Skip navigation

Real Estate IRA's Yes or No and why?

or Register to post new content in the forum

21 RepliesJump to last post



  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Apr 8, 2009 3:05 pm

I guess all of the tax accountants I spoke with were wrong.

Assuming you are being facetious instead of contrite, maybe you should consider the other obvious conclusion: that you have such an incomplete understanding of basic IRA regulations - quite aside from any real estate being involved - that you are misinterpreting or misunderstanding what you think “all the tax accountants” told you. But therein lies your problem: you want to recommend a strategy that is intrinsically and inescapably dependent on a very, very thorough understanding of all IRA regulations, and yet you clearly - and undeniably - have a very poor and confused understanding of those very regulations.

You cannot hope to approach this in a halfway manner, as you seem to do here, by on the one hand positioning yourself to clients and RIA intermediaries as the expert in this type of transaction, while on the other hand responding to basic questions by saying you are not the expert and that the client should consult his tax accountant. It’s simply not enough to know the real estate angle of this, because the client’s results depend on much more than that. All the more so when one small misstep could lead to the disasterous result of blowing up one’s entire IRA - hardly a risk to be taken lightly.

At least with your latest shift in recommended strategy to use a Roth instead of traditional IRA you are at last recognizing and coming to grips with the serious problem of paying higher taxes on the same RE proceeds when they come out of a traditional IRA. But you again show your ignorance and inexperience by failing to recognize the reality there are very few Roths accounts compared to traditional IRAs, and those that exist with significant balances adequate for buying RE are even more rare. There are plenty of reasons for that, but surely the main one is that most large IRAs resulted from 401K rollovers, and few 401Ks even offered Roth options until very recently.

So the idea is now at least sound from a tax standpoint, but you are left with the mother of all niche strategies. Good luck trying to make a living targeting that market.