Let’s imagine I buy an investment property in my IRA, and you buy a similar property outside your IRA. We both want to eliminate or defer taxes. I have more options on how I can proceed with my investment than you do.

– When I sell my property, I don’t have to buy another one within a few months.
– I don’t have to continue buying more expensive properties.
– I don’t have to use a certain amount of leverage to ensure I have enough interest expenses.
– I don’t have to borrow my gain through a refinance and bear the interest expense. I can just sell.
– I can focus on maximizing cash flow instead of trying to hit a sweet spot of only getting enough cash flow that can be hidden by deductions.
– I can invest in real estate options, mortgage notes, revenue participation contracts, and virtually anything else with my proceeds.

Repeat this situation over and over, and I believe my additional options will sometimes result in better bottom line investment performance.

Overall, I like what I’ve seen on your blog so far, and I’ll be checking out more of it over the next few days. It was great to see another commenter on 4HWW who wasn’t chasing their tail with “beating the market [dealer] strategies”.

Cheers,

Jeff

I think using your IRA to invest in real estate is great. If the money is already in there then it probably makes sense, and I believe there are some CPAs who help you get the cash flow to use NOW even if your IRA purchased the real estate. But it complicates things and if you aren’t already locked into an IRA then I don’t see a reason to do it.

I agree with what you’re saying about tax deferred growth, but doesn’t real estate offer the same tax savings without the limitations?

I never pay tax on cash flow from my properties because of interest and depreciation deductions. If the property goes up in value in 5 years I can refinance out the gain tax free. And when it comes time to sell I can always do a 1031 exchange.

Brian

I can agree to an extent with the brief portion of your blog that I’ve read… but your advice to completely stay away from retirement accounts is misled.

Kiyosaki makes that advice, and then his advisors write books under his same brand that tout the inarguable logic for self directed IRA and 401k accounts. Here a couple of facts that shake up your logic:

FACT: An IRA or 401(k) can invest in real estate, mortgage notes, private business, and almost any other asset

FACT: You don’t have to wait until you are 59 1/2 to receive penalty free distributions from a retirement account

FACT: The argument for tax deferred growth always wins when approached logically. A tax deduction in today’s dollars, compounding a return on what would otherwise be income/gains taxes, and paying distribution taxes in inflated dollars in the future results is substantially more wealth built, all things considered, than investing as a taxable person directly.

The real problem here is that most people don’t know HOW to use an IRA/401k to grow wealth. Brian, check out my blog (www.jeffnabers.com); I’m curious what you think about this topic as a real estate investor.