All Forum Posts by: Kin Lay

Hi, I am new into this whole IRA thing and need some education on the concept of self directed Roth IRA and self directed tranditional IRA. Please correct me if I misunderstand any of these concept.

For self-directed Roth IRA, I believe can contribute $5,500 each year until my MAGI is greater than $117,000. The SD Roth IRA is after tax contribution. The SD Roth IRA can be used for tax lien and buying property and rent it. By age 59.5 and I decide to withdraw my investment from IRA, I get all those valid tax liens and real estate properties without being tax. Is that correct?

On the other hand, SD Traditional IRA has similar contribution and income restriction limit. By age 59.5 and I decide to withdraw my investment from IRA, I have to pay tax I own on all those properties, how does that work if my assets are in term of properties? How do they value the houses? Do I have to sell some houses on that profolio to pay off tax I own? Do I get to keep (any) properties when I withdraw from the IRA? Or do I have to sell all the properties in SD Traditional IRA to cash basis and pay the tax?

Thanks in advance.

@Dmitriy Fomichenko Thanks for correcting me, I should use the word "contribute" instead of "invest."

I want to diversify my investment. I want both money manager and investment in tax lien or rental property. I done some research and it seems that if you are employee, you cannot open a self-direct 401K account (I am working on confirming that). Otherwise, I would prefer to use that for tax lien.

Anyway, my plan is have money manager manages my 401K account while I manage the SD IRA account myself with tax lien and rental real estate investment.

Let me know if I am confusing you.

If you are an employee of an company, can you still create self directed 401K or transfer the 401K money to self-directed 401K account?

Can someone give me some suggestions on what is the best (cheapest transaction and maintenance fee) company to open self directed Roth IRA account?

@Lance Lvovsky Thank you for your response. I actually studied Accounting with an MS degree, but not in tax focus. I do my own tax because I don't want to pay a fee to CPA.

I missed the Roth IRA deadline, I guess I can only do it next year.

Do you know what is the best (cheapest) self directed Roth IRA company out there where I can open an account? Currently, fidelity is managing my 401K.

I think money manager is the best way I can go with because I am not very good with this finance investing stuff.

Hi everyone,

I graduated from university about 9 months ago and had began working in the corporate world. I earn about $68K per year right now and I am single. My company do 401K with cash balance formula, which it matches $0.75 per dollar on my contributions of up to 8% of pay? 

I heard about the benefits of compound interests and lower taxable income. I don't really exactly know how it works, but I have read some forums and most people suggested the self-direct IRA. I haven't started yet, but I plan to do tax lien and rental real estate investment for sometimes the end of this year.

There are few questions I have and hopefully someone with knowledge can provide me some suggestions:

1) Can I invest both 401K ($18,000) and IRA ($5,500) at the same time?

2) If so, I plan to do 401K and give that money to some adviser to manage it (I heard usually a small fee of 0.5% commission) and do self-directed IRA by myself with tax lien investment (I will change to tax deed investment during recession). Would this be a good idea?

3) How would my contribution limit ($18,000 + 5,500) be different if I were to earn $150,000 per year? How does that impact the taxable income?

4) Is there a better suggestion for me?

Thank you for all your recommendation in advance!

Let me know if you want me to provide more information.

Based on you guys opinion, it seems that small counties tax liens are the areas I should be looking out for. I will definitely consider that for backup. However, tax liens on houses around the border of metro city of the state, is it as competitive as metro city tax lien bidding?

@John Underwood When you mention vacant lots as backup plan, how can you tell that vacant land has good potential? I am most likely not going to invest in land because of limited budget to build anything on it, but I am still curious to know.

@Jessie Griffin Thanks for challenging my strategy, I like it because it helps me to aware all of the weaknesses on my plans so I can improvise this plan. I don't really know when will the recession, but I feel that interest rate will goes up soon and when interest rate goes up, home price will goes down. My goal right now is to get myself ready for the next recession by raising as much capital as possible. I might not be able to earn anything the first year because of all the expenses that would incur to travel to a different state to bid on tax liens. By next year, hopefully I will be able to fully understand the tax lien and tax deed structure to all of my interested counties. If lucky enough, I can own one of these properties that I bid on and use the $15,000 credit to rehab the house and find a property management to rent the place. My desired tax lens and tax deed area is the border area of the metro city of the state. I think of it like people working in San Francisco, people would live in East Bay and commute to work for the lower cost of rent. However, if I buy it in rural area or small counties, I could struggle to find tenants. 

My plan is just the interest on tax lien for now. But I only want to put tax lien on property that has 2-5% rent-to-price ratio per month in case that I do win the property over. For tax strategy, I also plan to go with Jessie Griffin of the self directed IRA. The amount will based on how I can put my taxable income to the lower tax bracket.

If you have recommendations for me, please feel free to let me know. I am always open for ideas.

I want to thank you everyone for the contributions here once again. 

@Mayda Searfoss Hi Mayda, have you taken any action yet? I am looking at GA as well, but neighborhood around Atlanta, GA only. I want to stay close to urban city. Plus, I have budget of $5000. I am a new grad and not work long enough to borrow any credit at the moment. I am looking at tax lien sale. Let me know your thought and current process.

If you only have $5000 cash and you can borrow up to 15000 from bank or institution this year, how would you invest that money? Assuming you are fresh out of college and just landed a job for 6 months. Also, assuming you are from California and 2025 will have a recession.

For me, I am thinking about buying tax lien around Atlanta, GA, South Carolina, or Florida. Focus on 2 counties within those state and accumulate wealth there. Buying 1 tax lien cost around $4500 or 2 tax liens at a total of that cost (remaining budget go to expense for air flight and other expenses). Then keep accumulate that interest.

What do you think?

Thank you everyone for the input. 

4 more questions:

1) Do I have to pay tax on the tax lien interest gain?

2) If someone file bankruptcy while you hold the tax lien certificate, do you lose all of your money on that tax lien?

3) For premium bidding on tax lien, does that mean - let say a tax lien has a starting auction of $2000 and you won the auction for $5000, so you have to pay $5000 on that tax lien. Assuming that county has 18% tax lien interest. After a year, you should get $5000*0.18 ?

4) When you want to bid on tax lien, you put your money up to an account, and there is a possessing fee (around $35 in most county). If you don't bid on anything on that day, your money will refund back to you, but does that mean you will lose the $35?