Self-directed IRA in RE investment and mortgage notes. Benefits?

Question

Recently I had questions about moving or withdraw funds from former employer 401K account to invest in RE.  I've learned it takes a lot of impact with taxes and penalties and better off to move funds to Self-directed IRA.

Someone suggested to move the 401K funds to self-direct IRA and invest in RE and mortgage notes, since the move will not take taxes or penalties implications.  I'm not sure how this works.

Any help from experienced investors with this type of transactions?

Thank you,

Josue Vargas, P.E.

Carl Fischer · Answer

@Josue Vargas

You are correct in not investing in something you don’t understand. When your ready to learn more, checkout SDIRA websites and attend some classes. In addition, The mid Atlantic summit scheduled in October in Philadelphia will have a lot of the BP heavy hitters (@Dave Van Horn @Brian Adams @Matt Faircloth @joe fairless @j. Martin @paul Moore and many more) attending and your knowledge and network will be expanded greatly. This is a non selling educational event.

George Blower · Answer

@Josue Vargas

Here are some items to considering when investing a self-directed IRA in notes.

• The note cannot be to a disqualified party such as the IRA owner and most of his or her family members. 
• The IRA custodian is listed on the note as the lender (beneficiary) for the benefit of your IRA.
• All payments flow back to the IRA and grow on a tax deferred basis. 
• The note can be structured as secured or unsecured.  It is preferable to invest IRA funds in notes secured by real-estate in the even of default by the borrower.

Dmitriy Fomichenko · Answer

@Josue Vargas

Typical financial consultants do not have any experience nor knowledge about alternative investments. I understand that you don't have any experience with this but you would have to learn, it's your money and no one is going to care more about this than you. There are many of us here on BP who have experience and will be glad to guide you, but ultimately you have to invest your own time and be willing to learn. You are welcome to PM me so we can arrange a quick call and chat about this.

A good place to start would be to invest in a note fund. Contact @Dave Van Horn, he manages few of such funds, you don't have to do any work yourself, just invest and start receiving monthly checks. You can start with as little as $10K (I believe), but I think you must be accredited to invest (if I remember correctly). Later on you can invest in individual notes.

Brian Mcmenamin · Answer

@Josue Vargas I self-directed my IRA and bought a performing note. It was a great way to earn some passive income and performs a lot better than the mutual funds it has been sitting in for past 7 years. PM me if you have more specific questions. Best of Luck

Robert S. · Answer

@Dave Van Horn Thank you for the heads up.

Kevin Evans · Answer

Great info Dmitriy. You always have your finger on the pulse of the market my friend

Dmitriy Fomichenko · Answer

@Josue Vargas

Your understanding is correct: when you take money from your 401k before normal retirement age - you would have to pay taxes and penalties on the amount withdrawn, in most cases this is not a wise financial move.

Alternatively you can move these funds into Self-Directed IRA, without any tax implications. Then you have the freedom to invest into virtually any asset: real estate, mortgage notes, precious metals, multi-family syndication, note funds, private lending, etc. etc.

Investing in notes is my favorite for retirement accounts for several reasons: passive investing, low risk (if you do your due diligence), good returns.

This topic has been discussed here on the forum many times, I suggest you search the forum for the related discussions and you can learn a lot.

Dave Van Horn · Answer

Hey @Robert S. and @Josue Vargas

We just announced early bird tix to the public today! Plan to cover notes and retirement account investing (among other things) in our lineup of speakers/panelists/breakout sessions.

Here's the link to the website if you'd like more info:

https://midatlanticsummit.com/

And Josue, @Dmitriy Fomichenko is correct in his response above, but if you have any questions feel free to reach out via PM!

Carl Fischer · Answer

@Robert S.

Of course your welcome!

Robert S. · Answer

@Carl Fischer Thank you

Self-directed IRA in RE investment and mortgage notes. Benefits?

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