When I first began investing in real estate, I was 22 years old and I wanted to make money for two reasons: 1) To finish paying for college, and 2) To generate enough cash and equity to be able to live off my passive investments as soon as humanly possible. This meant that I needed access to every dollar I earned (as well as dollars I borrowed) in order to buy more houses, create more wealth, and get to the point where I could retire early.

Like many of you, I heard how amazing self-directed Roth IRAs are for real estate investors who use them to invest in real estate and grow their nest egg by leaps and bounds, tax-deferred. But every time I came close to actually getting started, this little voice would pop up in the back of my mind:

"I need my money NOW, not when I'm 60!"

I rationed that if I were going to wait until I was 60 to retire and take money out, then a tax-deferred retirement account made sense. But since I planned on retiring and living off my investments at the age of 25 or 30, I figured, "What's the point?"

Here's four points I should have considered:

Point #1: Why not? The opportunity to have at least a portion of your hard-earned money safe from the clutches of the government is too good to pass on. When no taxes are paid on interest earned, even small amounts of savings can add up over time. If you want to use as much of your income as you can to live on, or to do deals, consider investing at least a small percentage of your income or profits in an IRA.

What if you put a mere 1% of your income into an IRA account? If you earn $60,000 per year and invest only 1% of it, that is only $50 per month?not something that is going to have a major immediate impact on your ability to buy more properties. But it will add up in 30 years if you can earn at least 10% per year, which for creative real estate investors is low.

After all, aren't we in a business where you can wholesale a deal and make $5,000 in 15 days with $0.00 of your own to begin with? If you can make an infinite return, then trust me, you can earn an ROI of at least 10% per year. So why not sock away some savings or at least do one deal in your IRA? I think the chance alone to legally thumb your nose at the IRS is priceless.

Point #2: Diversify a little. Having success with high-return real estate investments does not mean the principle of diversifying is not applicable to you. Even the world's wealthiest people diversify their investments. They don't just keep reinvesting 100% of their money in one thing, because what if it stopped working and you lost it all?

You could separate your IRA funds from your other savings and investments and use them exclusively for some other kind of investment, like high-interest loans, buying liens and judgments, or even (gag me) mutual funds.

Point #3: You can still borrow it back. My rationale for not putting money in an IRA in order to have it available to use for deals does not add up when you consider that you can use IRA money to do deals. Of course, there are rules about how it's supposed to be done appropriately so as not to be considered self-dealing, so follow those, of course. I'll leave that subject to the IRA experts.

Your money will still available for you to use for deals with the added benefit of growing your profits tax-free until you take them out. The only downside is that it won't be available to use for anything else, like paying your bills. For this reason, I recommend having adequate savings to cover you in the event of a temporary cash crunch.

Point #4: Forced plans force success. The only time I've ever consistently and effectively saved money or paid down debts over time has been when it's an automatic plan of some kind.

When I decided to pay off my car loan, I just couldn't bring myself to part with a check for $6,000 all at once. For two years, I kept saying I would do it in one lump sum, but never got around to it and kept waiting for a better time which never came. So I set up automatic payments with my bank, who sent a check for 1/12th of the balance each month until it was paid off in a year without me even thinking about it.

My concern is that many people, like the old Me, keep putting off using an IRA until "someday" when they will begin using it to invest in all of their deals. I prefer doing it in an automatic, consistent method that does not rely on you remembering to put aside money, and is done a little at a time.

And I believe it's wise to keep your investment money separate from your other funds. Do you remember Mark Haroldsen's story in Financial Genius about the shame of "dipping into your capital?" What better way to keep that from happening than to store it apart from the rest where you won't be tempted to squander it?

In Conclusion

For these reasons, I think it's smart to use a Roth IRA to invest in real estate (or anything else that you can), even at, nay, especially at a young age. The younger you are, the more you have to gain by having all of your investment returns working for you rather than for the government.

The years are going to go by whether or not your investments are growing tax-free, so why not do it? If you haven't taken advantage of this incredible financial strategy, I recommend doing it now because "someday" rarely comes.