Invest in Syndication with IRA vs Cash

3 Replies

I am trying to decide if to use self directed IRA or cash to invest in a syndication project. Is there any advantages such as tax savings, depreciation for using Cash? I understand that using IRA it could be subject to UBIT because of the debt financing for the project but that seems not to be a huge amount. Other than that, what additional benefits can I get with investing with Cash? Thanks.

@Li Tolentino

I think you need to look at this from a different perspective. If you have both, savings and funds in an IRA, you need to look at each individually, not trying to compare one to another.

If you have money in your savings, you need to ask yourself: should I leave those funds in a savings account earning 0.5% interest, or would it more beneficial for me to invest those funds in a syndication? The fact that you have an IRA has very little to zero affect on your decision.

Now, you should also approach your IRA investing similarly: if you have an IRA would you rather leave it invested in the stock market, which is subject to higher risk and you have zero control over, or would you rather invest those funds into some alternative investment opportunity such as syndication (or buying rental, or being a private lender, etc.).

Again, this is not "either or" question. If you have funds in both: taxable and tax-deferred accounts, you need to be wise steward of all of your resources. Make your decisions accordingly. 

@Li Tolentino I completely second @Dmitriy Fomichenko advise. To add to that, determine the tax consequences of each transaction including what are the tax % and whether the taxes will be deffer-ed or the returns will grow tax free (Roth versus regular IRA) and factor these results into your decision as well!

@Li Tolentino

Maybe consider investing both types of funds. By investing with your IRA, the gains will grow on a taxed deferred basis. By investing with personal funds, you can have access to the gains and pay capital gain taxes.