All Forum Posts by: Rich Barrett

@Bill B. I agree, which is why we’ve avoided using SDIRA until now. We have a fair amount in IRAs from previous employment but I feel like using cash flow from current income is a more tax-advantaged way to invest in RE. 

This situation feels a little different because it's just land we want to hold and control for sentimental reasons. No income potential in the near term. My experience is that banks hate to lend in situations like that. Plus, I don't want to hamper future deals by increasing my DTI. So I'd like to buy the land cash and the only place I have that much personally available is in my IRA.

@Bill B.

Got it. I was a little slow on the uptake but now I understand. And that's a very good point about considering the tax liability but it sparks two more questions:

1. You said, "creating a tax liability where there wouldn't be one." But in fact I would have a tax liability when withdrawing funds from the IRA over time, the difference is that when I take it all out at once (in the form of land) versus incrementally over 20+ years, right?
2. You said, "while losing current tax deductions." Which current deductions would I lose out on?

Thanks so much for your patience and helping me understand this!

Rich

@Dmitriy Fomichenko

Thanks! All the comments were helpful, but after I read yours I googled "in-kind distribution" and that's very helpful. I think that's essentially what we would want to do:

1. Purchase the land inside the SDIRA.
2. At 59 ½ or any point thereafter, withdraw the land from the SDIRA.
3. Pay income tax on the value of the land (I'm guessing we'd need an appraisal?).
4. Build on the land and enjoy it's use. 

Does that sound right?

My wife and I are 54yo, with IRAs holding traditional securities, and have previously dismissed the idea of using that money for real-estate investment for various reasons.

However, there is a piece of land that we’d like to buy and we could buy it cash using one of our IRAs. I’ve done some reading on how to proceed, and I’m clear on the basic rules. However, the information I’ve come across is all about the rules for purchasing and holding the real-estate. Nothing I’ve read deals with what you are allowed to do once you turn 65.

For example, in purchasing the land it would have to be an arms-length transaction. But what about when selling it? Could I sell it or gift it to my kids? The whole point of buying this land would be the ability to pass it on to our kids or perhaps even build on it and enjoy it after we turn 65.

Can someone point me to more information on this? The most recent BP podcast on this topic was woefully short on details. Thanks!

@Christopher La Chica

I’d also suggest Turo.

Anything to put a layer of liability between you and the renter.

Your regular insurance policy will likely not cover an accident if the car was rented as part of the STR package.

@Linda Thomas

Am I in a time warp? Is it 2020 all over again?

I thought for sure I saw something on the news about a vaccine...

@Rhonda Louis - I have no connection to Dave Foster and I've never met him. But his expertise is top-notch and you should call him tomorrow. I've heard of so many people who don't get a QI involved until it's too late. 

I recommend "How To Do A Section 1031 Like Kind Exchange" by Michael Lantrip 

No, my understanding is that 1031 exchanges have to be conducted "at arms length" meaning you can't be closely related parties. 

Thanks, @Anand S. — that's another great idea.