SDIRA vs After Tax Cash

[Nathan Emmert]

I'm curious if anyone has run a comparison of the returns on a Self Directed IRA versus simply using after tax cash.

So funding a SDIRA has an obvious benefit, tax savings. With all the deductions and credits, etc etc etc, lets assume our real tax rate is 20%. I can fund $10,000 (for a couple) into 2 SDIRA accounts or fund $0 and have $8,000 cash after taxes.

From an investment point of view, I can take that SDIRA and buy real estate... but I must buy with a non-recourse mortgage. That means I need 40 - 50% down and will be paying 6.5 - 7% interest. On a $200k property, that's a $90,000 downpayment and $695 monthly payment.

With Cash, I can get in at 25% down and get SFH (4plex) at 5% interest. That'd be $50,000 down and a $805 payment.

The extra $40,000 cash only returns $1,320 a year (cash on cash) which is 3.3%... pretty crumby. Sure, I save taxes again on the cash return but with depreciating of the unit, most of that "profit" is wiped away in taxes anyhow.

Just curious what people think... is it worth funding a SDIRA for real estate investment or better just leaving the money in your checking account and taking the hit? Obviously if you're rolling over a 401k that had company matching or something the numbers change some... this is simply would you put $10k a year in an SDIRA or simply real estate invest with cash?