Financial Success Institute Releases Review of IRA in Real Estate -v- 401K

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Based on requests from readers, the Financial Success Institute has put together additional information comparing an IRA in real estate with a 401K in real estate.

IRA in real estate

Richard Geller CEO and managing director on Financial Success Institute

Both the 401K and IRA in Real Estate allow investors to retain full control of their investments.

Richard Geller, CEO and managing director of the Financial Success Institute, says, "It's clear from the many requests sent in by readers that there is a paramount need to fully clarify the similarities and differences between a 401K or IRA in Real Estate. Of course, the Institute is immediately responding to the need for more information about an IRA in Real Estate."

Geller explains there are many technical issues the Institute addresses for subscribers owning an IRA in Real Estate. "One is how unrelated business income tax (UBIT) affects a 401K or IRA in Real Estate. UBIT is a tax rule that levels the playing field between a tax-free 401K and IRA in Real Estate and ordinary businesses. UBIT mostly applies to running a business through a 401K or IRA in Real Estate. Both the 401K and IRA in Real Estate have to pay taxes similar to what ordinary businesses pay. However, an important advantage both the 401K and IRA in Real Estate have over other businesses is that profits go into the 401K or IRA in Real Estate tax-free. Additionally when a business owned by a 401K or IRA in Real Estate is sold, the 401K and IRA in Real Estate do NOT owe capital gains on the appreciated value the way ordinary businesses do."

Geller continues with another example of why subscribers with a 401K or IRA in Real Estate look to the Institute for guidance. "Unrelated Debt Financed Income (UDFI) applies to an IRA in Real Estate but not to a 401K in Real Estate. This gives the 401K a big advantage over the IRA in Real Estate. UDFI is money borrowed by an IRA in Real Estate. When an IRA in Real Estate borrows 50% of the money to make an investment, taxes are owed on the 50% of the profits made with the loan. The IRA in Real Estate can negate this tax by paying the loan off 12 months before the sale of the property. Although this is a drawback for the IRA in Real Estate, it does NOT apply to a 401K in real estate."

Geller gives this example further explaining UDIF. "Say your IRA in Real Estate purchases and rents out a duplex. The IRA in Real Estate buys the duplex with $50,000 cash and a $50,000 loan. The first year the IRA in Real Estate makes $20,000 in profit. The IRA in Real Estate would see $10,000 of the profit flow into the IRA in Real Estate tax-free but taxes would be owed on the other $10,000. One reason the Institute generally prefers a 401K over an IRA in Real Estate is because the entire $20,000 profit flows into the 401K in Real Estate tax-free."
In conclusion, Geller states, "The Financial Success Institute will continue delivering 401K and IRA in Real Estate information to investors wanting to avoid the pitfalls of Wall Street and grow their IRA in Real Estate into a rich retirement. Both the 401K and IRA in Real Estate allow investors to retain full control of their investments. Investors owning or thinking about owning a IRA in Real Estate will be interested in the Institutes recently released article IRA in Real Estate - a Good Idea or Not?

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Richard Geller
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