Who has had Success with SDIRA?

Question

Dmitriy Fomichenko · Answer

When you borrow from your 401k you have to pay interest on the loan, but the good news is that you are paying back to yourself.

Justin Windham · Answer

@Mike Reynolds The interest rate on your participant loan will be prime + 1%. As @Dmitriy Fomichenko mentioned, it will be interest that you pay back to your own plan.

@Tom Wilkins I also believe there is potential benefit to holding a number of different asset classes in a self-directed IRA or 401k, including real estate. I agree with @Brian Eastman's comments here.

Brian Eastman · Answer

@Tom Wilkins

I have held both rental property and notes in my self-directed IRA.  The growth in value has been consistent and vastly superior to what I experienced when my retirement savings was locked up in an employer 401k plan.

Both asset classes make sense.

As @John Thedford states notes are a great asset.  They are simple, secure, and provide consistent income.

I consistently disagree with John's assertions that it does not make sense to hold rental property in an IRA.  Sure, you do not get tax deductions, but you don't get those on any investments in an IRA because the income is not taxed in the first place.  However, rental property provides for appreciation, or the ability to add value via rehab work, neither of which is possible with a note.  Your IRA can also use leverage with a mortgage when investing in real property.  One can generate more significant return to the IRA in some cases with the right property deals.

Ultimately what you are looking at with a self-directed IRA is can you have greater security of your principal and better overall long term return on investment than you can by leaving the savings in conventional assets.  It is a diversification move, and nothing else.

It is very easy to use a self-directed IRA within the IRS guidelines, so long as you make sure to be aware of those guidelines.  Seek guidance from a professional plan provider and your CPA.

John Thedford · Answer

Tax benefits. I do mortgages with my retirement funds.

Account Closed · Answer

Success with an SDIRA is a combination of knowing your investments and the relationship with your IRA custodian. I can walk you through some pros and cons, but essentially with the right kind of SDIRA you can make as much as you want investing in what you know. Some people do not want to create taxable (business) income inside their IRA as IRAs have to pay income tax on UBTI. Other clients see it as a cost of an otherwise awesome net return. You want to steer away from any prohibited transactions.

Erik Kubec · Answer

I used an SDIRA to buy a condo cash 100%.  I pay a property manager to run it.  I use equity trust company in addition.  I converted it to a solo 401k, and can borrow $50k from it.  It made sense at the time--condos were selling for  $35k.  There is a degree of complexity to it.  That seems to be the down side.  The mistake I made was not converting it to a Roth IRA immediately at low market value rate.

Mike Reynolds · Answer

I am getting a solo k. What I plan on doing is borrowing from it and using that money to invest with buy and hold. Then take the proceeds of the rent to pay back the loan. I haven't done this yet as I am in the process of getting it all in order. I am also double checking with my lawyer and CPA to make sure I wont get into trouble. But if I am thinking correctly, I can get a zero interest loan, pay myself back and still get tax advantages.

If anyone sees this as prohibited please let me know. I am looking for all the insight I can get.

John Thedford · Answer

you have no tax benefits to mortgages outside of your retirement account

Who has had Success with SDIRA?

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