Dear Sue,
I have been a contractor/investor for more than 10 years. I have used other people’s money to buy, rehab and resell homes.
I sometimes pay my investors a pre-determined rate of interest for the use of their money. Sometimes I pay them a piece of the action.
For example, if I make a profit of 20 percent, I pay them 20 percent on their money. Needless to say I have many repeat investors.
I was working with a new investor the other day. She said that she needed a couple of days to transfer money from her retirement account.
I was surprised to hear that one could use retirement money for investments. I was under the impression that once one touched the money, one would be penalized and have to pay taxes to boot.
She said that her retirement plan was self- directed. I have never heard of such a thing.
She said that she could buy and sell real estate and not have to pay any capital gains. She said that she even owned income-producing property and that the monthly income went right into her retirement account.
She said that I should set up my own self-directed IRA because I do so much flipping. She said that I wouldn’t have to pay capital gains tax every time I sold a property.
It sounds really good to me. Almost too good to be true.
Have you ever heard of such a thing?
~Contractor Carl
Dear Carl,
Local icon Wendell Robie once told me, “Sue, it’s not what you make, it’s what you keep.”
Selling real estate in a self-directed IRA allows you to keep 100 percent of your profit. Your new investor friend is right on.
You can buy and sell real estate without paying any taxes as long as the money and or property remains in your self- directed IRA.
A self-directed IRA is ideal for your particular situation because you “flip.”
For those of you that invest in real estate, you know that in order to defer taxes, a holding period of at least a year is required.
You cannot only sell real estate, you can make loans, buy a business or even stocks.
I use PENSCO out of San Francisco. Their company was referred to me by an investment person from Bank of America.
I would suggest getting online and getting started today.
It will be a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors in Auburn. She can be reached at seesue@seehometown.com, or on the Web at homedollarsandsense.com.
