Self Directed IRA - Mobile Home Park Investing

[Toshiki Hoshino]

Hello BP,

What are some of issues that can arise from using self directed IRA to purchase mobile home park with partners? It would be all tenant owned homes. Thank you in advance!

Tosh

[Lane Kawaoka]

@Toshi Hiraoka

I'm sure a self directed custodian originator will get upset with this...

I am very against SDIRAs, Self Directed Roths or any tax sheltered retirement accounts because you are subject to UDFI (more details below) and cannot leverage your investment which is a pillar in real estate investing. If you want to do one here is a big list of them. Knock yourself out but I cashed out mine a while ago because I plan to live off my cashflow and retire well before the Government allows you to tap into your retirement account.

If you have distrust on where this country is going you need to expect that taxes will go up in the future. How else will we pay out for all these bank bailouts and quantitative easing.

What is the largest source of Revenue for the US IRS?

401K, SDIRA, IRAs, even Roth’s when not if they can change the tax laws. Basically qualified retirement money. People are not spending it and you can bet the IRS is going to get it.


You will pay taxes now or later and you will likely to pay more taxes in the future because you will make more money... so pay it now. Most people think they will be in a lower tax bracket in the future because they plan to downgrade their lifestyle... this is again incorrect money myths that are so prevalent.

By taking you money out early you will incur a 10% penalty but if you understand how you can easily get 20-30%+ returns in real estate a year that 10% penalty is nothing. You can recoup that in 6-18 months.

It's a no brainer... the numbers don't lie. Do the math.

Yes taking money out of your retirement account is a sin for most people.

Just make sure you don't buy jet skis and put it in cash flowing assets like rentals or syndications. Or start a business if your are exceptional at business.

QRPs or qualified retirement plans (Solo 401ks, checkbook IRAs, etc) are the answer to that person with a bunch of money in their existing 401K or IRA.

It's pretty typical that someone listens to the Simple Passive Cashflow podcast, signs up for the investor club, and books a free intro call has 200k-600k locked up in garbage retail investments AKA 401K.

Stop whatever you do don't roll over an old employers 401K into your current employers 401K. If you have money in your current employers 401K its stuck there. You need to quit your job. Well there is this one obscure tactic if you live in a Red state that could work but for you it's easier to take a loan from the existing 401K to start investing in hard assets.

If you are conservatively using prudent leverage and finding decent deals there is no reason you should not be able to retire in 10 years or less and thus negating the very reason for these accounts that you can't touch till you are old.

When you have money in these accounts it sounds good that you are not taxed on gains but you are restricted from getting a Fannie Mae loan. Using SDIRA's you have to get second tier financing options because its more risk for the bank, for example, a Roth IRA can buy real estate on leverage, however, will need a non-recourse loan which is often a fraction high-interest rate and lower LTV. No Bueno!

Caveat: If you are late to the game and already have a 401k over $100,000 then you should convert it to a solo401k. At that point, you should think about putting it into a syndication since you are restricted on how you can leverage it.

I work with people to come up with a strategy to withdraw their 401k to minimize taxes. Sometimes we need to get creative with oil & gas investments, land conservation easements, or bonus depreciation.