Contribute to Roth or Save for REI?

Question

Do you still contribute to your Roth IRA even though you can get better returns on real estate?

I have maxed out my Roth IRA for the last 3 years. This year, I have the money to max it out again, but I don’t know if I’d rather keep it liquid for the next real estate deal that may come along. I have 4 SFRs and a strip mall that I’ve bought in the last 18 months. And I’m getting better returns on real estate than I am in my IRA, but I don’t know if getting that 6k in a tax-advantaged account now is a better long-term investment.

I’ve toyed with the idea of a self-directed IRA, but with only 20k in there, it doesn’t really seem worth it yet.

Thoughts?

Austin Montgomery · Answer

Hey @Denyse Dar Thanks for the comment. I am currently netting 17% in my IRA, but my REI deals have been around 50%. I talked with a self-directed IRA custodian today. SDIRAs allow you invest in real estate through your IRA. You can buy/flip/rent property with the funds and the profits go back into the IRA tax-free. I think I am going to be doing that. If so, I may continue to contribute to it in order to use it to invest and make tax-free returns.

Denyse Dar · Answer

@Austin Montgomery An IRA will never net the kinds of profits REI will. Actually, my ROTH is a waste compared to my REI so I stopped contributing. My last REI (1 single family home) net me 120k in 5 years. While my ROTH IRA completely tanked with the housing crash. If you feel the need to invest in funds like that over riskier REI...then look into investing in REIT’s (Real Estate Investment Trusts.) Specifically ones that do farm lease-backs. Those traditionally net about 17% annually. No IRA is ever going to do that