While you can earn any amount on your self directed account you come across a problem if you do not have that 100K in the account. If you use owner financing for the a substantial portion you may be subject to unrelated business income personally for that prorata portion of the profit from the owner financing. Check your tax advisor for details. There are alternative approaches to move that profit into the IRA without the hassles of the unrelated business income. With the Roth it becomes tax free instead of deferred.
Self-directed IRA for RE investing - Posted by Nanette
Posted by Nanette on January 14, 2000 at 07:13:50:
Has anyone used their IRA for RE investing? What company have you used? I have a general idea how it works, but is it a very hairy ordeal? Thanks for your input.
I wrote one earlier this year. It was not hard. I was scared to death that “I” would screw something up bad, but the people there make sure that everything is perfect before the deal is executed. I was very impressed with their service and am writing another mortgage with my IRA in Feb.
Re: Self-directed IRA for RE investing - Posted by Chris (FL)
Posted by Chris (FL) on January 14, 2000 at 10:01:45:
Talk with the people over @ Mid-Ohio. One of their guys came down to our REIA and gave an example of a self directed IRA deal that really got my imagination going. It goes something like this:
Motivated seller wants debt relief. You tell him that you’ll rent now and buy (refinance) later. You give the guy $100.00 consideration (from your IRA). You agree to a bit of a discount on the strike price.
FMV — 100k
STRIKE PRICE – 90k
SELL PRICE ( in a couple years ) – 110k
PROFIT – about 20k
OUT OF POCKET – whatever you paid in option consideration ( could be as low as 10 bucks ).
So we’re talking about close to 20k profit without having to cut that extortioist known as Uncle Sam in on the deal. I find this sort of thing very exiting.
Ron LeGrand went over some of the same ideas when I saw him last. “Subject to” deals in ones self directed IRA were also discussed , but that’s a whole other story.
I am FAR from being an expert or any kind of authority on the subject ; so go talk to those in the know to verify what I’ve just posted. Just make sure you have an accountant and attorney that understand CRE.
Re: Self-directed IRA for RE investing - Posted by Steve-Atl
Posted by Steve-Atl on January 14, 2000 at 07:50:00:
I use my IRA for investing. Its really easy once you find the right custodian and understand the rules. Try looking at the Mid-Ohio Securities web site. They advertise on this site and they are the one I use.
One of the rules is that you cannot self deal. For example you can’t buy a property using your IRA, then take the profit as ordinary income. All profit must go back into the IRA. That makes it difficult to live on the proceeds of IRA investing but it makes the IRA grow at unbelieveable rates.
Assuming you buy a property with a FMV of $100k. In 2 years you sell it for $120k - $20k profit. In a traditional IRA, where you’re limited to $2k per year in tax-deferred deposit, does this pose a taxable event for the difference?
Re: Self-directed IRA for RE investing - Posted by Glenn OH
Posted by Glenn OH on January 14, 2000 at 08:25:26:
The key is to mix your properties. Some in and some out of IRA’s. Also, remember that a Roth IRA is not deductible, but has the advantage that its proceeds are not taxed in retirement.
Re: Self-directed IRA for RE investing - Posted by Glenn OH
Posted by Glenn OH on January 14, 2000 at 21:22:49:
I think most of us have been talking about the IRA owning the investment, i.e. having enough money in the IRA to do the whole deal. Then, just like any other investment, the profits stay in the IRA - 20K tax free in your example.
