Hold RE in Roth 401k?

[Don Ireland]

I've read advice here on BP saying that it doesn't make sense to hold RE in a "tax efficient account" because you "lose all your tax benefits of RE".  I find that puzzling and I'm looking for clarification.  

Sure you no longer deduct things like depreciation but if the house is a Roth asset (purchased using Roth funds), then doesn't that mean that there are NO TAXES from which to deduct?

My plan was to put after-tax-money in my Roth 401k plan and use that money for the downpayment and let the rents cover the mortgage and operating costs.  Having done that, it seems that all rents received and eventual capital gains will be completely tax free as long as I wait until I'm 59 1/2 before taking money out.  And if I DO want to use some of the funds before then, I can take a loan from the plan.

[Dmitriy Fomichenko]

@Don Ireland, you are correct about the tax treatment of a Roth account. If you wait until 59 1/2 years old, all the rents and capital gains will be tax-free.

The only thing is you would need a self directed Roth IRA or Roth Solo 401k to be able to invest in real estate. If you have a traditional roth 401k, you may need to look into setting up a self directed account and rollover the fund if possible.

If you want to take a loan, keep in mind that an IRA doesn't allow that. A self directed Solo 401k can have the loan option, but then you would also need to have self-employment. Just a side note there, but I think your plan will work. Do more research here on BP and you'll find a lot of information and examples from other investors who have taken the same route.