Rental Income w/ A Self Directed ROTH IRA

whichwayWhen I first started my Self Directed IRA the IRS said the most I could contribute to my IRA was just $2,000.   So I got started with $2,000 – and I am glad I did.

As my account grew, it didn’t take long for someone to point out the benefits of the ROTH IRA. The Roth IRA is different from a regular IRA in that when I decide to make withdrawals, the proceeds will be TAX FREE!

And that is a HUGE benefit, especially as tax rates have started to climb.I love the ability we have to invest in rental properties inside what’s known as a Roth IRA.

Mixing real estate with the benefits of the Roth IRA works something like this:

Buy a small townhome or condo in the name of your IRA.  Let’s say that cost you 100k.

Every month that home will have rental income.  Let’s say that is 1,000 every month.

That $1,000 of monthly income will go back into your Self Directed Roth IRA.   And that happens every month  until you sell the home.

So, let’s say that happens every year for 10 years.  Your total income will have been $120k. Of course you probably had to replace or repair something along the way, but you get the idea.

Now, watch what happens…..  What if you also made additional contributions to your Roth IRA every year too?  The IRS says that in 2013 and 2014 the maximum amount you can contribute to a Roth is $5,500.  You can find it posted here –,-Employee/Retirement-Topics-IRA-Contribution-Limits

If you kept all of your income, and then used your additional contributions, you could buy another 100k home in about 6 years.  Then you would have over $24k coming in every year.  10 years from now, you could easily own three homes – all inside your Roth IRA – giving you about $3,000 in monthly income.  If you decide to retire, I would imagine an extra $3,000 each month would help, wouldn’t it?

The best part is that if you retired and started to take some distributions from your Roth IRA – unlike a traditional IRA – the proceeds are TAX FREE!  That is a huge benefit, especially when you are retired.  Imagine starting the year knowing that you will have $36k coming in – tax free?  It’s not going to let you live the lifestyles of the rich and famous, but you won’t be destitute either.

But here is the best part…. you still have 3 homes inside your Roth IRA, with a value of $300k, or more, that you can tap into as needed.  Maybe you won’t want to hassle with 3 rental homes as a retiree.  At 36k per year, selling all three homes will give you a little more than 8 years of living expenses.   That’s not bad, is it?

This is exciting stuff, especially if you plan on having an active retirement,  You will likely need as much as possible stored away to keep up with the rising cost of living.  I know that my savings accounts aren’t going to give me the returns that my rental properties will – that’s for certain.

If you enjoy learning how you can protect and grow your net worth, you are going to love some more of these stories on Monday night.

Let’s talk about “Secrets of Self Directed IRA’s” this month at WREIA.  Come on out Monday night and join us at WREIA.

Remember…We will have WREIA this month on this Monday, July 21st.

Same Place, Same Time.
You can meet us all at the same place at the Womans Club of Bethesda, and we will start at the same time, opening the doors at 6:30 for light refreshments and networking.

“Secrets of Self Directed IRA’s”
 Register Here For The WREIA July Event

Join us at WREIA Monday night July 21st, and let me know if there is anything I can do to help you and your business.

John Peterson

Washington REIA Network, President
Profitable Property, Founder