SUPERCHARGE YOUR REAL ESTATE INVESTING WITH IRA
Supercharge your retirement account! Ted Thomas shows you how to invest in real estate with an IRA.
Which type of IRA might be best for you to do this? Let’s talk about the different types of IRAs, and how you can use them to purchase tax liens and tax deeds.
Investing in real estate with a retirement account has never been easier, more secure, or more profitable.
Investing in Real Estate with a Retirement Account is a great option for safely investing.
I’ve been involved in tax liens and tax deeds for a little over 25 years, and we’re going to talk about tax lien certificates and tax deeds. In particular, we’re going to talk about investing in real estate with a retirement account.
You’ll learn about traditional IRA accounts. We’re also going to talk about Roth IRAs and how you can use tax lien certificates and also tax deeds, which will really supercharge your accounts.
Both of these investments are terrific to put in your individual IRA or Roth IRA.
I’m also going to talk about mistakes people make at the auction, and I don’t want you to make those mistakes.
Investing in real estate with a retirement account is a safe way to invest, number one by buying tax lien certificates.
However, you want to add an additional safety level to it by making sure that your retirement account is going to make money, and don’t take a lot of risks.
So tax liens is the place to be. Tax defaulted properties have a little bit more risk, but they certainly have a ton of reward.
I’m going to teach you how to avoid the risk in real estate by doing it with tax defaulted property and tax lien certificates.
WHY COUNTIES SELL LIENS & DEEDS?
First of all, let’s discuss why these certificates and why these tax deeds make money.
They make money because the local government has a problem, and the problem they have is people don’t pay their tax. When they don’t pay the tax, then the government doesn’t have money to run.
In other words, how are they going to pay the school teachers? Or how are they going to take care of the retirement account for the county employees? How are they going to pay the county salaries? Okay, you’re getting the idea.
The county has a lot of bills to pay. So in order to pay the bills, all the local property owners must pay property tax.
When I say must pay, that means it’s a requirement. If you’re going to have property anywhere in the United States, you are going to pay property taxes.
So the local government has a problem, and that problem is they didn’t collect all the taxes. In other words, people didn’t send in the check when they said they were going to do it. So now what are they going to do?
WHAT ARE TAX LIENS AND TAX DEEDS?
Well, in a tax lien state, they’re going to issue a tax lien, and that’s going to be a tax lien certificate.
In the other States which sell tax deeds, what they’re going to do there is number one, levy the tax, then they’ve got to collect the tax.
If they can’t, they’re going to secure that property by seizing it, and then they’re going to go out and resell it after they confiscate it. So give a little thought to that.
The county has a lot of work to do before it gets to you. If you buy a tax deed, usually the auction will start somewhere around 20 cents on the dollar, and then it will go up. It starts basically right around the back taxes.
If you can buy those properties for 10 cents, 20 cents, 30 cents on the dollar, you’re going to have one heck of an investment.
REAL ESTATE INVESTING WITH IRA
I’m going to talk about the individual retirement account which is an IRA and also the Roth IRA.
Both of those are specialty investments that you need to learn about as you become an investor and begin investing in real estate with a retirement account.
Now, I’m not an attorney. I’m not a CPA, and I’m not an insurance man or a banker selling you one of these. I’m just telling you from a layman’s standpoint how these investments work.
HOW DO YOU WANT TO TITLE YOUR INVESTMENT?
The government will always ask you when you show up at an auction, whether you’re doing it online or offline, how do you want to title your investment?
Do you want to put it in your name? Do you want to put it in your mother’s name? Do you want to put it in a fictitious name?
How do you want to title that investment? You’re going to do all of this within your IRA. So you’re just like the manager for the IRA. You’re managing this company.
Investing in real estate with a retirement account is done within your IRA.
That’s going to make it tax deductible when you start, and if you do it with an IRA, it will make it so you don’t have to pay taxes when you finish. So think about that.
We’ll talk a little bit about the traditional IRA and the Roth IRA.
INVESTING IN REAL ESTATE WITH A RETIREMENT ACCOUNT
What are we talking about today? Investing in real estate with a retirement account.
If you want to make real money, you want to start out with what I call an individual IRA account. That individual account allows you to take a tax deduction. The money you save on the taxes you then can invest into that IRA.
There are all different amounts. It depends upon which one you choose, but you could do $1,500. Some allow $5,000, but some of these investments can be substantial.
You need to study the individual IRA and understand how much you can put in.
One thing I know you don’t want to do is go to a bank and start an IRA. You don’t want to go to an insurance agent.
I’m not negative on the bank, and I’m not negative on the insurance agent. But they’re going to sell you an IRA and call it an individual IRA, and you only can invest in the bank, and you can only invest in insurance.
That isn’t what we’re talking about here.
INVESTING IN REAL ESTATE WITH A SELF-DIRECTED IRA
You want to have your own self-directed IRA. Self-direct is the key word. You want to have that so that you can invest in anything you want.
Now, if you buy tax lien certificates, that’s nice and safe. That would be a good investment. Later on, you can learn how to buy tax deeds, another safe investment, if you know how. You’re going to do both of those within your IRA.
If your IRA can make money, when you make money within the IRA, you don’t have to pay the tax on it on the individual IRA, in other words, the traditional one.
TRADITIONAL IRA
With a traditional IRA, you don’t have to pay any tax until you take money out. You have a tax deferment until you withdraw the money. I didn’t say it was tax free. You will have to pay tax, but you don’t pay tax until you take it out.
So you get a tax deduction going in. You make some money in there, and you don’t have to pay tax until you take it out. That’s a traditional IRA.
ROTH IRA
The Roth IRA doesn’t work that way. With the Roth IRA, you have to have money in it. So once some money is in there, then if you put anything new in, you pay the tax when you put it in.
In other words, when you buy the investment, you put in the money for tax. You pay your tax, and then you don’t have to pay for the life of the Roth IRA.
You could have a Roth IRA and pass it on to your children or pass it on to a relative or whomever and not have to pay tax.
These are both really powerful investments, and the Congress made the law. I didn’t make the law. I’m just giving you a briefing on what it’s all about.
I don’t sell IRAs. I don’t get any commissions on telling you this. I’m just telling you for your own account that you need to start with a traditional IRA, and then you want to move to a Roth IRA.
Or if you’re coming from a pension plan or a 401K, you can start right out with a Roth IRA.
Roth IRA means you pay tax when you go in, and then you’re all done.
I’m not an expert on this subject, but I have become expert enough by watching other people do it. I have students that started out making pennies that now have so much money that they have seven figures inside a Roth IRA.
If that makes money every year, they don’t have to pay taxes on it. So think about that.
So what have I been talking about today? I’ve been talking about investing in real estate with a retirement account.
I don’t get any commissions from telling you this, but a traditional IRA is a good place to start. A Roth IRA is an even better place. If you’re transferring your money from another account, you want to get a Roth IRA before you do that.
REAL ESTATE INVESTING WITH IRA EXAMPLE
I have a client by the name of Bob Schumacher. He started with me 20-years ago. I’ll never forget the first time he made $1,500, and it was in his IRA. He thought that was a really big deal.
Well, now it’s 20-years later, and I’ve seen him invest $3,000 in a Roth IRA and take out over $100,000, and he didn’t have to pay tax on it.
CAN YOU HAVE MULTIPLE IRAS?
Where you’re investing in real estate with a retirement account, can you have multiple IRAs?
You don’t need multiple IRAs. You only need one, and get it named. So you want a special name for it, and you want to do as much investing as possible within the IRA.
Why? Because every time you make money, you won’t have to pay tax. As you get more and more successful in life, you’ll start out at a low tax bracket. But before you know it, you’re going to be up to 50%.
What if you could make money and not have to pay that 50%? That’s what an IRA will do for you.
BIG MISTAKES TO AVOID
Let me finish up by telling you about the two big mistakes that people make. They happen at the auction.
The number one big mistake is that people go to the auction to buy a property, and they’re determined to do that. I certainly understand that because they want to be successful.
But, if you haven’t looked at that property, haven’t had boots on the ground, haven’t photographed it yourself, if you haven’t been there, you don’t want to bid at that auction unless you’ve had someone look at the property.
You want to have looked at that property within the last few days because there could have been a fire. There could have been a hurricane. There could have been some kind of storm, and the property may be damaged.
You don’t want to buy something that you haven’t seen.
The other mistake is similar, except it involves the exit strategy. If you’re going to buy a property at auction, you need to think about this.
You don’t want to start buying properties off a list or from pictures. You want to make sure that you’ve seen the property as I just mentioned, and now you need to plan an exit strategy.
You don’t want to just start bidding at the auction and hope and pray that you get a great deal. Hoping and praying is really a bad business strategy. You need to sit down and say, what can I sell this property for?
That’s an exit strategy. If you don’t know your exit strategy, you really shouldn’t bid on that property.
TAKEAWAY
Investing in real estate with a retirement account is an excellent way to supercharge your IRA, and one of the best ways to invest in real estate is via tax liens and tax deeds.
Where else can you get interest rates as high as 36% secured by real estate or acquire properties for pennies on the dollar?
Tax lien certificates and tax defaulted property are safe, secure, and predictable investments if you know the rules and do your homework. Add those profits to your self-directed IRA, and you’ve got a powerhouse investment.
If you’re interested in investing in real estate with a retirement account and would like to know more about tax lien certificates and tax deeds, I have something special for you.
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