All Forum Posts by: John Humphries

Thanks everyone for the great advice!

@Mike Reynolds I do live in BC now, but my Roth is in the US. Retirement planning is a bit different here, but my Roth is just a regular US based Roth with the same rules as everyone else. I did the duplex house hack years ago in Toronto when I first moved to Canada.  I would recommend that approach for anyone getting started in RE. Great learning experience.  Here in BC, we already own our primary and a 1/2 duplex as a buy and hold rental. I'm hoping to use my Roth to invest in some US RE a) to diversify and b) to get into more lucrative markets.

As usual the BP community has been awesome in terms of offering advice, suggestions, and providing a great platform to learn. Thanks to everyone who corrected my assumption on Roth withdrawal penalties (@Mark S., @Frank Jiang, @Derrick Dill). There is quite a bit of misinformation out there. I hope I did not lead anyone astray!

Based on what I've learned so far,I think I will most likely back out most, if not all of my contributions to invest in buy and hold rental RE. What I will lose in tax benefits, I will easily make up in flexibility of using my money.The remainder of the money in the Roth will be transferred into an SDIRA and used to invest in a passive crowdfunding real estate model that I came across on BP. Any profits earned can continue to grow tax free in the Roth giving me more opportunities to invest as it grows. If any private lending possibilities come along for that money as well, I love the idea of using it to lend. 

For anyone following please don't take this as advice.  I would probably never advise anyone to pull money from a Roth as there are so many benefits to leaving it there. Plus I'm obviously not a tax professional! This is just what might work for me in my unique situation. 

Thanks again everyone!

 That's the best news I've heard all day! Again, I'll ask a tax pro to be sure...

@Larry Fried My understanding of the Roth is that the penalty would be at least 10%, so $3000 if I were to cash out of it completely.  Not to mention, possibly other tax implications. As it currently sits, there is only $10000 invested in corporate bonds at the moment as I rotated out of my stock portfolio a few months back to cash. Just leaving it as is for another 19 years (I'm 40) is not an option.  That money needs to work!

I agree with you that the best option at the moment would be to move it to an SDIRA (no penalty, just a $50 set up fee and then yearly fees around $250-$300) and invest in the CF that you mentioned.  I missed out on the Equity portfolio that just closed, but I'm wait listed for the upcoming debt as well as the next Equity.  I may end up just splitting my money into those two options. Glad to hear that you are still investing with them.

I also like the private lending possibility, but do people actually go that route for smaller amounts like $10,000 to $30,000?

By the way, forgot to mention that I love the private lending idea.  That is definitely something to look into and I would be curious about anyone's experience with doing something like that from a SDIRA.

@Frank Jiang Thanks for chiming in! I am curious about your last comment, but will have to let a tax professional comment on that.  It's my understanding (and I am definitely not a tax professional) that you can only withdraw money from your Roth with no penalty if you meet certain restrictions. In my case, because I am under 59 and using the money to purchase an investment (not having to do with education, not my first/primary residence, not because of death, etc.) that anything I pull out will be subject to the 10% penalty.  

Again, I'll leave that to the tax professionals out there.

@Larry Fried Hi Larry. I was just starting a new discussion about this at the same time as your response! I've spent my entire day today on SDIRA research it would appear that you are correct about all above. The checkbook IRA is next on my list of research topics.

I'm interested in investing in the crowdfunding model that you and I have discussed by email and have been in touch with them and wait-listed. I think the SDIRA would be a good tool for that type of investment. However, when it comes to buy and hold rentals, I think that with only $30000 in the account to work with, that the red tape and other expenses associated might outweigh any tax free benefits that I might get.

Basically, in the other thread, I was just asking if it is better to just cash out of the Roth and take the penalty vs using that little amount to try to buy real estate in an SDIRA.

Hi BP SDIRA experts. I'm looking for some advice and opinions. Here's the scenario:

$30,000 in a Roth IRA - I'm tired of investing in the stock market and excited about real estate investing. I'd love to use this money to get started with some buy and hold rentals, but how?

1. As I am 40 years old and would be using the $ to buy investment properties, if I cash out of my Roth, I will take a 10% penalty. Not the end of the world as it would allow me more flexibility with my funds for investing.

2. I could roll my Roth into a SDIRA but with only $30,000 in the account, I would not be able to buy any properties (that I would want, at least) with cash. In researching buying rentals with SDIRA money, financing is complicated, as I would need to get a non-recourse loan and probably a partner in order to have enough capital to buy something. Also need to make sure there are reserves in cash in the SDIRA to account for expenses. I also learned quite a bit today about expenses involved with custodians.

As an aside here, I've been living in Canada for the last 10 years with no US income so I am no longer able to contribute to my Roth in it's current state.

@Daria B. Thanks for the tip on Midland. I think they may have just won my business. By far, the best and most informative website of all the SDIRA custodians that I looked at. Also, the most knowledgeable rep that I have dealt with so far. Definitely cheaper than IRA Services Trust in terms of fees too. They also beat out the others that I looked up. Although, full disclosure, SDIRA fee structures all seem to be a bit different and for my purpose, Midland's seem to work best.

Perhaps this will have to be a different blog post to get a good response, but the next step is now to find real estate to buy in the SDIRA. I'd love to hear from anyone who has been through this process already, as it there are quite a few more layers of complication than just buying property outside of a Roth or trad IRA.

In my situation, because I have limited funds in my IRA and can no longer contribute to it (living outside of US with no US income), I will not have enough money in my SDIRA to buy the property with it alone. Looks like I will have to partner with myself somehow in order to fully fund a purchase. If anyone has does this before and has any advice, I'm all ears!

@Mark Nolan Thanks for the tip.  I'll check them out to see they can work for me.

As an aside... Is there any way to pull any of the money out the Roth IRA without taking a penalty? Same as above applies - under 59 years old, money not to be used for education, primary residence, death/disability etc. Just trying to find a way to make the money in that Roth more available and flexible for real estate.

I've got $30,000 in a Roth IRA with Ameritrade that I used to actively manage in stocks and corporate bonds. I'd like to use this money in real estate and real estate related investments now, but I am only 40 years old and (to my limited understanding) I can't just pull this money out without penalty. It has been over 5 years since I have opened and/or contributed to this Roth.

As an added wrinkle, I live in Canada now and have not had US income since moving here almost 10 years ago so I am not able to contribute new money to my Roth.

What I would like to do is to use this money to invest in two different real estate investment vehicles. One is a crowdfunding, "alternate investment" which basically would be buying shares in a portfolio of houses to be rehabbed, rented, and eventually sold. The other way that I would like to use the money is to buy individual investment properties in the US myself.

My understanding is that you can do either of these with a Self Directed Roth IRA. Is it possible to use one custodian to do both? Can anyone recommend a SDRIRA custodian or at least someone that is qualified to answer some of these questions?