I’ve been investing in my 401k for over a decade now and have taken very little interest in it. I want to be more hands on but the truth is that sticks and bonds don’t capture my imagination enough.
Another issue I have is that I’ve seen better returns on my 12 months of RE investing than I see on average in the decade of my 401k.
Who here does a Self Directed IRA for real estate? Pros? Cons? Do you buy properties out right, or use the SDIRA for down payments only? Do you use your IRA as a private lender?
Thank you for any help or direction you give!
I use my SDIRA to invest in syndications. I have friends and investors who use theirs for other strategies as well, including private lending, funds, and rentals. In my opinion rentals are the least ideal, due to restrictions on debt and the restrictions SDIRAs have in terms of preventing you from doing work on your own.
@William Durel , hello I'm in the beginning process of reinvesting my 401k also. My interest in converting my 401k to a self-directed IRA is to invest in real estate long-term. Being over 59 + 1/2 I can roll my company-sponsored 401k 2 a custodian for a self-directed IRA. Also from what I understand adding an LLC gives you checkbook control of your IRA. Which can cut out some of the administrative fees when purchasing rental properties. I was turned on to BP and the suggestions create new questions for me. I keep digging for as much info as possible before I make the switch I would say do the same. Advice from a newbie haha.
@William Durel Real estate will very often beat out anything a 401k can offer. In fact most of the time, the earnings on a 401k are misleading because when calculating those returns the funds do not properly account for the losses from previous years.
A 10% return in year 1, with a 10% loss return in year 2, followed by a 10% return in year 3, does not equate to a 10% return overall.
However this is entirely how the picture is painted for these funds.
Invite you to read "Heads I win, Tails you Lose" by Patrick H. Donohoe.
Although I do not use a SDIRA, I do work with investors/partners who do and there are some great benefits with getting the tax advantages of an IRA while realizing the returns of real estate. And when those returns on real estate also benefit from the tax advantages of an IRA, well that's pretty great too.
Some drawbacks I have seen can be attributed to slowness of access to capital, rollover time from other accounts and understanding the UBIT. Just google UBIT SDIRA.