Most likely, if you’ve ever asked a bank, CPA, or financial planner if you can use your 401K or IRA money to invest in real estate, they’d say “no”. What they really mean is they don’t know, or that THEY sell stocks and bonds and CD’s, not real estate.
Though it has always been legal to invest in real estate through your IRA since it was created in 1974, the idea of re-directing your retirement funds into investments other than stocks, bonds, and mutual funds is still pretty novel to a lot of people. Well, it’s not too good to be true—it’s true.
One of an IRA’s greatest features is that it allows you to enjoy the true power of tax deferred compounding interest. Compound interest occurs when interest is earned on a principal sum along with any accumulated interest on that sum. In other words, you are earning interest not only on your original investment money, but also on the interest earned from the original money.
Compound interest can occur with any investment you make, but the true power of compounding interest is obtained when you make an investment in a tax-deferred environment, like an IRA.
With a tax-deferred IRA, you do not pay tax immediately on your earnings—for example, the sale of a property, rental income on a property. Thus, you are able to get the compounding power on ALL of your pprofits, not just what is left after taxes. And with the Roth Self-Directed IRA, after five years the money is tax-free for life!
When deciding upon the appropriate IRA to roll your current retirement account into, think about Traditional vs. Roth. In both plans, your investment profits grow tax-free, but the differences are when you receive the tax advantages to the principal investment and yearly contributions. With a Roth IRA you don’t receive a tax deduction on your yearly contributions, but when you take your money out of the account you don’t have to pay any taxes. A traditional IRA gives a tax deduction every year based on your contribution, but you will have to pay income tax when you take your money out of the account.
Can you earn tax-free profits investing in real estate and real estate notes? Yes, you can. Let Great Lakes Secured Investments show you how. Many investors are successfully investing in real estate and other alternative assets through their IRA and not paying taxes on the profits. Not paying taxes on profits means more money for your retirement.
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