Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
8y
@Debb Childs, congrats on your first forum post, I see that you have been a member for over two years, what took you so long to finally participate in this awesome resource??
Brian gave you pretty good overview. I just want to add that retirement accounts are designed to be invested passively, a better use for your Roth IRA money would be to simply be the bank and lend it to another flipper.
Firstly, are you knowledgeable about flipping? Investing in what you know can make sense and a self-directed IRA can allow for that.
Flipping with an IRA has complexities. Firstly, everything must be done at arm's length and exclusively for the benefit of the IRA. This means you can make basic administrative actions such as selecting vendors and paying the bills on behalf of the IRA, but may not personally benefit such as by paying yourself for management. In the reverse, you may not add value to the IRA via the provision of goods or services. So no swinging hammers, pulling permits in your own name, etc. You get to be a fund manager.
Secondly, flipping is a business. When an IRA receives income from a trade or business on a regular or repeated basis, it can become subject to a tax known as UBIT which is meant to level the playing field and protect tax-paying businesses from unfair competition. You will definitely want to consult with experts on this topic. It may make more sense to be a lender to other flippers or invest in rental properties - both of which create passive (non taxed) earning in an IRA.
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
8y
@Debb Childs, congrats on your first forum post, I see that you have been a member for over two years, what took you so long to finally participate in this awesome resource??
Brian gave you pretty good overview. I just want to add that retirement accounts are designed to be invested passively, a better use for your Roth IRA money would be to simply be the bank and lend it to another flipper.
Rental Property Investor · Seattle, WA · Member since 2018 · 129 posts · 163 votes
8y
I would agree with Dmitriy, being a hard money lender myself it's the best way to get "easy" returns. Unless you have accumulated over $250K (IMHO) and want to acquire rental property. Then you can get non-recourse loans for 500K (50% LTV in this example) PP for multi-family and build personal wealth that way.