Real Estate - Going it Solo(k)

Mon, 26 Feb 2007 16:48:36 GMT

Most people know you can use your IRA or 401(k) to invest in stocks, mutual funds, bonds, CDs and other similar items. Did you know, however, that you can also possibly use your retirement accounts to invest in almost any type of real estate as well as real estate investment trusts, private notes and loans, mortgages, LLCs, LPs and Sub-Chapter "S" Corps, just to name a few? Of the 45 million individuals with IRAs, only 3% are invested in these alternative assets. The numbers for the 401(k) are roughly similar. Typically these investments are done through self-directed IRAs or self-directed 401(k)s, which combined can be called Unlimited Retirement Accounts (tm), or URA (tm) for short.

Possibly the least known but most powerful way to invest in real estate is through a Solo 401(k).

The Solo 401(k) has several distinct advantages over the IRA.

Your contribution limits can be higher - The amount of money a person is allowed to contribute to a Solo 401(k) is greater than what they typically are allowed to contribute to an IRA. This can be the difference between $4,000 and $40,000 in some instances.

The contributions can now be made into a Roth account inside the SoloK - The Pension Protection Act of 2006 makes the Roth 401(k) permanant. This act was signed into law by President Bush on 8/17/06 and removed the 12/31/10 expiration date that was in force previously. Besides the tax benefits of the Roth (not taxed when the money is pulled out), currently with a Roth inside a Solo 401(k) there are no income limits, unlike on an IRA.

There are no Unrelated Business Income Taxes (UBIT) - Within the SoloK, Unrelated Business Income Taxes will not come into play if you leverage any portion of a real estate investment purchase. In an IRA when a portion of a real estate purchase comes from a loan you have to pay UBIT on the related portion of the profit.

As a Certified Consultant through the IRA Association of America, I can help you understand the amazing possibilities available for your retirement accounts. If you have any questions feel free to call me or email me at Brink@WestElmProperties.com

Unlimited Retirement Account and URA are both trademarks of the IRA Association of America and Jeff Nabers.

BrinkTank

Real Estate - Going it Solo(k)