Roth IRA Conversion Strategies
Real estate strategies that may reduce the taxable amount of your Roth conversion
Move traditional IRA assets toward potential tax-free growth while using the valuation cycle of certain commercial real estate investments to potentially reduce the taxable amount you convert.
What Is a Roth IRA Conversion?
A Roth IRA conversion moves assets from a traditional IRA into a Roth IRA. Taxes are generally due on the value converted, while future qualified growth and distributions may be tax-free. For real estate investors, the value of the assets at the time of conversion can matter.
Invest → Value → Convert → Grow
Invest
Invest through a self-directed traditional IRA into a qualifying private real estate development.
Value
Obtain an independent third-party valuation during development, when the investment may be valued below its original amount.
Convert
Convert the investment to a Roth IRA based on its then-current independently determined value, generally subject to current income tax.
Grow
Any subsequent appreciation occurs within the Roth structure, where qualified growth may be tax-free.
The valuation is independently determined. A reduced valuation, subsequent appreciation and individual tax outcomes are not guaranteed.
Why timing matters:
The taxable amount of a Roth conversion is generally based on the value of the assets when they are converted.
For illustrative purposes only. This is not a projection, estimate or expected valuation reduction for any Peachtree investment. A reduced valuation, Roth conversion benefit, tax result and subsequent appreciation are not guaranteed.
Investment First.
Tax Strategy Second.
Start with the development, market, capital structure, risk and return potential—then consider whether the valuation cycle may create a Roth conversion opportunity.
Is This Strategy Right for You?
A CRE-based Roth conversion strategy may be worth exploring if you:
Hold meaningful assets in a traditional IRA
Want to move more retirement assets toward potential tax-free growth
Have sufficient time for a long-term investment strategy
Are comfortable investing in private commercial real estate
Can plan for the conversion’s current tax obligation with your financial advisors
Roth conversions create current taxable income and can affect an investor's overall tax situation. The strategy should be evaluated individually before investing or converting assets.
Why Peachtree Group
Peachtree develops commercial real estate from the ground up, creating a natural connection between the development lifecycle and Roth conversion planning.
For select investments, Peachtree coordinates with independent valuation providers and self-directed IRA custodians to create the framework investors and their advisors need to evaluate a Roth conversion strategy.
The investment comes first. The development cycle may create the tax opportunity.
Frequently Asked Questions
Why would I convert a traditional IRA to a Roth IRA?
A conversion allows investors to pay tax on converted assets today while moving those assets into a structure with the potential for future tax-free qualified growth and distributions.
Why use a commercial real estate development investment for a Roth conversion?
If an independent valuation establishes a lower value during that period, an investor may be able to convert the investment based on its then-current value. Subsequent qualifying appreciation would occur inside the Roth IRA.
Who determines the value used for the conversion?
Do I have to convert my entire traditional IRA?
Partial conversions may allow investors and their tax advisors to consider the tax impact over multiple years rather than creating the entire tax obligation in a single year.
Do I need a self-directed IRA?
The appropriate account structure should be established before making the private investment and completing the conversion.
When is the best time to complete the conversion?
The appropriate timing depends on the investment, valuation and investor's individual tax circumstances.
How are taxes paid on a Roth conversion?
What are the risks of using a real estate investment for a Roth conversion strategy?
A conversion creates a current tax obligation, and losses within a Roth IRA generally do not provide the same tax benefit as losses held in a taxable account. Investors should evaluate the investment independently of the potential Roth conversion benefits.
Does Peachtree provide tax advice?
Roth conversion strategies should be coordinated with an investor's tax, legal and financial advisors.
Put More of Your Future Growth in the Right Place
Explore Peachtree commercial real estate development opportunities that may be suitable for a Roth IRA conversion strategy.