IRA or 401k? | Episode 89 - a podcast by Bryan Ellis - SelfDirected.org

What’s better than a Self-Directed IRA?  The answer is, of course, a Self-Directed 401k!  It’s everything that the Self Directed IRA is… but safer and far more financially potent.  But do you qualify to have a Self Directed 401k?  I’m Bryan Ellis… I’ll tell you how to make it happen RIGHT NOW in Episode #89

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Greetings, my friends!  I’ve seen one question over and over in various forms, and it’s time I address it!  The question comes from Nathan, who says:

“I am a self-employed auto dealer in Walnut Creek, California operating as a sole proprietor.  I currently have a SEP IRA with a small amount invested.  I am interested in investing in a Solo 401K or Self Directed IRA that would allow me to invest in real estate rental properties.    Any information you have would be appreciated.”

Thanks for the question, Nathan!  I’ll be delighted to help you clarify that question in this episode.

But first, a quick shout-out to my flipping team in Phoenix.  Another job well done, guys!  They completed a deal on Desert Hills in the Phoenix metro area.  It was another great profit… over $31,000 in net profit, and the total net cash-on-cash return on this project was over 40%!  What’s even better… the deal took only 4 months and 3 days… and that 40% cash-on-cash return… well… that’s NOT an annualized number!  So, needless to say, our client in the Passive Property Flipping program was THRILLED with that result.

Related to that, I’d like to thank those of you who have, so kindly, expressed interest in getting involved in the Passive Property Flipping Program.  I’ll take a quick second to tell you about that, because there’s an opportunity coming up that may be of interest to you.

Here’s the bottom line on it:  Real estate flipping can be both VERY profitable, and VERY dangerous.  When done well, there’s a lot of money to be made.  RealtyTrac recently published a study about real estate flipping in the first quarter of 2015, and the results are that there were more than 17,000 properties flipped in Q1 of this year, and that the AVERAGE gross profit on those deals was over $72,000.

So clearly, there’s HUGE financial potential.  BUT… it’s not a simple thing to do, and it takes a lot of time.  Yet still, there’s interest in real estate flipping from many affluent investors who have the money and the willingness, but neither the time nor the skill.

That’s where the Passive Property Flipping program comes into plays.  My team is EXTRAORDINARY.  We have so many case studies to prove it that you’ll go crazy LONG before you see them all.  But that’s a good thing.  We have a process… a system… and it works… and there’s OVERWHELMING PROOF that it works consistently.  We’ve had exactly ONE losing deal… it was a very small $3,000 loss.  The rest of the deals… over a hundred in recent months alone… well, all of the rest have been profitable.  And I’m not going to tell you the results of a “typical” deal here because… well, your financial advisor has probably told you that results like we produce aren’t possible.  But our process works, and works incredibly well… and you’ll see exactly why we can produce great results consistently when you learn more about what we do.

So… if you’d like to know more, and how YOU can get involved in enjoying real estate flipping profits… but WITHOUT requiring your time or expertise, then I’d suggest you check out our special webinar training RIGHT NOW… you can watch it at SDIRadio.com/flip… and it will tell you all about the program, with a WHOLE LOT of case studies and VERY THOROUGH explanation of our process.

We are not ALWAYS able to take on new clients, but we do have an opening right now.  And this opportunity is only suitable for you if you have at least $75,000 of liquid capital.  If that’s you, and you’re interested in strong results for your portfolio from flipping go ahead and check out SDIRadio.com/flip.

Now, for our question of the day!

So… Nathan is a business owner and wants to form a self directed IRA or 401k and invest in real estate rentals.  Nathan:  Welcome!  You’re getting into a really exciting area of personal finance.

Let’s start with the IRA vs 401k question.  Nathan, a Self Directed 401k is better than a Self Directed IRA in every way.  As in, EVERY way.  Not even close.  The biggest difference, to me, is that if you accidentally commit a prohibited transaction – in other words, if you break any of the IRS rules concerning IRA’s – then you’ve got a disaster on your hands if you’re using an IRA.  With a 401k, it’s still a problem… but a pretty easy one to fix.  There are many more reasons a 401k is superior.  Check out Episode #3 of Self Directed Investor Radio for a complete discussion of the differences.

Nathan, I’m recommending a 401k to you because you qualify for it as a business owner.  If you didn’t own a business, you’d have to use a self directed IRA, which is still far better than any other non-self-directed retirement account option.

But… I’m guessing you have employees.  If that’s the case, then you can’t use a Solo 401k, which is what most people think of when they think of a self directed 401k.  A solo 401k is basically a 401k that’s intended only for businesses with no employees except the owner and the owner’s spouse.  But no problem… you can still have a fully self-directed 401k even though you have employees… you just have to use a “regular” 401k that isn’t a solo.  It will cost you slightly more, but it’s what the law requires.

Now… as for investing in rental property through your 401k… think hard about that, ok?  The fact is this:  There are a LOT of tax advantages to be had by owning real estate OUTSIDE of a retirement account.  Assuming you’re planning to hold your rental property for a long time, then it’s pretty likely you’d benefit from performing the transaction OUTSIDE of your 401k and depreciating the property, then later taking advantage of a 1031 exchange to defer the taxes forever.  Talk with a tax advisor to get the full story.  It makes sense to hold just about any kind of allowable investment asset in your ira or 401k rather than outside of it, but for long-term real estate holds, the tax advantages that exist for real estate specifically may outweigh other benefits you’d receive through your 401k.

And one more thing, Nathan… if you have your 401k set up CORRECTLY… and believe me when I tell you that they’re NOT all the same… then it’s possible for you to borrow a rather substantial amount of money from your own 401k, so that you can use that money to do your real estate deals outside of the 401k!  But again, that’s subject to your having a 401k that is set up correctly to begin with.

So Nathan, if you’d like a referral to the very best source for getting your Self Directed 401k established correctly – whether you need the solo 401k variety or the variety that allows for employees – just drop me a note at feedback@sdiradio.com and I’ll be happy to hook you up.

That goes for the rest of you, too, my friends.  A self directed 401k is an AMAZING tool… and if you’re saving for retirement and you qualify to have one, you’d be unwise to use anything else.

That’s all for today, my friends!  For you affluent investors who are interested in profiting from real estate flipping be sure to check out our special webinar training on The Passive Property Flipping Program over at SDIRadio.com/flip.  You’re going to love it!

 

My friends… Invest wisely today… and live well forever!

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