How To Set Up A Self Directed Roth IRA For Your Retirement


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A self directed Roth IRA is a phenomenal way to build a retirement account with VERY little of your own money invested. You can build a healthy portfolio in a very short period of time and then, when you retire, pull that money out TAX FREE.

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How To Set Up A Self Directed Roth IRA For Your Retirement

Joe: How to set up a real estate self-directed Roth IRA for your retirement. “Hi, Joe. What’s the best way for me to set up a retirement account using real estate as the primary investment? How much money do I need to make that happen and what are the benefits of doing it? Thanks for your help. I love your channel.” Thank you for that.

Joe: A Roth IRA is fantastic. Roth IRA is different than a regular IRA. A regular IRA is before tax investment. So you can take money that you’ve made and before you pay income taxes on it you can invest that money into stocks or real estate or anything you want that is approved, and you don’t have to pay any taxes on that money before you invest it. So, let’s say you made $10,000 and you’re in the 30% tax bracket. Normally you’d have to pay $3,000 in taxes on that. Well, you can invest the entire $10,000, so that’s great as an IRA.

Joe: And then when you pull that money out after your retirement, you have to pay taxes on the money that comes back to you. But with a Roth IRA, it’s so much better. You can make that $10,000 and you can pay the $3,000 in taxes and then you take the $7,000 and you can put it into the Roth IRA. There are caps on IRAs which are actually a little bit less than $7,000, but you don’t really need that much money in an IRA to make it start working for you.

Joe: So, you take that money, you put it into the IRA, and then when you finally retire any of the money that you’ve made on that $7,000 that you invested can come back to you but you don’t have to pay taxes on it now. So, assuming that you can make money over time in a Roth IRA, you can make a lot more money on a Roth with paying your taxes in advance then you could in waiting to pay your taxes after the fact. So, a Roth IRA can be very valuable doing that.

Joe: Now, you don’t need invest very much money in a Roth. You could set one up and put a thousand dollars into your Roth IRA and start making money and turning it into a fortune. You could take that $1,000, never put another dime into your Roth and turn it into millions of dollars. And the way you would do that is, you would use that thousand dollars in a self-directed way so that you set up and account with something like Equity Trust or Pensco – those are administrators that will take care of that administration work for the Roth. And then you can set up an LLC. You can fund the LLC with the money from the Roth and then you can start investing that money.

Joe: And once that money’s in there, let’s say you have $100 in that LLC account. You can buy a property with an option and then you can turn around and you can purchase a Subject To property or you can purchase a property on a Land Contract, because those are nonrecourse loans. And you can have nonrecourse loans inside a Roth IRA.

Joe: There’s a whole bunch of things to learn about Roth IRAs and it probably makes sense for you to get on their website, they have a lot of good resources there, to help you understand how those work, that show what the rules are about how many properties you can own in a particular LLC. Ultimately, you’re going to want to own multiple LLCs. So, the way that I’ve set up my Roth IRA is, I’ve got the Roth IRA up at the top. It own everything below it. And it owns an LLC which is a holding LLC. That LLC owns no property, but it owns multiple other LLCs.

Joe: So, that LLC owns multiple LLCs and each one of those has multiple properties in those LLCs. That way you limit your risk, it’s all owned by the main Roth IRA and when I decide to start pulling that money out, after you retire and you have to wait until you’re 59 1/2 to do that, and then you can start pulling that money out. You can pull that money out without paying any taxes on it and it can continue to grow if you decide not to pull it out.

Joe: And, if you die, it can continue to live without you and be able to feed your family after you die. And, there’s no requirements for pulling that money out ever. A regular IRA has those requirements. You have to have mandatory withdrawals from your IRA. So it makes it a lot easier to do it. It’s a lot longer term, it saves you a lot more money. You can structure your properties so that you have complete control over the checkbook because these LLCs that are owned is a checkbook that you have. You don’t have to go through the administrator to buy these properties. You can do them through the LLC itself.

Joe: You need to find a good CPA who understands Roth IRAs for real estate investors’ self-directed Roth IRAs. So, make sure you have somebody who understands those who will help you get through that process.

Joe: The most important part of a Roth IRA is you don’t intermingle your funds – ever. And one of the problems that this creates is, if you’ve got properties that are outside your Roth IRA and properties that are inside your Roth IRA and the properties that are outside the IRA have cash flow issues – let’s say you bought too many Subject To’s outside your IRA, which makes sense to do because you get the tax benefits to do it that way, so you buy these properties outside the IRA and you have a cash flow issue because you have vacancies or you have other problems, repair problems, whatever – then you can’t pull the money from your Roth IRA to help cover these expenses over here, and vice versa.

Joe: So, you can’t cover one batch with the other. They have to stay separate. If you intermingle funds with your Roth IRA, it can invalidate your Roth IRA and all the savings and taxes that you have can be removed. And you will have penalties and all other problems that you don’t want to deal with. So make sure that you do the accounting properly.

Joe: When you start to own a lot of properties, you need to make sure you have a bookkeeper, and you need to make sure you have a CPA who understands what you’re doing so that they can keep an eye on what you’re doing to make sure it’s all done properly, and so that you don’t create problems for yourself with your taxes.

Joe: All right. So, those are the basics of Roth IRAs. I could go on and on about this, but that’s the concept. Look into it some more because it’s going to make a huge difference for your retirement. Even if you’re starting, even if you’re fifty, and you’ve got ten years left. Even if you’re fifty-five and you’ve got five years left before you retire, you can still put money into a Roth IRA. It really makes sense to do this.

Joe: All right – I hope that helps. If you like this channel, subscribe to it. Also, go to my website, sign up for my free newsletter. I send out information to that group that nobody else gets. You might also want to check out my mentor program. Go to and we’ve also got automation that helps us find these sellers that’ll sell to us with owner financing. Go to and it’s an amazing software that’ll make your job a lot easier.

Joe: All right – I hope that helps. Good luck to you.

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