Self directed Roth IRA, anyone playing ball?

[whiteworks]

This should be interesting to see what the brain trust here comes back with. I’m sure some are balls deep into this game, and others have never even heard of the concept. Either way this should be an eye opener for some.

In theory you could grow your account to $100M and have no tax liability, that’s the short version but now that we have your attention here is a quick read that should get everyone up to speed on the topic for discussion purposes.

Secrets of a $100,000,000 Roth IRA

Personal finances for the aspiring millionaire lawyer

www.biglawinvestor.com

 

[Flatsix66]

The famous Peter Theil $5B tax free ROTH is in one of those. Not sure how you do it as an average dude without paying crazy fees to a custodian to hold the account. Would like to hear what others have done.

 

[whiteworks]

The famous Peter Theil $5B tax free ROTH is in one of those. Not sure how you do it as an average dude without paying crazy fees to a custodian to hold the account. Would like to hear what others have done.

My understanding is there are custodian trust companies that can be used as a vehicle for a small annual flat fee, like under $1000.00. I’m sure there are more costs involved as you create complex partnerships and what not?

The double edge here is that there is immense funding options for entrepreneurs to tap into that are in search of operating capital, be it real estate development, or other types of startups. Seems to me that if you really have a good grasp on what it is you’re doing and are looking to scale this is a unique funding source.

As far as peter theils deal, I believe they have capped tax free revenue at $10M a year after his deal LOL

 

[bowtiejunkie]

Peter Thiel invested his initial Roth funds in PayPal prior to IPO. The stock went to the moon. Then, rinse repeat.

The average Joe/Jane just needs to find those kind of PayPal investments prior to IPO.

 

[Mandelon]

I self direct my Roth, but it's a long way from $10,000,000!

 

[rivermobster]

I pay a guy to do this stuff for me...

I stay in my lane.

 

[whiteworks]

I self direct my Roth, but it's a long way from $10,000,000!

Are you just staying with traditional investment asset classes or dipping into RE, etc?

I pay a guy to do this stuff for me...

I stay in my lane.

I’ve read 97% of people do just this. Let’s say you knew a legit house flipper that you trust, you could take a portion of your holdings and invest it with him. If held in a Roth IRA the proceeds would go back in and be tax free

That’s just one example of course, there are endless ways to make or loose money LOL

Something that has stuck with me on looking at deals/selling things etc.. Yes is permanant, No is temporary. When you say yes you’re committed and balls deep. When you say No that can mean not right now, and turn into yes. I have no issue saying no to things.

 

[Maw]

I use Equity Trust Corp for my self-directed IRAs. Some stock but mostly business and real estate, they do the required paperwork and pretty much let you do the investing you want.

Not just Roth but traditional and beneficiary IRAs as well.

 

[Flatsix66]

I guess this would also be a good way to shelter money from lawsuits and bankruptcy...interesting. https://americanira.com/2014/10/29/self-directed-ira-owners/

 

[Mandelon]

Are you just staying with traditional investment asset classes or dipping into RE, etc?


I’ve read 97% of people do just this. Let’s say you knew a legit house flipper that you trust, you could take a portion of your holdings and invest it with him. If held in a Roth IRA the proceeds would go back in and be tax free

That’s just one example of course, there are endless ways to make or loose money LOL

Something that has stuck with me on looking at deals/selling things etc.. Yes is permanant, No is temporary. When you say yes you’re committed and balls deep. When you say No that can mean not right now, and turn into yes. I have no issue saying no to things.

Mostly equities. There is about $35K in built up dividend generated cash in there now. I have to pick something to spend it on....

 

[whiteworks]

I figured this thread would get more traction, buncha tight lipped ballers up in here

 

[sintax]

I figured this thread would get more traction, buncha tight lipped ballers up in here

or maybe just some budget ballers (in my case)

lets have this convo when my ROTH clicks over that next 0

 

[whiteworks]

or maybe just some budget ballers (in my case)

lets have this convo when my ROTH clicks over that next 0

This rabbit hole is a deep one, properly structured you can run a business and never pay taxes. There I said it

Let’s say you and I go halves on a flip house (just a possible business example), we each pony up $200K so total investment for acquisition and remodel is $400k. House sells for $800k we each profit $200k. My initial investment was held in SDIRA that funded my LLC that does flips, your money was from saving account. You get hit with a 30% ($60k) capital gains tax liability, my $200k profit just goes back into the LLC and I keep it all.

Discuss…..

 

[mesquito_creek]

This rabbit hole is a deep one, properly structured you can run a business and never pay taxes. There I said it

Let’s say you and I go halves on a flip house (just a possible business example), we each pony up $200K so total investment for acquisition and remodel is $400k. House sells for $800k we each profit $200k. My initial investment was held in SDIRA that funded my LLC that does flips, your money was from saving account. You get hit with a 30% ($60k) capital gains tax liability, my $200k profit just goes back into the LLC and I keep it all.

Discuss…..

To invest in alternative assets like a house, you need a self-directed IRA, and the IRS states that you must invest via a passive third party I.E. an REIT.

To directly invest in a property you can use your IRA as collateral against a non recourse loan, but that’s quite different than your scenario above.

Simply stated, what you propose doesn’t work as simply as you stated.

 

[LargeOrangeFont]

To invest in alternative assets like a house, you need a self-directed IRA, and the IRS states that you must invest via a passive third party I.E. an REIT.

To directly invest in a property you can use your IRA as collateral against a non recourse loan, but that’s quite different than your scenario above.

Simply stated, what you propose doesn’t work as simply as you stated.

That’s why the closet ballers are tight lipped.

 

[CanyonLakeDave]

I hold one of my rental properties in a self directed 401k. Yes a 3rd party company sets it up as a trust of sorts, open a bank account in the 401k/trust name and all money in and out to only be used to benefit the account. Pretty simple really but seems not a lot of people nor CPA’s are entirely familiar.

 

[whiteworks]

I hold one of my rental properties in a self directed 401k. Yes a 3rd party company sets it up as a trust of sorts, open a bank account in the 401k/trust name and all money in and out to only be used to benefit the account. Pretty simple really but seems not a lot of people nor CPA’s are entirely familiar.

Was the property acquired under that structure or were you able to transfer things around to create that flow?

 

[mesquito_creek]

@CanyonLakeDave Correct me if I am wrong, but essentially all the operational capital must be in the IRA from the start. ASSUMING that a married couple is ineligible for additional yearly contributions due to combined earned income in access of the annual limit (228k for 2023).

@whiteworks thats probably why they are somewhat rare. Most people who would think about it who are mid aged and working are not able to fund IRAs because they make too much money. Then when you are older and you roll your employer sponsored 401k into an IRA and could do it but at that age it’s not always a desirable to start investing in real estate.

But it’s possible under the correct implementation.

 

[lakemadness]

Something that has stuck with me on looking at deals/selling things etc.. Yes is permanant, No is temporary. When you say yes you’re committed and balls deep. When you say No that can mean not right now, and turn into yes. I have no issue saying no to things.

I like that line!