SD 401k

[Lynn Maher]

Hello, I am new and have a newbie question. I am self employed with an S Corp. It is a non real estate business and I am paid as a 1099. I also have a rollover IRA from a previous job. I would like to use the rollover IRA funds to start an investing career in real estate. I have been researching SD IRA vs SD 401k and my understanding is with the IRA the LLC will own the properties and any profits will need to be put back into the IRA not to me. To use now. With the 401k I may borrow up to 50k use it, pay it back and keep profits to invest further. This is more appealing to me and my situation. Any thoughts?

With either of these situations I see there are multiple places on line to start the process. But, I am in need of an attorney and need to change accountants. I feel I am in a which comes first, the chicken or the egg situation? Find a new accountant and turn this over to him/her or is choosing an online service acceptable? Also, any recommendations for an accountant in the western chicago suburbs?

Thanks so much!

[Jeff S.]

There are many threads on retirement plan's here, @Lynn Maher. As you read, you'll learn that many of us have rolled our IRA's into self-directed 401k's. There are many reasons, but chief among them is that an IRA limits your contribution to roughly $6k per year, depending on your age, but an SD 401k allows you to shelter over $50k per person, or more than $100k per couple. If you can pay the tax up front, these become Roth contributions and are tax-free forever!

You'll also read that owning real property already has many tax advantages when held outside of a retirement plan that you lose in an IRA or 401k. In this case, many prefer to hold their hard RE assets in taxable accounts and notes, liens, and other paper, which are not tax efficient, in their self-directed plans. Plus, a $50k loan might not buy much real estate. There's no right or wrong answer, but be careful whom you use as an advisor.

When choosing any professionals to help you with your real estate investments, make sure they too invest in real estate. Finding a CPA with both real estate and retirement plan experience shouldn't be too difficult. Attorneys are a different matter. Even real estate lawyers can be very specific, focusing on anything from landlord-tenant law, foreclosure, evictions, property disputes, lending, and securities. This is not the place for a generalist, so wait until you have a specific need in this case.  Good luck.