Real Estate or Roth IRA?

[Braden Downs]

Hello, I am 22 years old and started investing into a Roth IRA last year. Since then, I found bigger pockets and what real estate has to offer.

How have you decided to balance your type of investments? Theoretically, if I invest $400/m till I'm 60 I'll have $1mil - $1.6mil. But putting $400 a month into my Roth limits how much I can save for real estate, especially with my limited income right now. Did you go all in one route or stick to a even approach?

[Bernard Reisz]

@Braden Downs You've gotten great perspectives on this forum addressing these apparently conflicting approaches, Roth IRA vs. Real Estate.

The truth is that at this stage of the game - early in wealth building and just getting started in real estate - a real estate focused Roth IRA may be the best strategy. Allow me to explain...

• Purchasing properties likely takes more funds than you'll have accumulated so early in the game
• Effective real estate investing requires learning through observing and personal experience
• There are real estate market investments that require less initial capital and reserves: e.g., tax liens, tax deeds, notes, private lending, etc.
• Tax liens, tax deeds, notes, private lending, etc. provide a very effective way to learn about real estate investing
• Unlike buy-and-hold real estate, those other real estate investments (tax liens, tax deeds, notes, private lending, etc.) DO NOT have any built in tax-shield (no depreciation, no mortgage interest deduction, no property tax deduction, etc.) and therefore benefit most from being invested in through a Roth IRA.

Putting it all together, a Self-Directed Roth IRA for tax lien, private lending, notes, etc. may be ideal, giving you all the tax benefits of a Roth IRA and enabling you to get hands-on real estate experience.