Nationwide, a growing number of people are utilizing government-sponsored retirement plans (IRAs) to realize tax free and tax-deferred profits on all of their investments. A combination of emerging trends has made this possible.
First, the knowledge that IRA benefits (tax-free and tax-deferred profits/tax-deductions) apply to all types of investment possibilities, like real estate, private placements, mortgage notes, deeds of trust, and even livestock; not just traditional assets such as stocks, bonds and mutual funds.
Since the IRA was created in 1974, investing in real estate and other alternative assets has been legal. IRS Publication 590 (dealing with IRAs) states what investments are prohibited; these investments include artwork, stamps, rugs, antiques, and gems. All other ira investments, including stocks, bonds, mutual funds, real estate, mortgages, private placements, or even livestock are perfectly acceptable as long as IRS rules governing retirement plans are followed.
Most investors haven’t heard of this opportunity because most IRA custodians do not offer self-directed IRAs that allow you to invest in real estate and other non-traditional investments.
In addition to not paying taxes on your real estate profits, a truly self-directed IRA allows you to invest in assets you are most familiar with to secure your financial future.
If you were to contribute $4,000 a year to an IRA and assume an 8% rate of return for 30 years, your self-directed IRA would be worth $449,133 at the end of year 30.
If you made the same investment in a non-tax sheltered environment, assuming a 31% tax rate, it would be worth $286,752 instead of $449,133.
One of an IRA’s greatest features is that it allows you to enjoy the true power of tax deferred compounding interest. Compound interest occurs when interest is earned on a principal sum along with any accumulated interest on that sum. In other words, you are earning interest not only on your original investment money, but also on the interest earned from the original money.
Compound interest can occur with any investment you make, but the “true” power of compounding interest is obtained when you make an investment in a tax deferred environment, like an IRA. By taking advantage of an IRA’s tax-deferred status, you do not have to pay tax immediately on your earnings (like the sale of a property or rent collected).
Tax-deferred profits on your real estate transactions allows you greater flexibility to make more investments quickly, or to just sit back and watch your real estate investment grow in value, without worrying about taxes.
The most powerful force on Earth is compounding interest.” – Albert Einstein
Will You Be Able to Retire at 65…at 70…at 75?
Will you have enough money to keep your current lifestyle in retirement?
Will you have enough money to live better in retirement?
Will you have enough money to retire when you want to?
Will you have enough money to last throughout retirement?
As a real estate investor, you qualify for SIMPLE, SEP, Individual(k) and Roth Individual(k) IRA plans. While some of the plans seem only appropriate for just small businesses, it is important to note that real estate investors, like you, qualify for these plans in addition to a Traditional or Roth IRA.
The advantages of these plans are larger contribution limits and larger tax-deductions, plus your spouse, if employed, is eligible to participate. The best part is that you can still contribute to standard individual plans like a Traditional or Roth IRA in addition to a small business plan like a SIMPLE or SEP.
We can offer you an attractive rate of return for the use of your money. Your loan will be secured by a mortgage on real estate, with an attractive loan to value ratio. Your returns are either tax-deferred or tax-free, depending on which kind of IRA you have. Your real rates of return outside of tax-deferred/tax-free vehicles are reduced anywhere from 30-50% by taxes. If you don’t have a self-directed account yet we would be happy to introduce you to a company that has been assisting investors for 35 years and manages $3 billion in IRA assets. Or lend yourself some of your money as your own private bank and invest in one of the commercial or residential properties that we find for you or a group of investors like you.
Our Online Real Estate Course will teach you multiple strategies to make money in real estate.
Or if you are experienced in real estate investing please tell us what you are looking for.
