Passive investor for real estate Syndication

General Real Estate Investing
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Passive investor for real estate Syndication

Shelon Hutchinson
Rental Property Investor 路 Pensacola, FL 路 Member since 2017 路 32 posts 路 42 votes

馃かDon鈥檛 tell anyone!馃き

Be quite as loud as possible.

Don鈥檛 tell anyone that 馃搱you they can invest in real estate with their retirement fund.

Be very quiet 馃かwhen you 馃槂yelled from the top of the mountain that you don鈥檛 need millions of dollars to invest in real estate.

In fact you don鈥檛 need to have all this money in your checking account today.

See, it鈥檚 a common misconception that you need today money (money in the checking account) to invest in real estate.

Heath G. Jones, PhD have been spreading the word that you can invest in real estate with later money (SDIRA, eQRP, 401K, TSP)馃き.

Using later money to invest in real estate syndication can have significant benefits like cash flow and Capitol reservation.

It can also provide you with opportunities to leverage taxes incentives like Bonus depreciation.

There are some opportunities that are available right now for those who have been committed to working in corporate America and contributing to the 401(k). Some of these benefits will expire soon.

Please ensure you鈥檙e communicating with your CPA and your accountants to understand the different implication of moving capital from one vehicle to another to ensure that the decision aligns with your investment strategy.

馃敟馃敟How are you using your retirement fund to buy apartments?馃敟馃敟

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Greg ScottPro Member
Rental Property Investor 路 SE Michigan 路 Member since 2014 路 4k+ posts 路 6k+ votes
6y

Shhhh. Don't tell anyone that investing in rent property through an IRA often creates MORE taxes than if you did not.

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  • Greg ScottPro Member
    Rental Property Investor 路 SE Michigan 路 Member since 2014 路 4k+ posts 路 6k+ votes
    6y

    Shhhh. Don't tell anyone that investing in rent property through an IRA often creates MORE taxes than if you did not.

    4Reply
  • John FortesPro Member
    Multi-Family Syndicator 路 Abington, MA 路 Member since 2017 路 603 posts 路 347 votes
    6y

    There are more options than just personal savings and IRA's. I've partnered with investors who have leveraged their whole life insurance policies.

    There are some who might use stock options as well. 

    Happy investing!

    2Reply
  • Shannon Robnett
    Developer 路 Boise, ID 路 Member since 2020 路 173 posts 路 198 votes
    6y

    @Greg Scott Please educate me on the reality of your statement.  I understand that if you put in pre tax money that grows you pay more tax because it grew.  but if you are investing in say other peoples flips where you are not holding and would be considered a dealer otherwise and you grow tax differed you would have more to pay for sure but you did not pay tax at every transaction so your $'s grew faster and you pay taxes at the end of the game....but this is not a solid strategy?

    Non qualified funds same story?

    @John Fortes I would like to know more about your mentioned scenario also.

    1Reply
  • John FortesPro Member
    Multi-Family Syndicator 路 Abington, MA 路 Member since 2017 路 603 posts 路 347 votes
    6y
    Originally posted by @Shannon Robnett:

    @Greg Scott Please educate me on the reality of your statement.  I understand that if you put in pre tax money that grows you pay more tax because it grew.  but if you are investing in say other peoples flips where you are not holding and would be considered a dealer otherwise and you grow tax differed you would have more to pay for sure but you did not pay tax at every transaction so your $'s grew faster and you pay taxes at the end of the game....but this is not a solid strategy?

    Non qualified funds same story?

    @John Fortes I would like to know more about your mentioned scenario also.

    Happy to provide some color to my previous text. Different investors have access to different means of capital. For instance, whole life insurance policies take time to build up the cash value but allow you to invest it by taking a loan against your policy. 

    I have a recent podcast (episode JF112) with Sarry Ibrahim who dives into this deeper for anyone interested. Just go to my profile to find the link to the show. 

    Happy investing!

    1Reply
  • Greg ScottPro Member
    Rental Property Investor 路 SE Michigan 路 Member since 2014 路 4k+ posts 路 6k+ votes
    6y

    @Shannon Robnett

    When you buy real estate correctly (and outside of a government tax shelter), depreciation can offset cash flow income, so you don't pay taxes.  If you sell, you can defer capital gains taxes through 1031 or through buying something bigger and taking accelerated depreciation.  Do this your whole life and then die.  Nobody ever pays the deferred taxes because your heirs inherit at a stepped-up basis.

    Buy rent property in an IRA and there are all kinds of taxes you have to worry about. (Not to mention you pay a lot of fees to the administrator!) UBIT hits most people. Some say, you can avoid them through more complicated methods so you pay more to form a checkbook SDIRA in an LLC. Ignoring the administrator fees, you may be able to avoid all taxes for a while until you hit 59.5 and have to start taking required minimum distributions and you get taxed as ORDINARY INCOME. Then you die and your estate gets clobbered with taxes.

    Talk to a good CPA and they can verify all this.

    Why have you never learned this before?  There are large companies that buy advertising to sell you stocks and mutual funds. There are medium sized companies that advertise to sell you SDIRA programs.  There are only small companies that do any advertising related to buy & hold real estate.  So, the very best investments are left for those that seek them out.

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  • Shannon Robnett
    Developer 路 Boise, ID 路 Member since 2020 路 173 posts 路 198 votes
    6y

    @Greg Scott This is very true for a buy and hold strategy for sure.  As we all know some are in the game for cash flow and some are in it for growth, and that need tends to change during the game. 

    We are using it in conjunction with new ground up construction and syndication. So our investors get involved with SD IRA funds in the construction and stabilization process, and after 12-18 months exit with mid to high 20's for their returns back into the tax deferred vehicle of their SD IRA to avoid taxes. IF all they are really looking for is growth of the funds, this seems to accomplish that without involving a long hold period that does not really offer huge growth as these projects do in a very short period of time.

    I would welcome your comments on this process as you are an expert in the field.

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