All Forum Posts by: Cory Adams

@Robert Leonard Will is right here. That is huge. I would have just assumed that depreciation didn't apply but if you have to pay tax on UBTI then why not gain the benefit of depreciation. Next question relating to this: If an SDIRA (assume SD 401K is not exposed to this) uses leverage to buy a SFH as a rental and takes the depreciation expense, does depreciation recapture have to be considered when selling?

Thanks very much for all the responses. @David Beard the info you posted was what I was looking for regarding SD401K custodians, etc. (I have read some of your other posts on the topic in other threads).

For my first post all I can say is that BP is an invaluable resource!

Just a quick point of clarification I was originally asking Robert why he thought the SDIRA vs SD401k was the way to go. I was not comparing borrowing against a 401k and moving the 401k into an SDIRA. From what I have read if you have a closely held company that you can move an existing 401k to (from a previous employer you have left) to either a SDIRA or SD 401k. The SD401k was not subject to UBIT if you used leverage buying with a non-recourse loan. Thanks again folks and great posts.

@Will Barnard the idea of borrowing against your SD 401k for a second/third against a primary residence with interest deduction is absolutely brilliant but I think the reading of that the second sentence stands on its own. It says 5 years unless used to buy. But wait there's more: Looking at the link for Pub 575 it doesn't look like you can take the interest deduction either... Look for Denial of Interest Deduction. I would really like you to be correct but I think @Dawn Anastasi has the correct reading, although we could ask 5 different IRS agents the same question and receive 10 different answers.

@Robert Leonard I don't want to loose your insight and research on which vehicle is better, in your opinion, within this thread.

Thank you all that replied.

@Robert this particular account has been moved to a custodian that manages the account through the purchase of funds and equities (no longer tied to the original employer). I could easily move that one to an SD vehicle. When you did your research regarding both SDIRA and SD401K (assuming I could move this SD401k to my wife's small closely held company) what advantages did you find in the SDIRA over the SD401K? I thought that the SD401K was better because if leverage was used the income for that leverage was not subject to UBIT as it is in the SDIRA case?

@Will your strategy makes a lot of sense for my situation because it allows for some shorter time horizon deals in order to build up more equity to make bigger purchases down the road. On a related note do you foresee the Dodd-Fwwwwank act impacting your ability to make these rehab loans?

Hi folks - first post. I'm in Austin and new to BP.

I have owned a few SFH rentals and would like to expand my investments and am open to other types of properties.

If you had 170k in a 401K what types of deals might you consider and how might you structure the usage of that money?

I see the choices as:

1) Take several early withdrawals while paying the tax + penalty over a period of years and use those funds along with other cash to buy several SFH as the down payments accumulate. Advantage here is that I've paid the tax + penalty and the forward income can be used before retirement. I'm confident that when I retire the retirement age will be set to 99, the money will not buy a slap on the back and income taxes will be 99.9999% so while this might be a bit of sarcasm, I don't have a lot of confidence in the forward purchasing power of equities locked up in USD by the time I retire (I'm 45).

2) Setup an SD IRA or SD 401K while being aware of UBIT for the IRA case and leverage usage.

3) Leave the money in the capable hands of our prudent and conservative managers earning avg 4 to 6% / year (they really are great people). I'm concerned with bail-in announcements in the US and EU and being Corzined in another big down turn but then again I imagine all asset classes including RE will not get away from the blast damage in such another 2008 crash scenario.

Some things that appeal are the possibilities of using a large down to leverage into a multi-family with say more than 3 to 4 units. I do realize that there needs to be enough money left over in the SD IRA or 401k vehicle to cover any and all expenses on a monthly ongoing basis.

Thanks for your time.