063: How to use a Self Directed IRA to invest in Real Estate with Matthew Tillack

Mathew Tillack is my guest on the this episode of the InvestFourMore Real Estate Podcast. Matthew is an expert in self-directed IRA investing, and a real estate investor himself. I have know Matthew for quite some time and he is a member of one of my coaching programs on InvestFourMore.

What is a self-directed IRA?

A self-directed is a retirement account which allows you to defer taxes (traditional) when you invest money or avoid taxes from the gains you make in the account (ROTH). There are limits to how much money you can invest into an IRA each year, which should be discussed with your accountant or an expert like Matthew. Most large brokerage houses will let you invest with your IRA, but they limit what you can buy to stocks, mutual funds, bonds, and other traditional investments. The large brokerage houses may have self-directed IRA’s as well, but they will not let you buy real estate or other alternative investments. In order to buy rental properties with an IRA, you will most likely have to find a company that specializes in self-directed accounts.

What are some of the restrictions when investing with a retirement account?

When you invest into an IRA, there are many restrictions in order to get the best tax benefits.

  • You cannot take out money before you are 59 1/2.
  • You cannot personally buy or sell assets in your name. The IRA must buy and sell everything.
  • You cannot pay any expenses or take any income produced from assets in the IRA. All income and expenses must go through the IRA.
  • There are restrictions to what you can and cannot invest in.
  • You cannot run a business through your IRA, it is for investing only.

Why did I buy a turn-key property with my IRA?

I do not invest heavily into retirement accounts, because I am very impatient. I am 37 now and I don’t want to have my money sitting in an account with many restrictions for the next 20 years. However, I am a very aggressive investor and fairly young as well. Investing with an IRA or 401k makes sense for many other investors. I have an IRA that I slowly put money into when I was younger. I invested in mutual funds, REITs, and stocks with that IRA until last year. I was never a fan of the stock market and much prefer investing in real estate.

When I learned about self-directed IRA’s and that you could buy houses with them, I knew that would be much more fun than investing in stocks. I worked with a turn-key rental property company to buy a house in Cleveland for $45,000 which rented for about $750 a month. I happened to have about $50,000 in my IRA so it worked out perfectly. It can be tricky getting a loan with your IRA, so it was easier for me to pay cash. Matthew explains what the process is like to get a loan on a turn-key property on the podcast.

What are the advantages of buying real estate in a self-directed IRA?

The nice thing about IRA’s is they come with many tax advantages. You can defer taxes on gains or on money you invest into them. If you are trying to save money by paying less taxes, a retirement account works great. If you have already save a lot of money in your retirement account, investing in real estate may give you much better returns. The returns may also be more stable as we know how up and down the stock market can be. Real estate can go up and down as well, but the rents are usually pretty steady even if prices decline. If you have a company 401k, you may be able to roll that into a self-directed IRA account as well!

How can you get started investing with an IRA?

I have known Matthew for a while and he is even one of my Complete Blueprint for Successful Real Estate Investing students. He talks a lot about his investments on this podcast as well, but his day job is helping people invest with their IRA. You can reach Matthew at The iPlan Group website. They are happy to give free 30 minute consultations on how they can help you.