How to use Retirement Funds for Investing

16 Replies

@Amanda Han, I could use your help here...Meanwhile BP Nation, I need to know if it would be wise to move my money from a simple IRA to a Self-Directed IRA. I listened to Amanda's Podcast show #49 and it just seems to make sense. let me know what you think

In general, I believe it's important to focus on your timelines when trying to answer this question, and everyone has a different timeline. There are also different timelines when investing in real estate, for example a fast and simple flip or a buy & hold. 

Therefore, it really depends on the person in my opinion. Historically, the S and P 500 performs around 8% ROI annually. Possibly, if you believe your real estate investments will outperform this, including your time invested than it may be worth the adventure.


Joe Marini

@Christopher Bannister I have used self direction for real estate for over 2 decades. I come from a real estate back ground. I always think you should be in control of your investments but also knowledgeable in your investments. I liked self direction so much I started a company to administer SDIRAs. I’ve never looked back and found real estate to be lucrative in tax advantaged plans. Invest in things you know and understand and if you need an SDIRA for that then get one. Many clients diversify and have both brokerage iras as well as SDIRAs. They are not mutually exclusive. Good luck.

@Joe Marini thank you, appreciate the advice given and will look further into it. I haven’t made my first investment yet, but the niche I’m going to stick with will be buy and hold and flipping, emphasis on buy and hold for cash flow.

I wanted to bring this question to light because I wasn't sure if it would be wise to use that money on a flip if there was enough meat on the bone for all parties to make a nice profit. If the profit margin is there based on the deal, I believe my ROI will be much greater if I were to transfer funds. But I will be cautious and do more due diligence prior to pulling the trigger. Again, thank you!

@Christopher Bannister what intrigues me about your question is that you mention a Simple IRA (note capitalization). By 'simple' did you mean a 'regular' IRA, or did you mean a Simple IRA established for a small business? If the latter, and if the business is owned by you only, there may be advantages to rolling it over to a solo 401(k). See the IRS rollover chart for a breakdown of the alternatives open to you.

Also, buy and hold investments are common in self-directed IRA accounts, but flipping much less so. The reason is that too many flips in a year might look like your IRA is conducting business rather than making an investment. This could subject it to Unrelated Business Income Tax (UBIT).

Finally, I see that you live in Wilmington, DE.  You're less than an hour's drive to @Carl Fischer at CamaPlan.  If he's agreeable, I suggest you see if he can find some time to meet with you.

@Carl Fischer I would like to contact you this week if you'd have the time to further discuss this.  When talking with "financial planners", they typically aren't knowledgeable with regards to Real Estate Investing and tend to steer away from it, seems I have the best of both worlds with you and I'd like to pick your brain a bit more about this matter. 

@Alan Johnson It is a Simple IRA for a small business. I see you have a lot of experience as well and appreciate the feedback. I'm going to try and connect with Carl this week, but I'd also liked to keep in contact with you as well while I'm trying to get this figured out to make sure I'm making the right decision.

@Alan Johnson I needed that good laugh and I’ll be more than happy to meet up with you when I get off the road. I’m actually getting ready to head out of town now on my way to Atlanta, GA…but I should be back this weekend. Either way, I’d like to meet up to discuss this further and I’ll be sure to have my prescription from Dr. Jack Daniels with me, his vaccine shots are awesome!!!

@Christopher Bannister

Seeking self-direction a good way to diversify your retirement assets into real estate. A lot of members on Bigger Pockets are more familiar with real estate and feel like they can get a better return compared to the traditional assets that most retirement accounts are stuck with. Keep in mind that a self-directed IRA can be structured to invest into traditional, as well as alternative assets so you can add options instead of trading one set of restrictions for another. This is generally a good way to increase the chances of getting good returns from your retirement money. If you are self-employed, a Solo 401k might be an even better structure for you to look into.

@Justin Windham So what you're saying is that I can keep investing in stocks, as well as Real Estate, with a self-directed IRA? that's what I'm getting from that. If so, that's a great way to diversify, but wouldn't you agree that the ROI in Real Estate would bring greater returns?

@Christopher Bannister

Yes, I am saying you can invest into stocks as well as real estate with the SDIRA or a Solo 401k. I agree, most investors can get better returns in real estate or other alternative assets, but the real benefit here is that each investor can choose the assets that work best for their situation rather than being arbitrarily limited to one asset class. 

@Christopher Bannister If you intend to purchase real estate using SD funds and keep the loan inside your SDIRA. You can use a non recourse loan to provide additional leverage to give you more purchasing power.  For example: 100k house, 40% DP from your SDIRA and 60% comes from the NR lender for the financing. Hope this helps.

@Christopher Bannister

SDIRA and Solo 401k investments vary quite a bit from one investor to another. A lot of investors like to hold rental real estate, while others prefer to fund private loans from the account. Tax liens and tax deeds are popular investments for some. Syndications, private placements and crowdfunding investments can be popular too. We have seen crypto currency investing get a lot more interest as well. While some of this may be threatened by proposed legislation at the moment, especially for IRAs, self-directed investors have generally had the ability to invest into any asset class except collectibles. 

Originally posted by @Christopher Bannister :

@Amanda Han, I could use your help here...Meanwhile BP Nation, I need to know if it would be wise to move my money from a simple IRA to a Self-Directed IRA. I listened to Amanda's Podcast show #49 and it just seems to make sense. let me know what you think

Absolutely. I did that maybe 10 years ago. I converted to a ROTH IRA and paid the tax. My IRA now owns 5 houses and is worth substantially more than when I started.