When I first started raising money for real estate syndications, I had lunch with a prospective investor who was interested but didn’t have the $50,000 minimum it took to get in on the deal.
But then I asked, ‘Do you have an IRA or anything?’ And it turned out he had $500,000 sitting in his retirement account. $500,000 he could use to buy real estate.
So, how do we educate potential investors about the opportunity to invest through a retirement account? What steps can passive investors take to shift money from a 401(k) or IRA into real estate?
Henry Yoshida, CFP, is the Founder and CEO of Rocket Dollar, a web platform that lets people invest tax advantaged retirement monies into private alternative investments.
On this episode of Financial Freedom with Real Estate Investing, Henry joins Garrett and me to explain what alternative investments you can and cannot invest in using 401(k) or IRA money.
Henry walks us through the process of moving retirement money into a self-directed account and describes the differences between traditional custodians and self-directed capable custodians like Rocket Dollar.
Listen in to understand the pros and cons of investing with an IRA versus cash and learn how Rocket Dollar accelerates the process of investing in stock market alternatives like multifamily syndications!
Key Takeaways
Henry’s background in financial services and startups
- Always worked in 401(k)s, IRAs and employee stock option plans
- Develops products + companies using tax advantaged accounts
What attracted Henry to work around tax advantaged accounts
- Put in position to work with ‘everyday person’
- Help people maximize investments based on where put assets
What you can and cannot invest in with your 401(k) or IRA money
- Most people believe can only invest in stocks or mutual funds
- Collectibles and life insurance = only prohibited investments
The rules around using an IRA to buy real estate
- Complete paperwork in name of IRA
- Custodian must allow access to cash dollars
Traditional custodians vs. self-directed capable custodians
- Big brokerage houses only allow traditional investments
- Self-directed allow for range of private investments
What differentiates Rocket Dollar from other custodians
- Allow full spectrum of alternative investments
- Tech-first approach accelerates process
How to move money from an IRA to a Rocket Dollar account
- Open self-directed account in 7 clicks, under 4 minutes
- Liquidate investments from IRA to cash and transfer
The downside of owning real estate in an IRA or 401(k)
- May be subject to UBIT tax
- Miss out on tax benefits of owning real estate
The advantages of investing in real estate with an IRA vs. cash
- Rental income sits in account and grows tax-deferred
- No ordinary income or current taxes due
The disadvantages of investing in real estate with an IRA vs. cash
- Can’t use distributions to supplement income
- Not eligible for bonus depreciation
How Rocket Dollar makes it easy to invest in real estate
- Platform built from perspective of investor
- Accelerates familiar process for private investments
How Rocket Dollar educates investors around the rules of investing
- Explains prohibited transactions, disqualified person
- Reviews information during process
Related Articles
Retirement Accounts Under Attack? An Angle to Consider
Don't Follow Money, Make Money Follow You
How My Multifamily Journey Started
Connect with Henry Yoshida
Connect with Michael Blank
Apartment Investor Network Facebook Group
Email [email protected]
Resources
Explore Michael’s Mentoring Program
Join the Nighthawk Equity Investor Club
Access Michael’s Free Resources in the Freedom Vault
Review the Podcast on Apple Podcasts
Financial Freedom with Real Estate Investing by Michael Blank
IRS Guidelines on Retirement Plan Investments
Corey Peterson at Kahuna Investments
