The Investments You Should Never Make In Your Self Directed IRA – Real Estate Investment, Financial Planning, Financial Strategies – Do you want financial freedom in 10 years or less?
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The only path to financial freedom in 10 years or less is NOT by playing the self-directed IRA game better, but to get out of the game entirely.
Do you want real estate? … Or do you want freedom?
Do you want more money in your retirement account? … Or do you want to quit your job and have financial security?
At Cashflow Tactics, we don’t desire to be really good real estate investors – we desire to be free. These are the conversations that not even people at the highest level of real estate investment are really talking about.
All of the qualified plans were created for employees, NOT business owners and entrepreneurs. You spend all of this time and energy getting out of the rat race only to put your long-term assets back in the same bucket.
You are your number one asset. It’s time to adopt a completely different paradigm.
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This is a poorly presented topic and misleading.
No-one ever suggested that the way to invest in real estate was to first put your money in an SDIRA then buy real estate. If you have money then you should just directly invest in real estate … simple.
However, if you already have an established 401k/403b/457/IRA/HSA/PERA/529(?), possibly this is quite significant and came with some nice matching cash along the way, THEN IT MAKES SENSE to convert it to an SDIRA and buy some real estate. I have real estate inside my SDIRA, and I also have real estate owned directly. Both work very well!
Sure you do not get the tax advantages or depreciation, but you do get TAX-FREE rental income (incorrect stated as taxed in the video), and TAX-DEFERRED capital gains that may become TAX-REDUCED if you do a ROTH conversion later.
You do not directly get the x5 leverage (80% LTV) as correctly mentioned in the video, instead you can get a non-recourse loan for x2.5 leverage (60% LTV) or partner with a real person for x5. There is also a slight difference here since there is the tax advantage, so if you had $1000 with an effective tax rate of 20% you would have $800 to invest x5 (leverage) = $4000. $1000 tax-free with a non-recourse loan x2.5 leverage is $2500. $1000 invested in a partnership with a real person is x5 leverage or $5000. So a partnership deal actually gets more investable cash than using your own post-tax money. This example changes with your effective tax rate. Note: SDIRA loans will incur UBIT on rental income, and on the capital gain (unless the loan is closed a year before sale). To minimize UBIT have the property create very little income – i.e. shorten the loan period to increase the loan payment to consume most of the rent. Once the loan is paid off UBIT is no longer a problem, the rent and capital gains will be tax-free.
Great video Praise ALLAH FOR YOU BOTH!
I’d say right now as the market is bubbling, mutual funds are getting good returns. But over a 10 year period, real estate can do better. I have a self directed and a traditional Roth. Don’t put all your eggs in one basket. These guys are giving the beginner or common guy a safe haven. They are not wrong or right. With anything, educate your self before hand. Look before you leap.
If you were a scientist, I would prove your theory to be incorrect by presenting only one counter example. I can provide at least TWO, highly public examples that demolish your entire chain of reasoning, though you do bring out several salient points. The bottom line, you always have to carefully follow the rules.
Get rid of the music – it distracts from the conversation
From the comments I get the perception that you guys are a couple morons pretending to be some sort of influencers. Is this correct?
Your guys are wrong. There is absolutely a place for SDIRA's investing in Real Estate. My money is not locked up anywhere. I manage it.
Tim Kennedy's doppelganger
I am shocked at this ill thought out advice. I have been investing in real estate and notes with my Self Directed Roth IRA and HSA for over a decade and have created significant tax free wealth and enjoy a tax free life style. Your talking points are not well thought out and in some areas misleading. That said, there is a correct way and an incorrect way of proceeding with this type of investing, but to say "never invest in real estate with you SDIRA" is absurd. As always, when doing any type of investing, you should consult with tax professional and lawyer (only if they are real estate investors as well) before proceeding with any investment.
You guys just saved me from a major disaster! Thank you, No one ever mentioned about that part! Woow
You guys need to do more homework. You're giving bad info. If your SDIRA owns an IRA/LLC w/checkbook control and you're the manager of that IRA/LLC, you can do all the necessary administrative functions on it (pay bills, sign docs, etc…). You just can't go and do manual labor on it. That's fine if you're looking to do REI rentals as your time is likely better spent looking for the next deal rather than fixing up or maintaining a property anyhow. In effect, you're forbidden from paying that opportunity cost, which is likely a good thing in the long run. You just have to factor that in to your cashflow formula. What you guys should have said there is that an SDIRA may not be the best vehicle for real estate, depending on what you want to do.
I understand not doing this in a taxable IRA or 401k, but it does seem like a sound idea within a Roth IRA. All profits and capital gains are tax free. No need to manipulate write offs and depreciation expenses, like these guys apparently love to do. Also, nothing is stopping an investor from running a real estate investment business, like these guys advise, in addition to the Roth Self Directed IRA.
Money isn’t what your want it’s time. And that’s what money will do for your.
They are fools. They should at least disclosure they aren’t a financial advisor nor a tax advisor. That’s their first mistake. Fools are born every second and you saw two in a second.
You guys are dum! Retire already
I would say this is good advice to starting real estate investors. If you are an older person who wants to invest in real estate and is already locked into an IRA an SDIRA would be a good option still.
Sounds like the naysayers are personally invested in SDIRAs. . .
Great advice. Running businesses in a tax efficient manner is a great way to prosperity. Self Directed IRA may be useful … definitely useful to hold stocks. You can buy REITS, too. But if you are going to actually run a real estate business, there are other ways to be tax efficient. SDIRA takes away many flexibilities, leverage, and tax strategies… Great video and thinking. Thank You…!
Checkbook Roth
You're missing a key point though. With a Roth IRA you can take out the money you originally contributed after 5 years…
this is horrible advice.
If you have money in an IRA, you're earning 0% on money market accounts or you can chase bubble stocks that will implode. A self directed IRA into Real Estate isn't a bad option to consider. These 2 idiots are clueless.
I'm not understanding how moving funds (which are at the mercy of the volatility of the stock market) in my Roth IRA into a SDIRA, purchasing real estate with that SDIRA and maintaining an "arms-length" distance thru the use of a real estate IRA custodian is not ok.
You're giving wrong advice. White collar activity in SDIRA is legal but blue collar activity is prohibited.