CARES Act and Borrowing from IRA for Property Investment

[Ryan Sweeney]

Here it is, I have been wanting to get into real estate for some time.  After a positive test for COVID, I qualify for the retirement loan withdrawal.  Also, I work in the aerospace industry and have a strong potential to get laid off in the near future.  I also own a rural home and will be looking to relocate if this happens and may encounter some downtime on the sale of that home

With that background said, an experienced investor and friend approached me about a 50/50 split in his location. I have the deal would net about 14% CoCROI before the Refi. I talked to my CPA and if spreadout, I would most likely be hit with income taxes, driving down that estimated CoCROI to about 9%. I normally wouldnt even think about this, but given I do not want to touch my cash reserves and I am not confident in the markets returning 9% over the next year, when I can then turn and pay my loan back off. On the surface, it sounds like a no-brainer to me, but I feel like if I pay that money back into my IRA and then withdraw it again at 60 and pay taxes on it again, the government is getting over on me. I know what the estimated numbers say, but I need a sanity check and some opinions here before I leverage this to get into real estate.

All that said, I also want to give back to this friend who has mentored me and potentially leverage his cash in the future.  I am married and have a toddler.

What am I missing and what would you do?

Thank you.

[Basit Siddiqi]

@Ryan Sweeney

I am surprised your income taxes will give you that much of a hit.

It seems like he took the 14% and multiplied it by your federal/state marginal tax rate and told you 9%.
Did he factor in that you would have depreciation which would reduce the taxable portion of the cash flow?