Self-Directed IRA: Yes or No??

Question

Hello,

I'm still a newbie around here and I've read a lot about SDIRA but am still not sure if it's right for me??  I've come across some great real estate opportunities but not sure my options to fund them.  My question is:  Did you use a SDIRA and was it a good decision?

Thanks for all your help!!
	Kelli from Des Moines, Iowa

Dmitriy Fomichenko · Answer

@Kelli Ell

there are several considerations to help you decide if you should use SD IRA. First, you need to look at your current retirement account and see where your funds are invested and what kind of returns your account been generating over the last few years. Conventional IRAs are limited to conventional investments such as stocks, bonds and mutual funds. Most people that I speak with daily have very low returns 1-5% over the last 5-10 years, some even lost money. If you do it right with real estate you can have double digit returns. And with SD IRA you are not just limited to real estate, your investment options are virtually limitless. So ask yourself, do you want to keep your retirement funds invested as is or would you like to gain control and a lot more investment options?

Kelli E. · Answer

Thanks @Dmitriy Fomichenko & Account Closed

I appreciate you both for taking the time to respond.

Thanks!Kelli

Paul Timmins · Answer

Kelli

Check out a local self directed IRA custodial firm let them show you what is possible.

Two Great reads, I bought both J. Scott The Book on Flipping Houses,The Book on Estimating ReHab Costshttp://www.biggerpockets.com/flippingbook

Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and all the cash buyers (rehabbers) you will need.

Paul

Mark Nolan · Answer

You may also want to consider exploring the solo 401k for investing in real estate as it can be leveraged without subjecting it to UBIT.

Brad Johnson · Answer

I believe self directed IRAs are compelling vehicles to make passive real estate investments, but there are certainly trade offs.

A SDIRA investment would forgo the benefit of non-cash expenses (depreciation) but would enable the investor to defer taxes until IRA distributions are made. This enables the investor to grow their portfolio with additional tax-deffered funds, which can be used to purchase larger (or additional) real estate investments. Depending on your situation and your investment, this might more than make up for your inability to offset taxes via depreciation.

Furthermore, the illiquid aspect of direct real estate ties nicely with the "illiquidity" of your IRA account. You can't cash in your IRA before you hit retirement age without taken a stiff penalty and you can't simply trade away your real estate when the mood strikes you.

The longer term nature of real estate and IRA investments enable investors to stay calm in the face of temporary setbacks / challenges and allow ample time to execute a turnaround or investment strategy. Of course this isn't as applicable for IRA investments made in housing flips, but for those individuals investing in larger multifamily or commercial buy and hold RE investments, SDIRAs can help you gain exposure to direct real estate and realize superior cash flow returns relative to most other passive investments.

One final note - Our investors seem to prefer Equity Trust, but I'm sure most of the larger custodian's are quite good.

Edwin Cruz · Answer

One of the best books I read was “Learn How to Purchase Real Estate in Your IRA” by Matt Allen. It gives all the pitfalls and covers any gray area when using your IRA.

Self-Directed IRA: Yes or No??

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