All Forum Posts by: Bernard Reisz

@Su Lee Glad to provide the link to the podcast hosted by @Taylor L.

It's accessible at: https://www.passivewealthstrategy.com/self-directed-ira-myths-what-are-udfi-and-ubit-with-bernard-reisz/

The question that you're looking to get answered is addressed (I believe) somewhere in that episode, but there are certainly other great resources for that - as well as plenty of unreliable resources on the web.

When looking for an account-type for yourself, the best guidance that I can give is that you work with a company that provides multiple account-types (401k/QRP/SDIRA/401k-LLC/QRP-LLC/IRA-LLC, etc.) - so that you get the account that fits you best.

A service-provider that only delivers a single account-type is too likely to mislead and misinform, because these are definitely not "one-size-fits-all." 

@Account Closed There are multiple approaches to leveraging 401k-plans and other tax-sheltered accounts for real estate investing. 

@Yonah Weiss has pointed out (Thanks for the mention!) that accounts can be established for direct real estate investment, such that property is owned by the IRA/401k/QRP - rather than taking a loan or distribution to invest.

Regarding your specific question:

• Payment terms for plan-loans are governed by the IRS, plus your employer and plan admin. Banks may offer you more, or less, favorable terms. For example, the plan-loan must be amortizing.
• You may be able to leverage a lot more and get greater flexibility with a HELOC.
• HELOC doesn't become due if you change your job.
• HELOC does, theoretically, expose your home to some risk.
• HELOC interest will be tax deductible if used for investment.

@Joe Schultz While multiple account types can be used for real estate, business owners should (generally) not be using an IRA-based account. For multiple tax & financial reasons business-owners that don't have full-time employees should use a QRP-based account [e.g., Checkbook401(k)].

Rather than get too verbose over here, I'd refer you to a podcast I did with @Taylor L., who's also provided helpful info to you in this thread.

@Yonah Weiss Appreciate the tag - and honored.

@Yonah Weiss Appreciate the honorable mention!

@Costin I. can be relied upon for very thorough analysis and presentation. Always very informative - even if I may not fully agree with everything. :) 

@Jay Hinrichs No-nonsense, hard-hitting, uncommon common-sense.

@Michael Plaks Always ready to provide invaluable insight and practical perspective on tax - and other matters.

@Chris K. Reasonable and grounded legal perspective.

@Alina Trigub Appreciate the mention!

@Michelle Phelan Definitely a great strategy to consider, but as pointed out by @Scott Jensen there are many "gotchas," which come in the form of "unknown unknowns"  and unintended consequences. Ideally, you're looking to work with someone that can appreciate all the potential implications, considering your tax and financial profile. A traditional financial advisor or CPA will see only certain dimensions, while someone with a strictly real estate investment angle will have another perspective. Both of those perspectives will have truth to them, but neither will represent the whole truth.   

@Taylor L. Glad to chime in with regard to @Alan Grobmeier's post. But, I'll just copy and paste what I wrote about it earlier in this thread.

Mixing your personal investments with your IRA investments leads to compliance complexities and is discouraged. Same for mixing your Traditional IRA and Roth IRA. That's not to say that it's not done, just that we don't encourage it.

UBIT & UDFI are topics that are misunderstood. It does not help that there is an abundance of misinformation about these topics that is deliberately disseminated.

It's important for investors to ensure that they obtain their info from qualified and unbiased sources. Caveat Emptor! 

@John Solotarow You've gotten great info from @Taylor L. and @Brian Eastman. Important to add that you may not live in a house that is owned by your IRA. So long as you're following the rules for IRAs, with the primary one being that the IRA not be used for your current (pre-distribution) personal benefit - you can use an IRA for every real estate asset-class.

@Nathan Shankles For Traditional IRA: Income tax at your marginal income tax rate, plus 10% additional tax. For Roth IRA, any "non-qualified" distributions subject to income tax, plus 10% additional tax.

@Nathan Shankles

IRA money - Traditional and/or Roth - can be used for real estate in a multitude of ways. But, as @Taylor L. posted, there are rules to be aware of (and followed). 

Mixing your personal investments with your IRA investments leads to compliance complexities and is discouraged. Same for mixing your Traditional IRA and Roth IRA. That's not to say that it's not done, just that we don't encourage it.

Can you use the profits outside the IRA? To the extent that an asset belongs to your IRA, so do all the profits from the ownership of that asset. Just as you can't use mutual fund dividends from IRA-owned securities for non-IRA expenses, the same holds true for real estate rental income produced by an IRA-owned property. Ditto for hard money interest, LP distributions, etc.

@Daniel Dietz Cost seg does not require an appraisal, as it's based on cost basis (that's why it's called cost seg) - not on fair market value. 

Similarity, debt on the asset impacts your equity - not your cost basis.