Ask David

by Dr. David Phelps

Question:

I have recently terminated our office 401K plan (thanks for your guidance) and rolled the cash assets that belong to my wife and I into a traditional IRA account with a self-directed account custodian.

Now that we’re set up to start directing our own investments, what kind of real estate should I invest in?

Dr. Bob. (Indianapolis, IN)

David’s Answer:

Congratulations on taking control of your investment assets, Bob! You can invest in any alternative investments that you wish. However, using your qualified retirement account funds as investments in debt obligations such as lending against secured real estate (“be the bank”) or through funds or syndications that provide debt investment structures are my first choice due to tax preferences and ease of investment management.

Ownership (equity investments) of real estate property is allowed in a qualified plan. The negative to equity in an IRA account is two-fold: 1) you lose the tax benefits of equity ownership that are realized outside of the IRA environment, and 2) the management of the account and the property as an equity owner can be more time-consuming for you, the account holder, particularly if the assets owned are single family rental properties. Whenever possible, I like to own equity assets outside of my qualified retirement accounts.

 

 

Dr. David Phelps


A former practicing dentist, today David Phelps is a nationally recognized speaker on creating freedom, building real businesses and investing in real estate. He authors a monthly newsletter, “Path to Freedom” and hosts “The Dentist Freedom Blueprint” podcast. The Freedom Founders Elite Mastermind Community provides the pathway to freedom for professional practice owners.


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