Rentals, Lending, and Flips in your Self-Directed IRA

WEBVTT
00:00:08.160 --> 00:00:10.400
Welcome everyone to the Directed IRA podcast.
00:00:10.480 --> 00:00:13.359
This is Matt Sorns, and I am here with the incredible Mark J.
00:00:13.519 --> 00:00:14.000
Kohler.
00:00:14.400 --> 00:00:25.039
And we are excited to be talking to you about how you can use your IRA account to invest in a rental property, a flip, or maybe even doing some private lending with it.
00:00:25.120 --> 00:00:30.640
If you've not heard about it, it's called a self-directed IRA, very popular topic, something we've each done ourselves.
00:00:30.879 --> 00:00:39.840
Yeah, and if you're a regular listener, this is the show that you can share with that friend, your family member, business partner that you're like, I've been telling you about this.
00:00:40.000 --> 00:00:42.000
This is a show where we keep it simple.
00:00:42.159 --> 00:00:45.439
We're going to go through some examples, all the options that are out there.
00:00:45.520 --> 00:00:51.200
And then we'll dive a little deeper on a few of the steps and then rentals flips lending, kind of some of what it looks like.
00:00:51.359 --> 00:00:54.240
So that way you guys can walk away with kind of a bird's eye view.
00:00:54.320 --> 00:00:57.840
But this is for our regular listeners, please listen and share this.
00:00:57.920 --> 00:00:58.960
I think this is the one to share.
00:00:59.119 --> 00:01:03.679
Yeah, and we're opening hundreds of new accounts every month, over a thousand accounts back in December, new.
00:01:03.759 --> 00:01:04.879
So we've got a lot of new people.
00:01:05.040 --> 00:01:07.920
We want to make sure you know the rules of the rule and what is possible.
00:01:08.159 --> 00:01:08.480
All right.
00:01:08.560 --> 00:01:09.680
Well, let's start with the first thing.
00:01:09.760 --> 00:01:13.280
I just want to get this off the table, which is I've done this.
00:01:13.760 --> 00:01:18.319
Mark's done this, but like uh we're not just like, you know, cooking the food.
00:01:18.480 --> 00:01:19.920
We eat our own cooking on this.
00:01:20.000 --> 00:01:24.319
We love the concepts we talk about, whether it's a tax or legal strategy, retirement account strategy.
00:01:24.400 --> 00:01:25.760
We've generally done it ourselves.
00:01:26.319 --> 00:01:31.519
So I bought my first rental property with a self-directed retirement account in 2017.
00:01:31.760 --> 00:01:34.000
It was a three-bedroom, two-bath rental.
00:01:34.159 --> 00:01:40.719
When we say buying real estate with an IRA, we're not talking about buying a REIT or some publicly traded real estate company.
00:01:40.879 --> 00:01:44.719
I mean like the rental property down the street, the duplex or something.
00:01:44.959 --> 00:01:49.760
So I bought this little three-bedroom, two-bath rental in Indianapolis.
00:01:49.840 --> 00:01:52.159
It rented, I bought it for$84,000.
00:01:52.319 --> 00:01:54.159
It rented for$950 a month.
00:01:54.319 --> 00:01:57.599
I sold it five years later for$184,000.
00:01:57.760 --> 00:02:01.200
So all that cash flow built up in my retirement account, no tax.
00:02:01.280 --> 00:02:04.879
That$100,000 gain back into my retirement account, no tax.
00:02:05.040 --> 00:02:07.040
No need to do a 1031 exchange.
00:02:07.280 --> 00:02:11.280
I bought that property because I thought it would be better investment.
00:02:11.360 --> 00:02:15.919
It would appreciate more in value than a mutual fund or target date fund I was doing before.
00:02:16.240 --> 00:02:18.960
Well, I'll take that and raise you by two.
00:02:19.360 --> 00:02:21.120
Um that is an awesome story.
00:02:21.280 --> 00:02:36.639
Matt had a few more zeros involved in his deal, but back in 2009, right after the real estate crash, or in the aftermath of all that, if you were around from back then, I bought my first rental property in my health savings account.
00:02:36.800 --> 00:02:38.879
And it was Chris Albin out in Chicago.
00:02:39.039 --> 00:02:39.439
Remember him?
00:02:40.000 --> 00:02:41.360
And I still own it.
00:02:41.599 --> 00:02:44.879
It was it's the cutest little low-income housing meth lab.
00:02:45.120 --> 00:02:46.159
I mean, it's adorable.
00:02:46.319 --> 00:02:51.840
And I bought it for I I'll show the Repsy at a lot of events to show you.
00:02:52.080 --> 00:03:06.560
I did a 10% down on a fourth,$40,000 Section 8 little, again, low-income housing house, uh two, two one, two one back with a broken driveway, no carport.
00:03:06.719 --> 00:03:24.000
Anyway um, it's out in Elgin, which is uh has its good and bad areas, but um I did it with 10% down, and back then you could fund a uh health savings account for around four four grand, and it's all I needed for the 10% down, seller carry back financing.
00:03:24.080 --> 00:03:25.599
I didn't have to sign on the loan.
00:03:25.759 --> 00:03:29.439
I still own it today, and it cash flows about 200 bucks a month.
00:03:29.599 --> 00:03:41.599
Uh, there was a couple of years where we had to use the the resources that we had built up in the bank account for um, I think there was a some roofing that we had to repair and this and that.
00:03:41.759 --> 00:03:45.759
But it's paid for some medical for some of my kids, some dental work and this and that.
00:03:45.840 --> 00:03:46.719
But I still own it today.
00:03:46.800 --> 00:03:47.919
It's in my health savings account.
00:03:48.000 --> 00:03:49.759
It's probably worth about$10,000 more.
00:03:49.919 --> 00:03:51.360
Again, it's a tough area.
00:03:51.680 --> 00:03:55.599
But um, if you don't do that, you can do that in your health savings account.
00:03:55.680 --> 00:04:00.719
Or if if not, you have a bank account at Wells Fargo earning you a quarter of a percent.
00:04:00.879 --> 00:04:05.520
So I've made more money in my health savings account on that rental property, which is paid for our health care.
00:04:06.240 --> 00:04:11.520
Yeah, and so when we talk about buying real estate in your retirement account, we're talking about an investment.
00:04:11.840 --> 00:04:14.879
Like you're buying this because it's a good investment.
00:04:14.960 --> 00:04:27.279
So if you're someone that like knows and loves real estate and you believe in the future of that as an asset, and Mark and I, we talk to so many real estate investor groups, realtors, professionals in the real estate space, uh, have some in our family.
00:04:27.360 --> 00:04:29.040
And it's like, well, what do you know?
00:04:29.279 --> 00:04:31.600
We are always talking about you should invest in what you know.
00:04:31.759 --> 00:04:35.759
Well, why are you buying a mutual fund if you're in the real estate space chasing deals all day?
00:04:35.920 --> 00:04:40.399
You should be investing your long-term wealth, your retirement account, in the assets you know and believe in.
00:04:40.480 --> 00:04:42.399
And this doesn't have to be a publicly traded company.
00:04:42.560 --> 00:04:44.639
It's these little assets that we've talked about here.
00:04:44.720 --> 00:04:45.839
We're gonna give you more examples.
00:04:45.920 --> 00:04:47.839
So let's do two more examples.
00:04:48.079 --> 00:04:48.319
I love it.
00:04:48.480 --> 00:04:49.040
Let's keep giving them.
00:04:49.199 --> 00:04:51.519
Yeah, two more examples, um, if I may.
00:04:51.680 --> 00:04:51.839
Yes.
00:04:52.000 --> 00:04:55.439
And then we'll give you some steps so that you know like how hard this is.
00:04:55.519 --> 00:04:56.959
And I want to also make the caveat.
00:04:57.199 --> 00:04:59.279
You are not pulling this money out of your IRA.
00:04:59.439 --> 00:05:01.199
I am not pulling money out of my HSA.
00:05:01.600 --> 00:05:03.759
There's no penalty, there's no tax.
00:05:04.000 --> 00:05:09.600
I'm just going from fidelity to directed IRA saying, hey, I want to go invest in this.
00:05:09.759 --> 00:05:11.120
Fidelity won't let me do it.
00:05:11.199 --> 00:05:12.079
Can you let me do it?
00:05:12.160 --> 00:05:12.560
Yes.
00:05:12.800 --> 00:05:18.959
And people have been doing this for 30, 40 years, the self-directed IRA uh industry.
00:05:19.199 --> 00:05:21.199
So, okay, another example.
00:05:21.439 --> 00:05:26.800
Um, I like it when you talked about the wholesaling and which is kind of a form of flipping.
00:05:26.879 --> 00:05:31.360
You're buying land and then selling that land because it gets maybe uh zoned a different way.
00:05:31.519 --> 00:05:34.560
So I know you got a couple sweet examples, but I'll do a lending example.
00:05:34.720 --> 00:05:38.160
Now you've done more of this than me, but if you can, I'll steal your thunder a little.
00:05:38.480 --> 00:05:44.480
So recently my wife and I did a hard money loan and we took money out of our self-directed 401k.
00:05:44.639 --> 00:05:56.480
So we're showing we're using these examples because it it could be an IRA, it could be an HSA, it could be a 401k, but it was in my wife's solo 401k and her little S Corp, and we did a hard money loan.
00:05:56.560 --> 00:05:58.319
And it was a 12 and two.
00:05:58.720 --> 00:06:07.040
Now, what that means is when we loaned it to this builder, he was back east, and we were in first position, they needed money to rehab the property.
00:06:07.199 --> 00:06:14.879
We got pictures of it, we did our due diligence, we got a first trusteed, we loaned them X dollar, it was over six figures, but we loaned him this.
00:06:15.040 --> 00:06:16.639
We get two points right out of the gate.
00:06:16.720 --> 00:06:23.519
So if we loan them 100 grand, we get 2,000 back on day one, and then we get 12% per annum.
00:06:23.600 --> 00:06:26.879
So 1% a month every month they hold that loan.
00:06:27.120 --> 00:06:33.759
Well, they held it about nine months, and so we made 9% interest over nine months plus the two points.
00:06:33.839 --> 00:06:37.120
So we made 11% in nine months on that loan.
00:06:37.360 --> 00:06:42.639
It was secured by real estate, so it's a form of real estate investment, and we did it in the 401k.
00:06:42.959 --> 00:06:43.680
Yeah, yeah.
00:06:43.759 --> 00:06:46.639
And I've done many, many loans out of my retirement account.
00:06:46.720 --> 00:06:49.360
That's mostly what I do because it's more passive for me.
00:06:49.439 --> 00:06:57.839
And so if you're someone in the real estate space or you've thought about using your IRA to invest in real estate, think about what's the right investment strategy for you.
00:06:58.000 --> 00:07:03.839
Also, you know, sometimes the strategies change on the times, you know, private lending's been good because rates have been a little higher.
00:07:03.920 --> 00:07:11.120
So you can charge more, you know, uh, and flips have not been as popular because the market's been a little flat from an equity standpoint.
00:07:11.279 --> 00:07:15.680
When that shifts, you know, you might be like, well, I might want to be getting more on flips because the return's better.
00:07:15.759 --> 00:07:17.360
So a lot of a lot of dynamics there.
00:07:17.439 --> 00:07:20.639
But um, but one thing I've seen too, which is, you know, we've seen the flip.
00:07:20.720 --> 00:07:21.920
I'll give a number of examples.
00:07:23.120 --> 00:07:26.560
I um that rental property that I bought, by the way.
00:07:27.040 --> 00:07:27.360
Okay.
00:07:27.920 --> 00:07:30.319
Um, the very first one back in 2017.
00:07:30.720 --> 00:07:34.160
So I when I bought that property, it was a turnkey rental.
00:07:34.800 --> 00:07:37.199
Someone else had already bought it.
00:07:37.839 --> 00:07:40.720
A client of mine with their solo K.
00:07:41.759 --> 00:07:43.839
They bought it for like 20 grand.
00:07:44.319 --> 00:07:44.800
Oh my gosh.
00:07:45.040 --> 00:07:46.720
I don't know how much they put into it.
00:07:47.120 --> 00:07:48.959
Um no, they bought it for around 40, okay?
00:07:49.040 --> 00:07:51.600
They bought it for around 40, and I don't know how much they put into it.
00:07:51.680 --> 00:07:55.680
I bought it for 85, but I bought it from their solo 401k.
00:07:55.839 --> 00:08:02.399
So their their retirement, their self-directed retirement account, and this can be SEP IRA, Roth IRA, HSA, traditional IRA, whatever.
00:08:02.480 --> 00:08:04.000
There's dimensions and account types.
00:08:04.240 --> 00:08:09.279
But their account went in and said, I'm gonna buy this property, pay people to fix it up.
00:08:09.360 --> 00:08:10.399
You can't go do the work yourself.
00:08:10.480 --> 00:08:11.519
We'll talk about that in a second.
00:08:11.759 --> 00:08:13.199
And then I'm gonna sell it for the profit.
00:08:13.279 --> 00:08:16.480
And that whole profit goes back into the retirement account.
00:08:16.959 --> 00:08:22.240
Now I came in and said, Hey, I want to just own it as a rental, buy and hold.
00:08:22.879 --> 00:08:26.639
And and I didn't get the upside on the flip, but I bought it at a good time.
00:08:26.800 --> 00:08:29.360
The market went up over the time period I held it, and it was a good cash flow.
00:08:29.439 --> 00:08:31.360
I frankly bought it because it was good at cash flow.
00:08:32.000 --> 00:08:36.960
Now, another angle on this is, and we'll see this all the time at directed IRA.
00:08:37.039 --> 00:08:41.679
I mean, you know, we're opening up 30, 40 accounts a day sometimes, and they're all making an investment.
00:08:41.840 --> 00:08:43.440
Half of them are doing real estate.
00:08:44.480 --> 00:08:45.440
We'll see this all the time.
00:08:45.679 --> 00:08:57.039
One person's IRA goes and buys the property, another person, another investor's IRA is lending on the property, fixing it up, and then someone else's IRA later buys it down the road as the buy and hold property.
00:08:57.440 --> 00:09:01.120
And as long as they're arm's lengths individuals, it it's not a problem.
00:09:01.279 --> 00:09:01.440
Yeah.
00:09:01.519 --> 00:09:08.399
You now you can't have your own IRA loan to you or your wife's or husband's IRA buy the property from you.
00:09:08.480 --> 00:09:16.080
But if these are arm's lengths individuals and you get into this industry, or I should say, kind of this community, it's super common.
00:09:16.159 --> 00:09:27.440
And it and it's there's no cooking the books, it's all fair deals, but people figure out that there's people there's more money available in retirement accounts than people have in their back pockets.
00:09:27.679 --> 00:09:30.320
And so all of a sudden you start seeing all this movement.
00:09:30.480 --> 00:09:45.840
One of the other examples I just love to is the buying land and getting it zoned, or um knowing that there's a development going down the street and they buy land and then sit on it, or it could even be uh tax lien.
00:09:46.559 --> 00:09:47.600
Let me give an example on that one.
00:09:47.919 --> 00:09:48.639
Yeah, okay, yeah.
00:09:48.799 --> 00:09:50.159
Okay, that's an example.
00:09:50.240 --> 00:09:52.960
This takes a second, but it's pretty cool and powerful.
00:09:53.279 --> 00:09:58.240
This I had a client who used a Roth IRA, and I remember him calling Creme de la Creme.
00:09:58.320 --> 00:10:03.600
Yeah, the creme de la creme, because when that money you make money in the Roth IRA, it's gonna come out tax-free later in retirement.
00:10:03.840 --> 00:10:07.759
Now, this client, he said, he said, I want to get an option on a piece of land.
00:10:08.000 --> 00:10:08.559
Ooh, an option.
00:10:08.639 --> 00:10:10.080
Yeah, got an option on land.
00:10:10.159 --> 00:10:13.039
Now, this was this was a sophisticated real estate investor client.
00:10:13.279 --> 00:10:15.759
This was land up against a highway.
00:10:15.919 --> 00:10:20.559
Now, he knew that the county and the state were planning to put an exit right around where this land was.
00:10:21.120 --> 00:10:26.240
And they were gonna connect other roads and all stuff just happening, kind of it's like outskirt development type stuff.
00:10:26.480 --> 00:10:31.600
And he knew that that land was gonna go from just agricultural low value to highway commercial.
00:10:31.919 --> 00:10:33.759
So he went and put an option on it.
00:10:33.840 --> 00:10:36.080
Now, that land was maybe worth like 300 grand.
00:10:36.320 --> 00:10:38.480
So he went and got an option on it for 400 grand.
00:10:38.639 --> 00:10:39.759
It's like 400, 400 grand.
00:10:39.919 --> 00:10:40.639
The farmer was giddy.
00:10:40.720 --> 00:10:40.879
Yeah.
00:10:40.960 --> 00:10:48.639
So he told the farmer, he said, Hey, I'm not gonna buy the land from you, but I want the right to buy it from you within five years for 450 grand.
00:10:48.879 --> 00:10:51.039
And the farmer's like, dude, it's worth 300 now.
00:10:51.120 --> 00:10:53.200
I know what this land goes for per acre.
00:10:53.279 --> 00:10:54.720
I'll buy more down the street, you know?
00:10:54.879 --> 00:11:01.919
It's like not so but my client said, I'm gonna give you 10 grand now for the rights to the option, and then I have this right for five years.
00:11:02.000 --> 00:11:08.000
And he recorded what's called a notice of option on title saying, Hey, I have a claim for this property at a specific strike price.
00:11:08.320 --> 00:11:12.159
Well, three years later, this exit actually goes in.
00:11:12.320 --> 00:11:12.559
Okay.
00:11:12.879 --> 00:11:16.080
And my client has the right to buy this at 450.
00:11:16.240 --> 00:11:18.960
Well, this property is now worth one and a half million.
00:11:19.200 --> 00:11:22.799
So what he does is he doesn't go buy it at 450.
00:11:22.879 --> 00:11:24.159
He had the right to buy it at 450.
00:11:24.240 --> 00:11:27.279
He could exercise the option and force the purchase at 450.
00:11:27.600 --> 00:11:31.279
He sold the option to another developer that wanted to develop and build it out.
00:11:31.519 --> 00:11:33.440
Right now, there's like a gas station and a subway.
00:11:33.919 --> 00:11:34.879
I know the development.
00:11:35.039 --> 00:11:35.279
I love it.
00:11:35.360 --> 00:11:35.679
I love it.
00:11:35.919 --> 00:11:39.840
And so, and so what he did though is that million dollar, he had a million-dollar gain.
00:11:39.919 --> 00:11:46.960
He put 10,000 down from his Roth IRA, and a million dollar gain came back into it entirely tax-free.
00:11:47.120 --> 00:11:47.279
Yeah.
00:11:47.519 --> 00:11:50.720
Because he sold the option for, let's say, 1.5 million.
00:11:50.799 --> 00:11:54.639
And when he sold the option, he had to still pay the farmer his$450.
00:11:55.200 --> 00:11:58.559
And so the net result was a million dollars of profit.
00:11:58.639 --> 00:12:02.159
And the invest the investor developer was excited, happy.
00:12:02.639 --> 00:12:04.480
The option owner was happy.
00:12:04.720 --> 00:12:09.679
Farmer wasn't probably too excited that you know he missed out on this opportunity, but he got his$450.
00:12:09.840 --> 00:12:13.440
And he didn't know what was happening until all of a sudden there's a service station in the subway there.
00:12:13.519 --> 00:12:15.600
And he's like, huh, I wonder, yeah, I they don't know.
00:12:15.759 --> 00:12:16.000
Yeah.
00:12:16.559 --> 00:12:18.399
But you know, that's the good investing.
00:12:18.480 --> 00:12:22.399
You you you find opportunity, you see it, and you get fine, figure out ways to do value.
00:12:22.480 --> 00:12:24.720
And you that's so hard to do in the stock market.
00:12:25.039 --> 00:12:25.600
Yeah, yeah.
00:12:25.759 --> 00:12:36.399
Now, here's the takeaway, and then we're gonna get into some steps here, and then we'll get in, we'll unpack a little bit more detail because we don't want to just be, you know, we we love to give real helpful advice here, believe it or not.
00:12:36.639 --> 00:12:40.720
So I'm I I know some people do podcasts and like you can do this.
00:12:40.799 --> 00:12:41.279
Well, when?
00:12:41.440 --> 00:12:43.679
Well, you got to buy a mastermind group in Vegas for 10 grand.
00:12:43.919 --> 00:12:45.120
No, no, we're gonna tell you everything.
00:12:45.200 --> 00:12:45.679
We got it.
00:12:45.759 --> 00:12:52.240
Our helpline, our law firm, the uh the directed IRA uh team and the customer service is amazing.
00:12:52.399 --> 00:12:55.440
If you want to take action in this area, we've got the resources to help you.
00:12:55.519 --> 00:13:07.440
So, what the basic point I want to make here is that if you are in the real estate industry in any way, shape, or form, maybe you're into storage units, maybe you're into uh strip malls, maybe you're into uh RV and R.
00:13:07.919 --> 00:13:08.720
You said strip malls.
00:13:08.799 --> 00:13:09.840
I was wondering where you're going with that.
00:13:10.320 --> 00:13:14.879
Strip malls in Vegas.
00:13:14.960 --> 00:13:15.120
No.
00:13:15.279 --> 00:13:25.840
And if you're but if you're you know into like RV parks or whatever it is in the real estate industry, you have insider knowledge.
00:13:26.000 --> 00:13:28.240
That is not illegal to trade on that.
00:13:28.320 --> 00:13:33.840
You know something about real estate that someone may out someone else may not know.
00:13:34.000 --> 00:13:37.279
So you can use your retirement account to play in that game.
00:13:37.440 --> 00:13:42.000
You do not have to leave your retirement account in stocks, bonds, and mutual funds in Wall Street.
00:13:42.159 --> 00:13:50.080
All you have to do is move your account without penalty, without tax, fire that investment advisor that's not giving you that opportunity.
00:13:50.320 --> 00:13:58.559
Be careful what you hear when they go upside down on you and upset that you're pulling the money, and then get it into a position where you can invest in what you know.
00:13:58.720 --> 00:13:59.600
That's the concept.
00:13:59.919 --> 00:14:00.960
And you can do it, people.
00:14:01.039 --> 00:14:07.279
And we've been helping to the tune of over three billion dollars of client account value now.
00:14:07.440 --> 00:14:11.120
Hear a directed IRA of people that brought their money and taken it elsewhere.
00:14:11.200 --> 00:14:12.480
We're not gonna tell you what to do with it.
00:14:12.720 --> 00:14:13.279
It's your money.
00:14:13.360 --> 00:14:15.600
Yeah, it's called self-directing for a reason.
00:14:15.679 --> 00:14:18.480
Not Mark and Matt directing, it's called self-directing.
00:14:18.720 --> 00:14:19.279
Yeah, yeah.
00:14:19.360 --> 00:14:24.480
I mean, and that's the cool thing about using a self-red, it's like the menu is all of a sudden open architecture.
00:14:24.559 --> 00:14:26.480
It's whatever you want that's allowed by law.
00:14:26.639 --> 00:14:33.200
Uh guys, the only thing you cannot buy with an IRA is life insurance, collectibles, and S corporation stock.
00:14:33.360 --> 00:14:34.720
Everything else is fair game.
00:14:34.879 --> 00:14:37.440
Now we can't buy real estate and have personal use of that.
00:14:37.519 --> 00:14:38.559
I want to talk about that in a second.
00:14:38.639 --> 00:14:40.799
We need to buy it for investment purposes here.
00:14:40.960 --> 00:14:52.960
But like Mark said, the key here is really getting to a custodian of the IRA that lets you invest in the assets you know and believe in, whether it's real estate, that could be crypto, that could be private funds or precious metals.
00:14:53.120 --> 00:14:53.919
We don't care.
00:14:54.080 --> 00:15:00.240
We just want to talk about real estate because that was being the most popular and one that's had, you know, made the most millionaires over the years is real estate.
00:15:00.399 --> 00:15:02.240
So um, but that's that's it.
00:15:02.320 --> 00:15:03.519
It's really the three steps.
00:15:03.679 --> 00:15:10.320
You open an account at directed IRA, whether this is a traditional IRA, Roth IRA, SEP IRA, HSA, so okay, wherever the account type works for you.
00:15:10.559 --> 00:15:11.840
Step two, you fund it.
00:15:12.000 --> 00:15:15.679
Maybe that's your IRA at Schwab and you can old 401k.
00:15:15.919 --> 00:15:17.519
This is your old employer 401k.
00:15:17.600 --> 00:15:19.360
You don't even know what it's invested in anymore.
00:15:19.519 --> 00:15:20.799
You can roll that over.
00:15:20.960 --> 00:15:25.919
Um, this can be new contributions in, you know, and you'll have to get enough contributions in there to do a deal.
00:15:26.080 --> 00:15:28.960
But then step three is you're like, all right, go invest it there.
00:15:29.039 --> 00:15:30.399
Go do this deal, go do that deal.
00:15:30.480 --> 00:15:31.759
And then your IRA owns it.
00:15:31.840 --> 00:15:38.879
This is the money you make on this isn't going to you, it's going to your IRA and building up the wealth in your IRA in a tax-advantaged way.
00:15:39.120 --> 00:15:56.559
Now there is a step in there between two and three, where you may say, I want to, and this is we have prior podcasts on this and all the support you need, is to say, well, I want to pool different accounts together, or I want more uh easy access and the ability to transact.
00:15:56.720 --> 00:16:09.039
And that's where this LLC concept comes in, a special purpose LLC, sometimes called an IRA LLC, where you say instead of just calling up the directed IRA and say, go buy this real estate, go fund this LLC.
00:16:09.200 --> 00:16:18.240
And the law firm sets up an LLC for you, funded by your retirement account or accounts, which is okay because you're kind of pooling the money together to work together.
00:16:18.399 --> 00:16:20.960
Family accounts can work together in that format.
00:16:21.120 --> 00:16:23.919
You fund the LLC, that's 2.5.
00:16:24.000 --> 00:16:27.039
And then number three, you can go buy the real estate or do whatever.
00:16:27.200 --> 00:16:29.600
But that methodology gives you a lot of flexibility.
00:16:29.679 --> 00:16:30.399
And you go do it.
00:16:30.480 --> 00:16:32.240
Go do it for five years, 10 years.
00:16:32.399 --> 00:16:34.159
All the money goes back to the LLC.
00:16:34.320 --> 00:16:36.720
And then someday you wake up and go, you know what?
00:16:37.039 --> 00:16:42.799
Close down the LLC and send all that money I made tax free back to those retirement accounts.
00:16:42.960 --> 00:16:46.159
And then you go to that retirement account and go, oh, what kind of account is this?
00:16:46.480 --> 00:16:47.759
Oh, I can pull the money out for medical.
00:16:47.840 --> 00:16:48.799
I can pull it out for retirement.
00:16:48.960 --> 00:16:54.480
I can go, and then you just deal with the rules of that type of account once you get it back to the account.
00:16:54.559 --> 00:16:56.240
But that LLC is yours to build.
00:16:56.399 --> 00:16:56.639
Yeah.
00:16:56.799 --> 00:16:56.960
Yeah.
00:16:57.120 --> 00:16:58.639
Now we're two tax lawyers here.
00:16:58.720 --> 00:17:01.840
So you might be like, whoa, you just jumped a whole nother level there.
00:17:02.000 --> 00:17:03.679
Guys, it is not that complicated.
00:17:03.919 --> 00:17:04.240
All right.
00:17:04.319 --> 00:17:08.559
We have thousands, tens of thousands of clients that have done this strategy and this structure.
00:17:08.720 --> 00:17:12.160
Um, it's I always tell clients this is like learning a new board game.
00:17:12.319 --> 00:17:13.359
It's not rocket science.
00:17:13.519 --> 00:17:15.119
You just need to learn the steps and what to do.
00:17:15.200 --> 00:17:17.839
Once you've done it once or twice, it's the same thing over and over again.
00:17:18.000 --> 00:17:19.119
And so that's what our team serves.
00:17:19.279 --> 00:17:24.319
You can book a call with the team at directed IRA, go to directedIRA.com, book a call, it's right on the homepage.
00:17:24.480 --> 00:17:26.240
We'll walk you through this, what you're trying to do.
00:17:26.400 --> 00:17:27.519
Do you have retirement accounts?
00:17:27.680 --> 00:17:30.079
Your money you're trying to work with, what account should you open?
00:17:30.319 --> 00:17:31.680
Can I do this type of real estate?
00:17:31.759 --> 00:17:34.079
We'll help educate you so you know what's possible.
00:17:34.240 --> 00:17:40.319
And if you're like, oh, I need that LLC or more structuring or advice, you can work with our law firm KQS lawyers too.
00:17:40.480 --> 00:17:42.960
Yeah, I like the either way you start.
00:17:43.039 --> 00:17:48.720
I'm gonna I'm gonna throw out that some of you listening, you don't even know a lawyer that knows this stuff.
00:17:48.880 --> 00:17:52.640
Like, I want you to know we've been in this business for 25 years.
00:17:52.799 --> 00:18:02.000
We've got 14 incredible tax lawyers that take calls from clients all over the 50 states, get on Zoom, and we're gonna talk about your situation.
00:18:02.160 --> 00:18:04.000
And it's attorney client privileged.
00:18:04.079 --> 00:18:06.480
We have a fiduciary duty to tell you what's best for you.
00:18:06.559 --> 00:18:10.880
We aren't selling you anything, and it's actually extremely affordable for a couple grand.
00:18:11.119 --> 00:18:22.240
You can get a new entity set up for your retirement account, meet with a real attorney, and we could build a diagram for you and say, okay, here's all your options that are at your, you know, fingertips.
00:18:22.400 --> 00:18:24.880
And oh, by the way, how's your estate plan coming?
00:18:25.039 --> 00:18:26.960
Oh, how's your other tax planning coming?
00:18:27.039 --> 00:18:28.240
We're gonna see things.
00:18:28.480 --> 00:18:31.519
And um, it's a really, really powerful consultation.
00:18:31.680 --> 00:18:35.519
And you can do that before or after you talk to directed IRA.
00:18:35.599 --> 00:18:40.240
So just know that this this uh synergy between our two companies is so so powerful.
00:18:40.319 --> 00:18:44.000
And that's k o slawyers.com.
00:18:44.160 --> 00:18:45.440
You can make an appointment there.
00:18:45.599 --> 00:18:46.799
Okay, now let's talk about.
00:18:47.039 --> 00:18:48.480
Can we we kind of went through the steps?
00:18:48.559 --> 00:18:50.720
Now it's yeah, let's let's talk about rentals.
00:18:51.039 --> 00:18:52.000
Maybe, or no, did you want to?
00:18:52.240 --> 00:18:53.119
I just want to hit some rules.
00:18:53.359 --> 00:18:53.759
Oh, rules.
00:18:53.839 --> 00:18:54.880
Yeah, let me just hit some rules.
00:18:55.839 --> 00:18:56.079
Yeah, yeah.
00:18:56.559 --> 00:18:57.680
So there is a rule though.
00:18:57.759 --> 00:19:00.880
There's a big rule called the prohibited transaction rule.
00:19:01.039 --> 00:19:04.799
Okay, I wrote a book on self-directed iries, it happens to be the number one book in the subject.
00:19:04.880 --> 00:19:05.839
I've got like four chapters.
00:19:07.599 --> 00:19:09.920
It's got four chapters on just prohibited transactions.
00:19:10.000 --> 00:19:11.359
I'm not trying to plug it, I'm just saying.
00:19:11.680 --> 00:19:13.839
So, okay, in acknowledgments, he mentions me.
00:19:13.920 --> 00:19:15.279
So do you?
00:19:15.440 --> 00:19:16.079
I think I think you do.
00:19:16.319 --> 00:19:16.799
Yeah, definitely.
00:19:16.880 --> 00:19:17.039
Yeah.
00:19:17.200 --> 00:19:17.279
Yeah.
00:19:17.920 --> 00:19:18.319
Go read it.
00:19:18.400 --> 00:19:19.519
Go read it out loud, you know.
00:19:19.759 --> 00:19:20.880
This looks really well written.
00:19:20.960 --> 00:19:21.839
I ought to read this sometime.
00:19:22.720 --> 00:19:23.039
You can do it.
00:19:23.119 --> 00:19:24.079
Go read it read the preface.
00:19:24.319 --> 00:19:24.720
Acknowledge.
00:19:24.960 --> 00:19:26.079
Who do I think first?
00:19:26.319 --> 00:19:28.559
In the first sentence, oh my gosh.
00:19:28.720 --> 00:19:31.119
I would like to specifically thank my partner, Mark J.
00:19:31.279 --> 00:19:32.799
Kohler, CPA and attorney.
00:19:32.960 --> 00:19:33.279
Wow.
00:19:33.599 --> 00:19:39.759
Mark introduced me to the subject of self-directed iries over 12 years ago and continues to be a leading expert in the field.
00:19:39.920 --> 00:19:47.119
As a successful author of books on taxes and asset protection, Mark also shared valuable insights that helped me navigate the book writing process.
00:19:47.519 --> 00:19:47.839
Thank you.
00:19:48.000 --> 00:19:50.319
I knew that I hadn't read that for a long time.
00:19:50.720 --> 00:19:51.680
Give credit where credit's due.
00:19:51.839 --> 00:19:52.079
Thank you.
00:19:52.160 --> 00:19:53.039
Is this this is second?
00:19:53.359 --> 00:19:54.160
14 years ago.
00:19:54.240 --> 00:19:56.000
And this book, that's 20 years ago now.
00:19:56.079 --> 00:19:57.119
This book's been out for six years.
00:19:57.359 --> 00:19:57.440
Yeah.
00:19:57.599 --> 00:19:58.400
Third edition is coming out.
00:19:58.799 --> 00:19:59.440
You guys would love this.
00:19:59.519 --> 00:20:00.160
It's a good book.
00:20:00.240 --> 00:20:01.039
Go get it on Amazon.
00:20:01.359 --> 00:20:01.519
Yeah.
00:20:02.480 --> 00:20:03.839
Sorry, I got on a little tangent there.
00:20:03.920 --> 00:20:06.720
But I what I wanted to say is there's some rules here.
00:20:06.880 --> 00:20:08.480
Here's the gist of it.
00:20:08.880 --> 00:20:13.200
When you're investing your IRA, you're trying to grow your IRA.
00:20:13.359 --> 00:20:16.079
Not personally make money because your IRA did something.
00:20:16.240 --> 00:20:16.640
All right.
00:20:16.720 --> 00:20:18.160
So, or personally benefit.
00:20:18.240 --> 00:20:22.480
So, for example, when we say your IRA buys a rental property, you're not staying at that property.
00:20:22.640 --> 00:20:24.400
Your kid's not staying at that property.
00:20:24.559 --> 00:20:25.839
You're trying to grow the IRA.
00:20:25.920 --> 00:20:28.720
You're trying to find the tenant that will pay the most money possible.
00:20:28.880 --> 00:20:33.680
When you sell that property, you're trying to find the person that'll pay the most money to go in and grow your property.
00:20:33.839 --> 00:20:34.640
Your kids will not do that.
00:20:34.799 --> 00:20:36.000
I will just forewarn you.
00:20:36.079 --> 00:20:38.880
Your kids are not the right renter or buyer.
00:20:39.279 --> 00:20:40.799
They want to do, you know.
00:20:41.039 --> 00:20:43.359
So, um, and the Congress knew that.
00:20:43.440 --> 00:20:52.319
And so, like, we're restricting you from using your IRA and transacting it with yourself or certain family members, like your kids, your spouse, your parents.
00:20:52.720 --> 00:20:55.440
Those people are all restricted to your brother-in-law is fine.
00:20:55.680 --> 00:20:59.359
Because we know we know you're gonna screw your brother-in-law over.
00:20:59.440 --> 00:21:00.960
So, you know, just have at it.
00:21:01.200 --> 00:21:03.039
Yeah, your sister even is okay.
00:21:03.119 --> 00:21:05.039
Brother and sister, siblings, aunts, uncles, cousins.
00:21:05.200 --> 00:21:06.799
Your IRA can't actually Suzanne.
00:21:06.880 --> 00:21:07.680
I would not do that to you.
00:21:07.839 --> 00:21:08.640
I just want to throw that out.
00:21:08.799 --> 00:21:09.279
Yeah, yeah.
00:21:09.359 --> 00:21:10.240
But way clear.
00:21:10.480 --> 00:21:11.759
But there's a couple brother-in-laws I would.
00:21:11.839 --> 00:21:11.920
Yeah.
00:21:13.839 --> 00:21:15.359
Not to stay unmentioned here.
00:21:15.680 --> 00:21:19.519
One other thing, let me just note, is a couple other things that could come up in real estate.
00:21:19.680 --> 00:21:21.440
Let's say you're doing the flip property.
00:21:21.599 --> 00:21:22.720
You can't work on the property.
00:21:22.799 --> 00:21:28.400
Okay, your IRA can pay a contractor to go do the work or a handyman or whoever to fix up and repair.
00:21:28.480 --> 00:21:32.000
But you physically can't put on the tool belt and go work on the property.
00:21:32.079 --> 00:21:34.079
That causes a another type of prohibited.
00:21:34.480 --> 00:21:35.839
And you might go, well, what the hell?
00:21:36.240 --> 00:21:37.359
I'm in the flip business.
00:21:37.519 --> 00:21:45.519
That's where I really get that extra 10% return is because I'm, you know, elbow grease and I know all the angles and I don't have to pay for that contract.
00:21:45.839 --> 00:21:47.440
I know, we get it.
00:21:47.759 --> 00:21:51.519
But book into the deal, okay, you have to do the math here.
00:21:51.920 --> 00:21:53.200
What's my baseline?
00:21:53.359 --> 00:21:59.680
I'm gonna take my IRA and go buy Tesla stock and sit around who knows how long, and it could it go up, could it go down?
00:22:00.000 --> 00:22:03.519
I have no control over that, not that Tesla stock is bad at all.
00:22:03.839 --> 00:22:12.799
Or I go do a flip and yeah, maybe pay a little five or 10% more for a contractor to go put the rain gutters on rather than me on a Saturday afternoon.
00:22:13.039 --> 00:22:16.240
Will I make a little less on that flip compared to me doing it myself?
00:22:16.400 --> 00:22:16.880
Yes.
00:22:17.039 --> 00:22:20.880
But will you make a lot more than sitting on a stupid stock in Wall Street?
00:22:21.119 --> 00:22:21.519
Yes.
00:22:21.680 --> 00:22:23.359
That's what you're comparing it against.
00:22:23.519 --> 00:22:27.039
So don't overthink it and say, well, I can't do the work, so it's a bad deal.
00:22:27.119 --> 00:22:27.920
No, no, no, no.
00:22:28.079 --> 00:22:31.519
Look at your R-O-I-Return on investment.
00:22:31.680 --> 00:22:33.359
That's what you're comparing it against.
00:22:33.519 --> 00:22:34.799
So be okay with that.
00:22:34.960 --> 00:22:38.400
In fact, this will all work for Matt because he does not want to put it on a tool belt.
00:22:38.559 --> 00:22:40.319
I mean, it's really maybe at Halloween.
00:22:40.480 --> 00:22:41.759
You could be village people.
00:22:42.000 --> 00:22:42.480
I guess so.
00:22:42.559 --> 00:22:42.799
I guess.
00:22:43.039 --> 00:22:43.119
No.
00:22:43.680 --> 00:22:43.920
All right.
00:22:44.079 --> 00:22:45.279
I'm I'm more like the chief.
00:22:46.880 --> 00:22:47.599
You're the Indian.
00:22:47.839 --> 00:22:48.640
Yeah, that's what it's for.
00:22:49.200 --> 00:22:49.519
All right.
00:22:49.759 --> 00:22:53.200
So, okay, let's hit one other last rule I just want to know.
00:22:53.279 --> 00:22:53.599
Okay.
00:22:54.160 --> 00:22:55.680
And um, and we're here to help.
00:22:55.759 --> 00:22:56.240
That's what I say.
00:22:56.319 --> 00:22:57.839
We're here to help the team at directed IR.
00:22:58.000 --> 00:23:01.519
You can hire the lawyers if you need to as well, but we're here to help you along in the process.
00:23:01.759 --> 00:23:03.039
Um, one other thing.
00:23:03.200 --> 00:23:10.240
Let's say you're a real estate agent buying a property, and that the seller's offering a 3% buyer's agent commission.
00:23:10.480 --> 00:23:11.680
You cannot receive that.
00:23:11.759 --> 00:23:13.440
You might be, but Matt, I'm licensed.
00:23:13.599 --> 00:23:15.039
My IRA is not paying me.
00:23:15.119 --> 00:23:17.599
It's the seller of that property that's paying me.
00:23:17.839 --> 00:23:27.119
Yeah, but you're if your IRA is buying the property, that's like enabling this transaction, and you're financially benefiting personally by getting paid because your IRA made an investment.
00:23:27.200 --> 00:23:28.720
And the IRS is like, that's a no-no.
00:23:29.200 --> 00:23:33.759
So you can be an agent, you can even represent your IRA buying the property, but you're gonna waive the commission.
00:23:34.000 --> 00:23:36.400
Easy solution, just reduce the purchase price.
00:23:36.640 --> 00:23:41.119
Your IRA can benefit, you just can't benefit from your IRA making an investment.
00:23:41.440 --> 00:23:42.480
Yeah, I love it.
00:23:42.799 --> 00:23:49.119
So if you're already pretty entiful, this sounds this sounds really enticing.
00:23:49.359 --> 00:23:50.240
Your next step.
00:23:50.319 --> 00:23:58.240
Now we're gonna give a couple other specifics here on uh examples on buying a rental, let's say, but this is the opportunity to say, you know what?
00:23:58.319 --> 00:24:05.440
I need to subscribe and like this podcast, get updates whenever they do a podcast, because I need to learn more about this.
00:24:05.599 --> 00:24:08.720
Our first 10 podcasts on this topic go back in our history.
00:24:08.799 --> 00:24:11.440
We try to go through step one, step two, step three in depth.
00:24:11.519 --> 00:24:18.960
Yeah, we try to joke around and make it fun, but the point is a little bit of education on this is gonna go such a long way.
00:24:19.519 --> 00:24:21.440
And start booking your first appointment.
00:24:21.519 --> 00:24:29.200
Book an appointment with directed IRA, customer service, or the law firm and say, I am going to take action and I'm going to start learning about this.
00:24:29.279 --> 00:24:33.119
And people, once you start doing that, the universe is gonna bring you a deal.
00:24:33.200 --> 00:24:35.200
And you're gonna go, oh my gosh, here it is.
00:24:35.279 --> 00:24:36.559
And it's gonna be freaking awesome.
00:24:36.720 --> 00:24:37.039
Yeah.
00:24:37.200 --> 00:24:38.720
And we have webinars on this.
00:24:38.799 --> 00:24:41.119
We have a guide, and we're gonna put a link in the description too.
00:24:41.200 --> 00:24:47.119
We have a beginner's guide to investing in real estate with a self-directed IRA too that'll help give you some tools and other resources.
00:24:47.359 --> 00:24:49.359
What we're trying to say here is we got you.
00:24:49.519 --> 00:24:50.559
We got a lot of resources.
00:24:50.640 --> 00:24:53.119
We've helped tens of thousands of clients do it.
00:24:53.279 --> 00:24:59.599
Um, this might be a new concept to you, but for many people, this is something that's very interesting, empowering, and exciting.
00:24:59.680 --> 00:25:03.200
It gets you connected to your money and to this wealth that we're building.
00:25:03.359 --> 00:25:06.480
Guys, there's$45 trillion in US retirement accounts.
00:25:06.559 --> 00:25:09.599
For so many of us, it is where the vast majority of our wealth is.
00:25:09.759 --> 00:25:11.200
But we want to be proactive about it.
00:25:11.359 --> 00:25:16.079
We want to be investing in it in the best way we can so we can grow it and have a retirement we're looking forward to.
00:25:16.400 --> 00:25:21.599
Okay, so here we wanted to leave you with a couple examples of a specific asset type.
00:25:21.759 --> 00:25:24.640
And maybe we can go back to the examples we already shared a little.
00:25:24.720 --> 00:25:30.480
I'll go back to my little single-family home in in the Chicago area uh suburbs.
00:25:30.799 --> 00:25:32.799
Is let's do the steps.
00:25:33.200 --> 00:25:36.640
I had actually opened my health savings account at Wells Fargo.
00:25:36.720 --> 00:25:40.000
Right now, Wells Fargo is not opening up HSA accounts.
00:25:40.079 --> 00:25:41.759
They used to do it, they don't know.
00:25:42.079 --> 00:25:46.319
But back in the day, I had opened up my HSA and put my four grand in there.
00:25:46.559 --> 00:25:53.839
Then I um realized with Matt as we were launching, we hadn't even launched directed IRA at that point.
00:25:54.000 --> 00:25:54.400
That's right.
00:25:54.480 --> 00:25:58.319
I had opened, went and opened up an HSA at one of our competitors.
00:25:58.400 --> 00:25:59.200
I won't say their names.
00:25:59.279 --> 00:26:01.440
They were the only ones that would open up an HSA.
00:26:01.920 --> 00:26:04.000
We were we were pioneers in this people.
00:26:04.160 --> 00:26:04.720
We really were.
00:26:04.799 --> 00:26:06.880
We wanted to figure it out before our clients.
00:26:07.039 --> 00:26:16.319
And so I opened up my HSA with this uh trust company, and then I moved the money from Wells Fargo to the trust company, and it was four grand.
00:26:16.559 --> 00:26:20.160
I probably opened up the account, it was like 300 bucks, whatever, four hundred bucks.
00:26:20.319 --> 00:26:21.759
Opened up the account, moved that.
00:26:21.920 --> 00:26:24.240
Now I could pay for the account fee personally.
00:26:24.319 --> 00:26:28.640
So I paid for the account fee personally, kept my whole four grand ready to go.
00:26:28.960 --> 00:26:36.160
Then my called my friend Chris Alvin, give him a little shout-out, awesome real estate investor in the Chicago area, and I said, Hey, you're doing single family homes out there.
00:26:36.319 --> 00:26:39.039
You got anything cool, like a cheap deal, seller financing.
00:26:39.200 --> 00:26:41.119
I've got four grand down payment.
00:26:41.200 --> 00:26:42.799
I know it's small, but you're doing these.
00:26:42.960 --> 00:26:45.200
He had like a portfolio, if you remember, like 200 grand.
00:26:45.680 --> 00:26:47.680
He's a former school teacher, turned real estate investor.
00:26:47.839 --> 00:26:48.480
Yeah, it was awesome.
00:26:48.559 --> 00:26:51.279
He was just buying all these little turn and burns.
00:26:51.440 --> 00:26:55.039
So he said, Yeah, yeah, I got this grandma, she owns this property.
00:26:55.200 --> 00:26:57.359
Um, she's going to live with her kids.
00:26:57.519 --> 00:27:00.960
She'll sell it and carry the paper because it's mailbox money to her.
00:27:01.200 --> 00:27:02.720
And um, I'm like, okay, cool.
00:27:02.880 --> 00:27:03.920
So he put the deal together.
00:27:04.079 --> 00:27:06.720
I can show you the Repsy at an event here sometime.
00:27:06.960 --> 00:27:12.000
And I bought it for approximately 30 something because I only have four grand.
00:27:12.240 --> 00:27:14.400
So I had to have money for closing and all that.
00:27:14.559 --> 00:27:16.400
So I bought it for about 35 grand.
00:27:17.680 --> 00:27:20.400
But before we went into closing, I opened my LLC.
00:27:20.559 --> 00:27:22.079
You can go to the Secretary of State.
00:27:22.319 --> 00:27:26.000
This was back when I was more of a privacy was not as much of an issue.
00:27:26.160 --> 00:27:28.160
This is over 12, 13 years ago.
00:27:28.319 --> 00:27:31.200
I went and opened an LLC called Kohler Holdings.
00:27:31.359 --> 00:27:31.839
LLC.
00:27:31.920 --> 00:27:35.200
No, state state website of Illinois, and you'll see it.
00:27:35.359 --> 00:27:38.559
And that LLC is 100% owned by my HSA.
00:27:39.039 --> 00:27:41.759
Open up a bank account back at Wells Fargo.
00:27:42.160 --> 00:27:45.200
Then I moved the money back to Wells Fargo to the LLC.
00:27:45.839 --> 00:27:49.759
Which was from the self-directed HSA at a self-directed HSA custodian.
00:27:50.000 --> 00:27:50.160
Yep.
00:27:50.240 --> 00:27:56.079
So the they said, all right, this HSA is gonna own 100% of Kohler Holdings.
00:27:56.480 --> 00:28:03.920
And it and to buy 100% of Kohler Holdings, it put in that four grand, which was in the Kohler Holdings LLC bank account at Wells Fargo.
00:28:04.000 --> 00:28:04.720
Just connecting the dots.
00:28:05.039 --> 00:28:05.920
Yep, no, no, I love it.
00:28:06.000 --> 00:28:06.319
I love it.
00:28:06.400 --> 00:28:08.000
I jumped over that spot a little quick.
00:28:08.319 --> 00:28:10.720
But it was funny because the money had made this route.
00:28:10.799 --> 00:28:15.920
It had gone from HSA account at Wells Fargo to the trust company.
00:28:16.079 --> 00:28:27.039
Then I opened up the LLC bank account owned by the HSA, and then the money came back to the Wells Fargo account, not in the HSA account at Wells Fargo, but the LLC bank account.
00:28:27.200 --> 00:28:31.519
Then Chris called me up and said, Hey, closings next week, whatever, send me a check or wire.
00:28:31.599 --> 00:28:32.480
And I'm like, all right.
00:28:32.640 --> 00:28:43.039
And I sent the money from Wells Fargo over to a title company in Illinois and took title to the property and the name of the LLC, signed a promissory note to this little lady to this day.
00:28:43.119 --> 00:28:44.640
I'm still paying that note.
00:28:45.279 --> 00:28:52.720
And um Chris is the property manager because remember, I can't own the tool, do put on a tool belt and be the property manager.
00:28:52.799 --> 00:28:55.440
So I hired Chris at 10% of rent.
00:28:55.759 --> 00:28:58.640
And he's been the property manager ever since.
00:28:58.799 --> 00:28:59.680
I talked to him the other day.
00:28:59.759 --> 00:29:00.400
He's doing great.
00:29:00.480 --> 00:29:06.960
And so cash from the rent goes into the property management company.
00:29:07.119 --> 00:29:14.160
They pay certain bills or whatever, and then they send the money net back to the LLC bank account and it pools up.
00:29:14.319 --> 00:29:15.680
Sometimes I'll draw it out.
00:29:15.759 --> 00:29:19.200
And if I want that money, I've got to send it back to the HSA.
00:29:19.519 --> 00:29:25.200
Now, once we open the directory directed IRA trust company, I told that other competitor, you're fired.
00:29:25.279 --> 00:29:28.079
And I move the HSA account to directed IRA.
00:29:28.160 --> 00:29:37.519
So you can open up an HSA at directed IRA right now, still fund it for last year if you had a high deductible account and insurance policy.
00:29:37.680 --> 00:29:40.000
And uh, I don't know, am I missing any steps?
00:29:40.079 --> 00:29:41.519
But it still collects rent.
00:29:41.680 --> 00:29:41.839
Yeah.
00:29:42.000 --> 00:29:46.480
And then that LLC, like you said, I think that's that last step is you don't take money from the LLC.
00:29:46.559 --> 00:29:47.519
You don't own the LLC.
00:29:47.599 --> 00:29:50.400
In Mark's example, the HSA did, or your self-directed IRA.
00:29:50.559 --> 00:29:53.759
So you'd send money from the LLC back to the IRA or HSA.
00:29:54.079 --> 00:29:58.640
And maybe, you know, once you're 59 and a half, you can start pulling the money out from your IRA tax-free.
00:29:58.720 --> 00:30:04.160
For the HSA, it can go against medical, you know, your kids' dental orthodontists, you know, bills, everything stuff that you were doing.
00:30:04.319 --> 00:30:08.160
But um, so my LLC, just since we're sharing our LLCs here, you know, yeah.
00:30:08.319 --> 00:30:11.759
You know, so you should show me your LLC out of mine.
00:30:12.079 --> 00:30:12.240
Yeah.
00:30:12.319 --> 00:30:25.519
So my account's at directed, you know, and um it set up an LLC or the the subdirected account owned the LLC 100% called Legend Legend, I-N-R-E-L-C.
00:30:25.839 --> 00:30:26.160
Okay.
00:30:26.319 --> 00:30:26.559
Okay.
00:30:27.200 --> 00:30:29.759
Legend, it's not Kohler Holdings, you know.
00:30:29.839 --> 00:30:30.480
Yeah, I don't want to be.
00:30:30.720 --> 00:30:31.279
You're you're smarter.
00:30:31.519 --> 00:30:31.839
You're smarter.
00:30:32.240 --> 00:30:32.559
A little unique.
00:30:32.720 --> 00:30:33.119
For KG.
00:30:33.359 --> 00:30:36.880
It was uh, I think my LLC, some of them are off of album names.
00:30:37.039 --> 00:30:39.359
So that's the Bob Marley album, Legend, is a good one.
00:30:39.759 --> 00:30:40.000
Okay.
00:30:40.240 --> 00:30:42.079
And INRE Indiana Real Estate.
00:30:42.160 --> 00:30:43.200
I needed something unique.
00:30:43.440 --> 00:30:47.359
Anyways, so but that LLC, same same process here.
00:30:47.519 --> 00:30:49.200
Money went from the IRA to the LLC.
00:30:49.359 --> 00:30:50.319
LLC has a bank account.
00:30:50.400 --> 00:30:54.880
It's a Titan Bank, Titan Bank's who we use now and coordinate with a lot of our IRA LLCs.
00:30:55.279 --> 00:30:57.279
And then it bought the property.
00:30:57.519 --> 00:31:00.160
It the cash flow was going there, rental income is going there.
00:31:00.240 --> 00:31:01.359
I had a property manager too.
00:31:01.440 --> 00:31:03.119
Now you don't have to have a property manager.
00:31:03.279 --> 00:31:04.240
This was in Indiana.
00:31:04.400 --> 00:31:05.519
Marks was in Illinois.
00:31:05.680 --> 00:31:07.440
Let's say I bought one in Arizona.
00:31:07.599 --> 00:31:09.200
I could kind of manage the property.
00:31:09.279 --> 00:31:18.160
I can't do the work, but I could go show it to a tenant, write a lease, bug them if they don't pay, you know, and I can cut the bills for the checks and everything.
00:31:18.319 --> 00:31:20.559
I don't want to do that anyways, even if it was here.
00:31:20.720 --> 00:31:24.720
But I'm just saying you can do some of that self-management if you want.
00:31:25.440 --> 00:31:29.680
Um, and then when I sold that property, the money went back in the LLC.
00:31:29.759 --> 00:31:31.599
And for the most part, I've done some other things.
00:31:31.680 --> 00:31:32.880
I've invested in some private sectors.
00:31:33.119 --> 00:31:34.720
I like your lending, I like your lending idea.
00:31:35.119 --> 00:31:36.319
So now the money's there.
00:31:36.480 --> 00:31:36.640
Yeah.
00:31:36.880 --> 00:31:39.519
How do you do you do a lot of due diligence or what?
00:31:39.680 --> 00:31:41.119
So some of you may go lend.
00:31:41.200 --> 00:31:42.720
How do you lend out of your LLC?
00:31:42.799 --> 00:31:44.000
Do you mind giving one example of that?
00:31:44.079 --> 00:31:46.000
Like someone says I'm a contractor.
00:31:46.240 --> 00:31:46.480
Yeah.
00:31:46.559 --> 00:31:53.200
So uh for example, I lent money from my IR LC to a uh a real estate investor named Natalie.
00:31:53.359 --> 00:31:53.599
Okay.
00:31:53.680 --> 00:31:53.839
Okay.
00:31:54.000 --> 00:31:55.519
Then I got a YouTube video on this.
00:31:55.599 --> 00:31:55.759
Okay.
00:31:56.160 --> 00:31:59.119
I met her, I went to the property, we're going through the property.
00:31:59.279 --> 00:32:03.759
Now, Natalie was like this hairdresser, contractor slash real estate investor.
00:32:03.920 --> 00:32:04.240
Oh my gosh.
00:32:05.119 --> 00:32:06.720
But she like owns the salon and everything.
00:32:06.799 --> 00:32:07.440
She's cool.
00:32:07.759 --> 00:32:15.279
And so um, but the the house was like uh it was in such disrepair, a bank wouldn't lend on it.
00:32:15.519 --> 00:32:15.759
Okay.
00:32:16.319 --> 00:32:18.079
And so, but it was a good value.
00:32:18.160 --> 00:32:21.440
And in fact, the the lot was a lot that could be split.
00:32:21.599 --> 00:32:21.920
Okay.
00:32:22.160 --> 00:32:25.359
And she and the sellers didn't know that or care to like go through that process.
00:32:25.440 --> 00:32:30.319
So there's an extra value there in just the land right next to it, not let alone the property she was gonna rehab.
00:32:30.559 --> 00:32:38.960
So it felt really good about the property that it had the equity there, lent her the money, and I did the same 12% interest in two points.
00:32:39.039 --> 00:32:40.960
It's what I always lend on, typically.
00:32:41.200 --> 00:32:42.559
And she went and bought it.
00:32:42.720 --> 00:32:48.319
Yeah, she went and bought it, she rehabbed it and and later sold it and paid me off.
00:32:48.960 --> 00:32:54.400
And so, um, and then when that money came back in, I had it lent back out in two weeks later, you know.
00:32:54.559 --> 00:32:55.039
That's the thing.
00:32:55.119 --> 00:32:57.359
When they're lending, you want to get it right back out.
00:32:57.599 --> 00:33:02.079
Um, and so what it takes is what I'll say is at first it might seem hard.
00:33:02.160 --> 00:33:04.880
Well, I don't know anyone that wants to borrow money on a real estate deal.
00:33:05.200 --> 00:33:10.880
Go to your local real estate investor association meeting and say, hey, I'm a new private lender looking for deals.
00:33:11.039 --> 00:33:12.079
You're gonna have a lot of new friends.
00:33:12.400 --> 00:33:16.000
I'd wear a bulletproof vest because you're gonna be tackled in the hallway.
00:33:16.160 --> 00:33:17.440
I want to borrow money, I want to borrow money.
00:33:17.759 --> 00:33:22.799
Use some discretion, maybe not lend to someone doing their first deal that doesn't have any assets or anything to their name.
00:33:22.880 --> 00:33:24.160
You don't want to be careful about that.
00:33:24.319 --> 00:33:26.079
Use someone that has some experience.
00:33:26.240 --> 00:33:32.880
Um, but also what I found is the the people that I lend to, they're always doing the next deal and they want to keep rolling money.
00:33:33.039 --> 00:33:39.039
And so you kind of start work with people you have a good relationship with and um that that's the private lending use.
00:33:39.279 --> 00:33:39.519
I like it.
00:33:39.599 --> 00:33:42.640
And we've got a great podcast on due diligence.
00:33:42.880 --> 00:33:45.759
Like, how do I loan the money and not lose it?
00:33:46.000 --> 00:33:50.720
What are the steps with a trusteed and confirming your own first position and all that?
00:33:50.880 --> 00:33:54.559
So we go back into our list of shows if you really want to go there.
00:33:54.720 --> 00:33:59.839
But the the other thing that I want to point out that Matt kind of glossed over is 12 and two.
00:34:00.000 --> 00:34:01.119
Now let's think about that.
00:34:01.359 --> 00:34:08.159
Matt said, soon as I got that money back, I was out two weeks later with another loan because he's got two or three people that love to borrow from him.
00:34:08.239 --> 00:34:09.920
So they're always like, hey, are you available?
00:34:10.079 --> 00:34:10.639
You know, isn't it?
00:34:10.719 --> 00:34:12.400
Can I because they're going doing deals.
00:34:12.559 --> 00:34:16.480
So if you're getting 12 and two and you do it twice in a year.
00:34:16.639 --> 00:34:20.800
So Matt loans someone money for six months, yeah, and then another six months.
00:34:20.960 --> 00:34:26.480
So he's done two loans, and most borrowers that are doing rehabs, they don't want to have that money for more than six months.
00:34:26.719 --> 00:34:27.360
It's costing them.
00:34:27.679 --> 00:34:28.239
It's costing them.
00:34:28.320 --> 00:34:31.119
They want to, I mean, Matt's sending out some guy with a bat named Vinny.
00:34:31.199 --> 00:34:33.519
So I mean, they want to get that money back to Matt right away.
00:34:33.760 --> 00:34:39.119
So 12 and 2 means he's getting 14% on that first loan in the first six months.
00:34:39.280 --> 00:34:40.960
He got he averaged 12 and 2.
00:34:41.119 --> 00:34:46.239
Remember, it's six months, so that's six percent interest, one percent per month, plus the two points.
00:34:46.400 --> 00:34:49.280
So he made eight percent in that first six months.
00:34:49.440 --> 00:34:52.320
Then he turns around, does it again, gets another two percent?
00:34:52.400 --> 00:34:55.679
Now he's up to 10, and he's got six more months of run mate.
00:34:56.079 --> 00:35:00.639
So now he is averaging sixteen a year.
00:35:01.679 --> 00:35:07.360
Guys, I'm sorry, is your mutual fund giving you 16% with a guaranteed first trustee?
00:35:07.840 --> 00:35:09.679
Oftentimes Matt's praying they default.
00:35:09.840 --> 00:35:14.639
Yeah, because if he defaults, he goes and takes the property and sells it and gets to keep the profit too.
00:35:14.800 --> 00:35:20.400
So he's averaging 16% with complete guaranteed rate of return.
00:35:20.719 --> 00:35:22.800
Yeah, I mean, guaranteed a little strong there.
00:35:22.880 --> 00:35:23.599
You know, they could not pay you.
00:35:24.000 --> 00:35:24.880
Yeah, there it could be risk.
00:35:24.960 --> 00:35:25.840
Yeah, there could be some risk.
00:35:26.000 --> 00:35:27.119
Yeah, there's risk.
00:35:27.280 --> 00:35:28.239
But you get the property, you know.
00:35:28.400 --> 00:35:34.239
Yeah, yeah, but it's secured, you know, there's an it's backed by an asset, not by some promise or an unsecured note.
00:35:34.400 --> 00:35:44.000
And so, yeah, and I think, you know, if you guys know the rule of 72, you take what's your annual rate of return, 16%, you divide it by 72, that tells you how long it takes for your money to double.
00:35:44.320 --> 00:35:46.800
72 divided by 16 is like four years.
00:35:46.960 --> 00:35:52.719
When you're getting a 16% annual rate of return, your money is doubling every four years without putting any more money in.
00:35:52.880 --> 00:35:53.599
I ran the numbers.
00:35:53.679 --> 00:35:58.960
If I just lend 100 grand at 16% in in 18 years, that'll be$1.6 million.
00:35:59.599 --> 00:36:07.679
Making no new contributions, just getting being consistent about that and getting the money invested and investing in an asset you know and believe in over time.
00:36:08.159 --> 00:36:10.159
So we went on a little bit.
00:36:10.400 --> 00:36:11.280
Moral of the story, moral of the home.
00:36:11.519 --> 00:36:11.920
Bring us home.
00:36:12.000 --> 00:36:12.639
Bring us home, baby.
00:36:12.880 --> 00:36:15.360
Moral of the story is the world is your oyster.
00:36:15.440 --> 00:36:20.960
Don't believe in Wall Street trying to sell you the things for your retirement account that's on the menu that they happen to have.
00:36:21.119 --> 00:36:23.119
You can invest in stocks, bonds, or mutual funds.
00:36:23.199 --> 00:36:24.079
You can buy annuities.
00:36:24.159 --> 00:36:25.199
I'm not saying that's not bad.
00:36:25.280 --> 00:36:31.599
I'm just saying if you want to invest in real estate because you know it and believe it, you can do it with your IRA or 401k.
00:36:31.679 --> 00:36:34.000
We do it for clients every day here at directed IRA.
00:36:34.079 --> 00:36:35.760
Give us a call if we can be of assistance to you.
00:36:35.920 --> 00:36:37.119
We've got a ton of resources.
00:36:37.280 --> 00:36:38.800
We've been dropping them through the show.
00:36:38.880 --> 00:36:41.920
So please reach out to those resources and grab those if you can.
00:36:42.079 --> 00:36:43.280
We will see you next time.
00:36:43.440 --> 00:36:44.880
Until then, stay calm.
00:36:45.039 --> 00:36:46.079
Self direct on