Optimal tax-free (Roth) investments

[Jacob Vorreuter]

I'm interested in self-directing my Roth IRA and investing in real estate.

I recently read Tax-Free Wealth by Tom Wheelwright and he stresses the point that you should not nest a tax-advantaged investment in another tax shelter. Ie: don't buy real estate on which you can claim depreciation and other deductions in a Roth IRA.

What are the optimal real estate applications of a tax-free account?

Debt syndication deals / Private money lending

Participating in debt syndication deals or private money lending seems like one option. From what I've seen, these opportunities generate 8-12% annual returns.

These investments typically generate interest-only cash flow distributions that are taxed at ordinary marginal income rates, right? Or do these get taxed at capital gains rates? Do they count as passive income that can be offset by losses in real estate equity investments?

Alternative investments

I don't have many ideas here, but the one about which I'm curious is international agriculture. AgroNosotros has appeared on several podcasts to discuss their sustainable specialty coffee and cacao plantations in Panama, Columbia and Belize. Once operational, they claim these generate 13% annual returns on average. I haven't done enough research to understand the tax implications of such an investment, but I'm guessing there are fewer deductions (if any at all) to offset that income?

What other investments do you recommend to take advantage of tax-free growth?

[Carl Fischer]

@Jacob Vorreuter

First and very important-Invest in what you know and understand. I get great returns from real estate not in my ira. I get even better returns with real estate in my ira. 

My thought is to look at what investment asset gives you the best return and put it in your Roth. Be it real estate, royalties, tax liens, private lending, litigation financing, animals, fish, etc as long as you know and understand the risks and how to mitigate them.