Using IRA to Fund House Purchases
I am looking to start using my Roth IRA into purchasing some houses but down have $50,000,000. in there. Is there a good guidline to use to start off with different real estate investments with certain amounts?? I know because I am just starting out that I wouldn't be able to finance a whole house but what can I do with it??
For instance:
$1-$5k dollars invest in tax liens???
$5k- $20k invest in dirt cheap properties??
$20k-$50K wholesale, rehab???
$50k+ Larger wholesale, rehab
$200k+ Apartment rehab.
Any other good ideas for starting out investing with a Roth IRA??
What about loaning yourself some money that is in the IRA. Is this possible?? If it is then you could borrow the money out. Of course the interest that you could pay on the loan might governed.
I can check into this. I am starting with a pretty low amount so I don't know how it will work out. Ever since the stock market hasn't been doing well I am looking into doing other things with my retirement money, you know??
I think most of us are looking for other ways as well to get our money out of the market. Thanks for bringing up a great topic to talk about.
Working with money between you and your IRA is really tricky I would consult a great attorney before I started this. I wouldn't want the IRS getting involved.
You can withdraw from your IRA...for up to 60 days, during which you have to put the money back in...longer than that, you've ruined and disqualified your IRA.
Suggest you get and read IRS Publ. # 590, which sets out current rules for IRAs.
On p.40 it is stated: "The following are examples of prohibited transactions with a traditional IRA...Borrowing money from it..."
Now, as my Special Report on How to Use Your IRA to Buy RE, Notes, etc. states and discusses, if an IRA holder plans carefully he/she might make a loan to an LLC or Corporation which is basically controlled by him/herself and since this loan is to another legal "person" it isn't considered self dealing within rules of IRA.
John, that makes better sense. Thanks for the documentation.
So what is the purpose of borrowing from the IRA if you have to have the money back in it in 60 days.
This might be good for a fix-up, but 60 days is kinda short. From what I heard at the seminar, they said that the IRA entity could purchase real estate. The only problems is that all money from the real estate must go back into the IRA.
I don't have a problem with that just as long as it's going somewhere. But I have a Roth IRA, I can take money out of that after 5 years. Am I on the right path, or just blowing smoke??
From what I understand, having your IRA purchase an investment IS allowed. Transactions between the IRA's investment and yourself is not allowed.
Which means purchases on investment realty needs to have it's own Identity and can not do anything to do with you.
What my original post was saying is that if you have a small IRA like I do, what investment vehicles are better at certain amounts?
The first thing is that you have not talked about much except doing a prohibited transaction in your IRA that is not allowed by the IRS. There is serious tax implications into doing the transaction you have talked about and I will not go into detail but you would not like the tax and penalties you would incur. What we do with our IRA's is loans to individuals on a hard money basis and I purchase real estate notes. I borrow from people with IRA's and pay them 12% interest only payments and I keep the money borrowed for two years then refi.
Hope this helps
From what I understand, having your IRA purchase an investment IS allowed. Transactions between the IRA's investment and yourself is not allowed.
Which means purchases on investment realty needs to have it's own Identity and can not do anything to do with you.
What my original post was saying is that if you have a small IRA like I do, what investment vehicles are better at certain amounts?
Is there a way to use the IRA to purchase properties??