Investing with pre-tax dollars?

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Hi everyone, I've been devouring some recommended books over vacation and one book made a point that actually blew my mind.  It stated if you buy a $50,000 home with traditional W-2 income, I truly"paid" $75,000 pre-tax dollars for the property.  In other words, I had to earn $75,000 to buy a $50,000 item.  This fact finally made me realize the benefit of "pre-tax" saving/allocating and the power of passive income to use for future purchases.  

Now, I've listened to around 70 podcasts, read quite a few books and in my recollection the only way to use pre-tax dollars for real estate is through a self directed IRA which is more appropriately used for notes than a rental property.

Is there any other way to allocate W-2 income pre-tax to use for investment property purchases?  


Maybe HSA or ESA? I'm smiling as I type that, but if it's possible with an IRA...

I just spent a ton of time researching this thing myself since we are in tax season. STAY AWAY FROM THE IRA! In my research the only way to go is a solo 401k that is self-directed where I have the ability to invest in non-traditional assets such as real estate. It is not that you can't do a IRA, but boy once you compare the two you will realize just how many disadvantages the IRA has (along with a SEP too); where-as the 401k does not. It is check-book so I am the sole trustee (versus a custodian even if you set up a LLC in a IRA), I can borrow up to $50,000 or 50% of my invested balance for ANY personal use, I have the ability to have a sub-Roth account that does not follow the typical income requirements of a Roth IRA. I can deduct around $50,000 in pre-tax dollars! From a real estate perspective the good thing about the 401k it is not subject to UDIF (unrelated debt financed income) on leveraged real estate, which happens when I borrow money (mortgage) to buy a property. With a IRA or SEP you will run into this problem and it is going to be a huge tax hit. Granted, you need to keep in mind that the loans must be non-recourse in a 401k, but I have the option down the road to include a LLC in my 401k for extra protection, and have that "arm" be my RE investing tool.

Check out this thread for more info:

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