These days when I pass the mirror, I always wonder whose looking back at me cuz it’s sure not the 30 something person I think I am. I guess the answer to that problem, is not look into the mirror!
So, I’m looking for the good things about getting older. Know what the best thing is (given that I have no grandchildren yet)? For me it’s the day when I turn 59.5 and can take money out of my retirement fund and start spending it!
For those of you who can’t even think that far ahead, at least give some thougt to tax planning. Remember a dollar saved in taxes is a dollar you don’t have to earn! Real estate as an investment vehicle works for me, becuase of the leverage involved and the control I have and the great tax incentives. When you combine a good real estate investment with good tax planning, you can grow your wealth faster since you have some great tax free or tax deferred IRS sanctioned programs to take advantage of. Here’s a quick rundown of three of these programs to shelter real estate investment income. I’ve been using two of them for years.
Self Directed IRAs Investing in Real Estate
If you have a retirement account from a job you’ve left, did you know that you can self direct that money and invest it in real estate? Or, if you have IRAs, you can also self direct and invest them in Real Estate. First, you need a custodian to handle the transactions. Simply set up self directed IRA’s and self directed Keogh’s and 401K’s through a custodian such as Entrust or Pensco Trust. I use Pensco Trust out of San Francisco. They’re great at making sure you handle all the details and they can help you through the process. There are tricky issues to work through like needing non recourse debt financing and working through the UBIT taxes can be a challenge.
But for every roadblock there is a solution and if you have a Roth IRA and invest right, then your money can grow tax free! There are lenders willing to finance the necessary non recourse loans, and the UBIT tax is only on the leveraged portion and can be as low at 15%. Be sure to check out your particular situation with a tax professional.
In the next couple of days, I’ll write about the 1031 and the Family Foundations.
So, give it some thought. Don’t be afraid of getting older becuase it’s a blast!