as trust deeds or mortgage notes. And continue to look for way to acquire property in your own name. Generally it is better to buy real estate in your own name since you get tax benefits now (which is not the case with your Roth IRA, that's why notes work great for that).

Also look for ways to make more money and utilize Solo 401k for the future investments.