Lender · Lakeland, FL · Member since 2021 · 9 posts · 5 votes
Hello, I am posting to see if anyone has had experience with a lender that specializes in loans for Self Directed IRA's? I finally pulled the trigger and moved my Roth away from Wallstreet! As I analyze investment options, I am just curious to see if anyone else has executed this and has any input.
There are a handful of lenders that specialize in non-recourse loans and are familiar with IRS guidelines. Not all will lend in New York.
First Western Federal Savings
North American Savings Bank
Solera National Bank
Titan Bank
Be sure to check with your plan provider and tax professional to understand how leverage works in an IRA. The portion of income attributable to the borrowed funds in the deal is taxable as Unrelated Debt-Financed Income. You will want to understand both the tax impact and the administrative requirements surrounding reporting and your IRA paying the tax.
The net result is that your IRA gets to use leverage and create higher cash-on-cash returns as a result. The tax on UDFI will put a dent in the boost that leverage provides, but will not come close to canceling out the benefits of investing using other people's money.
There are a handful of lenders that specialize in non-recourse loans and are familiar with IRS guidelines. Not all will lend in New York.
First Western Federal Savings
North American Savings Bank
Solera National Bank
Titan Bank
Be sure to check with your plan provider and tax professional to understand how leverage works in an IRA. The portion of income attributable to the borrowed funds in the deal is taxable as Unrelated Debt-Financed Income. You will want to understand both the tax impact and the administrative requirements surrounding reporting and your IRA paying the tax.
The net result is that your IRA gets to use leverage and create higher cash-on-cash returns as a result. The tax on UDFI will put a dent in the boost that leverage provides, but will not come close to canceling out the benefits of investing using other people's money.
While your point is not technically incorrect, you are asking the wrong question. We see this line of questioning a lot.
Turn it around. Why invest an IRA in stocks when you can invest in an asset like a rental where you have better principal protection and more control over the outcomes?
Comparing an IRA investment to a personal investment is apples and oranges.
All that matters to the IRA is the best mix of securing and growing the value of the account. Whether an asset may or may not have different advantages in the taxable world is neither her nor there.
When evaluating the best investments for an IRA, you have to compare to other things that can be done with the IRA. For many retirement savers, real estate is a vastly superior option to conventional IRA investments.
Lender · Lakeland, FL · Member since 2021 · 9 posts · 5 votes
3y
Hi Alexander,
I appreciate your input, at this point I am in the investment analysis phase and am just looking for opinions on those who have executed this.
I am aware that the Roth is tax efficient already and real estate does not get the same tax benefits when purchased in a roth. However, I am seeking the best ROI for the Roth at this time, not trying to maximize writeoffs and deductions. I can observe tax benefits from purchasing real estate with my own capital, and differentiate my retirement funds into a real estate project that I would not want to live in or manage, and observe a better return than anything I have recieved from Wallstreet.
My goal is to be entirely hands free if possible. I am exploring several options in syndications, promissary note's, crypto mining, and the start-up investment fields.