Expert: Paul Henneman - 7/20/2007

Question
Hey Paul,

I've been doing alot of research on investing. I've learned alot in the past few weeks on about.com and through books. Now I'm not too worried about liquid funds as of right now because I'm still young, but I was thinking of investing in REITs. Now, do you think I should open a Roth IRA so the high yield dividends aren't taxed, or should I just invest through Ameritrade or some online brokerage and take the 35% hit and continue to reinvest the dividends?

Also I want to eventually get into Real Estate investments on my own. What do you think would be the best way to go about this? Begin by taking a mortgage? I've heard of Tax Liens and such or attempt to get a few other individuals to go in on it and form a Corporation?

Answer
Thank you for your question!
  Do the investments through an IRA or ROTH IRA if at all possible. The tax advantages are huge. It might not seem like much right now, but the way interest compounds over time, there will be a truly great advantage if you make use of the tax benefits in an IRA or ROTH IRA.
  There are only two problems with this: The current maximum contribution to an IRA account is $4,000 a year, going up to $5,000 a year. So, if you have the ability to invest more than that, the rest will need to be in an individual account.
  The second problem is access to the funds. There are penalties if you withdraw the funds in an IRA account before you are 59 and 1/2 years of age. So if you intend to retire early, or have any need of your investments before retirement age, the penalties will hurt.  
   Unfortunately I am not a real estate expert, so would hesitate to answer any questions on that. My experience lies with stocks, mutual funds, and other equity oriented investments.

I hope this helps! Please do not hesitate to follow up with me if I can be of any additional service,

Best Regards,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com