More on Conversion to Roth — Video

Wanna know more on conversion to Roth? Here ya go. Contrary to what many believe, real estate isn’t what I recommend as an investment inside your self directed retirement account.


Transcript:   Hi this is Jeff Brown the “BawldGuy”. Today we’re going to continue our conversation about why you would want to pay so much in taxes to convert a traditional to a Roth? More so, why you would want to avoid buying real estate inside that retirement plan versus a buying note? Here’s why, when you buy a piece of real estate outside just in your own name, you’re going to be required to put 20 to 25% down and you’re going to pay under 5% interest, amortize for 30 years, and it will be a nice investment as long as you chose wisely. That exact same property bought inside your plan is going to require twice that down payment, maybe a little less than twice, you’re going to be paying six or more percent maybe and it’s not going to be over thirty years. It’s probably going to be over twenty-five years. All the terms are a little bit worse than outside, not to mention they took away half your down payment compared to what you would have. If you buy a set of notes at discount inside that plan, you’re not hoping that the property’s going to go up in value. You just bought your appreciation because the note was bought at a discount. In the example I’ll give today, you probably got a 35% discount on a note. In one case, say you have $75,000 in your account. If you put 60 to 65,000 down on a piece of real estate, you’re fortunate to buy a 130, 40, $50,000 piece of property with the aforementioned loan terms and then you hope for appreciation. You also have some potential tax problems if it’s a traditional set up or a Roth IRA. You just don’t know what the IRS is going to do they have different rules for all of them. On the other hand if you took that $65,000 and bought a $100,000 note, you’ve already made 35 grand. Not to mention that immediate cash flow to your plan is going to be over 10 grand a year, over $800 a month from day one. When it pays off you don’t get 65 back, you get a 100. That’s why you buy discounted notes inside your solo 401k on the raw side that’s what I recommend and not real estate. It just makes a ton more sense. Hope you enjoyed this. Hope you learned something. This is Jeff Brown, the BawldGuy. I’ll see you next time.

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About BawldGuy

I'm second generation real estate, first licensed in fall of 1969. Having been mentored by several iconic brokers, I'm also CCIM trained, having completed all 200 hours back in 1980. Have successfully executed well over 200 tax deferred exchanges, many of which have been multi-state in nature. Strong points are analysis and the creation and real world application of Purposeful Plans employing several strategies synergistically. The idea is to arrive at retirement with the most after tax income possible, backed by the largest net worth.

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