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Reduce Your Taxes by $10,000 with a Solo 401(k)

January 21, 2013 by Marco Santarelli

If you're self-employed or have a small business, the idea of a 401(k) may make you jump to two conclusions: “My company is too small” or “I can’t afford it.”  Well, you’re not too small and you can afford it!

A Solo 401(k) is inexpensive to set up and easy to maintain – and it delivers substantial tax and saving advantages.  Use a Solo 401(k) plan if you’re self-employed or run an owner-only business.  You could add multiple owners and a spouse to a Solo 401(k) plan, but if you add full-time employees you’ll need to convert it to a more traditional IRA  plan.

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Filed Under: Financing, Real Estate Investing, Taxes Tagged With: Financing, IRA, Real Estate Investing, Reduce Your Taxes, self-directed IRA, Solo 401(k), Taxes

Investing in Real Estate Using a Self Directed IRA

April 10, 2012 by Marco Santarelli

A growing number of real estate investors are using a self-directed IRA to finance their property purchases nowadays. That’s because a self-directed IRA can provide them with the opportunity to buy real estate and earn rental income without paying early distribution fees.

The Investment Company Institute – the national association of U.S. investment companies, estimates that about $4.7 trillion in IRAs were held in the U.S. last year. Of this, an estimated $94 billion (only 2 percent) are in Self-directed IRAs.

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Filed Under: Asset Protection, Financing, Real Estate Investing, Taxes Tagged With: ERISA, Real Estate Investing, Real Estate IRA, self-directed IRA, Self-Directed Retirement Account

How to Use Leverage with a Real Estate IRA

June 1, 2010 by Marco Santarelli

Using self-directed IRA funds to purchase income-generating real estate is a profitable strategy an ever-growing number of investors are employing. These accounts (a.k.a. real estate IRAs) can buy rental property as an investment, just as they would buy stock market securities.  This means real estate IRA holders can use their retirement funds to purchase real estate without incurring early distribution taxes or penalties and they can realize the rental payments as tax-deferred income within their IRA.

The challenge, however, is this: How do you purchase real estate that costs more than the money you’ve accumulated in your retirement account? Because the Internal Revenue Code prohibits account holders from extending credit (a personal guarantee) to their own accounts, personal loans can’t be mixed with IRA funds. So unless you have an IRA flush with funds, it would seem that your purchase options are slim to none.

Leveraging borrowed funds

There is a way out of this dilemma. Real estate IRA accounts can make use of borrowed money as long as the credit history, income and/or assets of the account holder are not used to acquire or guarantee repayment of the loan.

There is only one leverage option that meets these criteria: non-recourse loans.

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Filed Under: Financing, Real Estate Investing Tagged With: IRA leverage, Real Estate Investing, retirement account, self-directed IRA, tax-deferred income

The LLC-IRA for Real Estate Investing

February 3, 2010 by Marco Santarelli

By now I am sure you've heard that it is legal, permissible, and profitable to invest in real estate using your self-directed IRA, SEP, or Roth IRA. If you've been using this technique, you know the drawbacks – delays in funding, fees from your custodian, potential lawsuits against your IRA.

Well, there's a solution… the LLC-IRA.

Instead of investing directly from your IRA, we set up a single-member LLC that is owned by your IRA. Your IRA account is the sole member of the LLC. The LLC is a legal entity that has powers and protections that are not possessed by any individual or by any regular IRA.

The combination of the self-directed IRA custodian and the LLC produces great results. This is an entirely new type of LLC, not your run-of-the-mill LLC you may have done before. It generally requires an attorney to draft the operating agreement and provide an opinion letter to your IRA custodian. If the LLC operating agreement is improperly drafted, the entire LLC-IRA may be disqualified and taxed.

Lawsuit Protection of Your IRA Account

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Filed Under: Asset Protection, Real Estate Investing Tagged With: Asset Protection, IRA, LLC-IRA, Real Estate Investing, self-directed IRA

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