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Gentle Colleagues:

I am a brand new Fool. There is more valuable discussion here than I had anticipated, so it is a real pleasure to join in. Hope this is the correct board (Posted on Real Estate Investing and Retirement Investing). For your consideration, I would like to describe the way planets are aligning in our household and ask for any advice and/or experiences with one possible course of action that we are beginning to explore.

I am looking at changing employers here in the near future. The details of that are not really important to the story, though it is a drama well known to many of us in IT. The relevant part is a 401k account that will be 100% available to roll out to an IRA once it all plays out. This is factoid #1.

As for factoid #2, my wife and I have done OK with a 'buy, improve, and hold' strategy in real estate. I am fairly handy and like to buy distressed properties, descend upon them with my velvetine demo bar, fix 'em up, and offer them back out on the rental market. We shoot for just North of break-even which in our market, means a larger down payment even after price negotiation.

By now you have figured out the question. I have heard that it is possible to invest in real estate with pre-tax dollars as part of, or at least in the same spirit as, an IRA. (Showing major ignorance here). I am wondering if this can be done. If so, briefly, how? How difficult might it be for a sweaty guy with a demo bar? Can anyone offer any recommended reading, preferably with pictures?

Feel free to offer any experiences. I am concerned about the mechanism used and whether it meshes well with the buy, improve, and hold strategy. Especially the 'improve' part, where there is a lot of money spent on behalf of the property after the actual sale. Are we limited to the maximum annual IRA contribution at the local home center each year? Would we hold some of the original investment amount back for use in the improvement? I suppose a 'companion' IRA account is neccessary. This must be where positive cash flow goes. But where would negative cash flow come from if the 'companion' account were insufficient? This is an intriguing idea, especially as I may have some time on my hands coming up here between gigs.


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