Author Topic: Using Roth IRA for rental property  (Read 993 times)

Crystal1588

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Using Roth IRA for rental property
« on: October 07, 2015, 01:44:48 PM »
Just posted this in the "Ask a Mustachian" forum but I think this is a better place for it...

Hi all-
I am 27 years old and my husband is 29.  We have 2 kids.  We have about 100,000 in 401ks (both traditional and roth) and Roth IRAs.  We are looking to retire when we are about 35-36.  Our combined income is $140,000 gross and we already own an investment property that cash flows about $400/month (2 bedroom condo).  Our main strategy for FI is rental properties.  We have $15,000 earmarked for another down payment on a property and are adding about $2,500 (including the profits from the condo) into this account every month. We are hoping to get a multiplex.

That being said, we are open to withdrawing from our Roth IRA if we find the perfect property that has good cash flow.  Does anyone have any experience with doing this? We figure that we are probably looking at needing about $70k for a sufficient (20%) down payment and reno costs.  At our current savings rate, we are looking at just under 2 years until we have enough for a down payment.  FYI we started the accounts right out of college, so they have been established for 5 years.

Thoughts?

MDM

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Re: Using Roth IRA for rental property
« Reply #1 on: October 07, 2015, 02:17:17 PM »
You can "Remove Topic" from the Ask A Mustachian board - see the very bottom left of your post there.  Better to keep all the discussion in one place.

Crystal1588

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Re: Using Roth IRA for rental property
« Reply #2 on: October 07, 2015, 02:20:17 PM »
Just removed it, thanks for the info!

boarder42

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Re: Using Roth IRA for rental property
« Reply #3 on: October 07, 2015, 02:22:31 PM »
its the money in the account that has to be established for 5 years not just the account

ie money you put in in 2015 wont be available til 2020 to withdraw

Crystal1588

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Re: Using Roth IRA for rental property
« Reply #4 on: October 07, 2015, 02:25:27 PM »
its the money in the account that has to be established for 5 years not just the account

ie money you put in in 2015 wont be available til 2020 to withdraw

But as I understand it (correct me if I'm wrong) you can withdrawn contributions at any time.  So, for us, that would equal about 30k in Roth contributions.

MDM

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Re: Using Roth IRA for rental property
« Reply #5 on: October 07, 2015, 02:31:51 PM »
But as I understand it (correct me if I'm wrong) you can withdrawn contributions at any time.
Yes.

Probably not telling you anything new here, but when "withdrawing from our Roth IRA if we find the perfect property that has good cash flow" you do need to compare returns on an after-tax basis.  You pay no tax on the Roth returns, but you do pay tax on rental returns.