You've been hearing a lot about about self-directed IRA s and real estate. You're intrigued. You can think of all kinds of real estate investments you'd use your self-directed IRA for. The only catch? You don't have much money in your IRA yet.
Most IRA investors pay all cash for a property or they have to borrow 50-65% of the purchase price at rates 3-4% higher than conventional interest rates. Paying high interest rates inside your IRA can potentially erode your cash flow and decimate your returns.
So, what do you do while you're building up a balance inside your IRA? How can you take advantage of today's amazing real estate market if you don't have the resources inside your IRA to make a 35-50% down payment or pay all cash for a property?
Watch this 60 minute training video and find out!
Kaaren Hall president of uDirect IRA Services www.uDirectIRA.com and professional investor David Campbell www.HasslefreeCashflowInvesting.com will show high income earners how to use a self-directed IRA to create amazing real estate profits -- even starting with a small balance.
In this 60 minute FREE webinar you'll learn:
1) how to make IRA profits as a high income earner starting with a relatively small self-directed IRA
2) deferred down payment strategies used by savvy IRA investors to double their returns and lower their risk
3) how to buy a $1,000,000 property inside your IRA with as little as $10,000 down
4) the benefits and pitfalls of owning and financing "low money down properties" inside your IRA
5) when your IRA should own positive cash flow properties and when positive cash flow sucks
6) how easy it is to use a self-directed IRA to maximize your profits while minimizing your tax bill
7) where to find non-recourse IRA financing at low interest rates
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Investing Your IRA When Your Income is High but Your Balance is Low
1. www.HasslefreeCashflowInvesting.com
Investing Your Self-Directed IRA
When Your Income is High but
Your Balance is Low
Fourth Dimension Real Estate, Inc.
David Campbell - CEO
www.HassleFreeCashflowInvesting.com
uDirect IRA Services
Kaaren Hall - President
www.uDirectIRA.com
2. www.HasslefreeCashflowInvesting.com
David Campbell - Founder
Hassle-Free Cashflow Investing
Former high school band director
Self-made multi-millionaire
Real Estate investor / developer / broker
+$800 million in transactional experience
Financial educator / author / speaker
Houses, condo-conversion, multi-family, winery, resort, office, retail,
medical office, production home building
Faculty Member: Investor Summit at Sea with Robert Kiyosaki
Regular Contributor to the Real Estate Guys Radio Show
4. www.HasslefreeCashflowInvesting.com
Today’s agenda
•when your IRA should own positive cash flow properties and
when positive cash flow sucks
• IRA profits as a high income earner starting with a relatively
small self-directed IRA
•deferred down payment strategies
•the benefits and pitfalls of owning and financing “low money
down properties” inside your IRA
•how easy it is to use a self-directed IRA to maximize your
profits while minimizing your tax bill
•where to find non-recourse IRA financing at low interest rates
5. • Kaaren Hall, President
• uDirect IRA Services, LLC
• (866) 538-3539
• KHall@uDirectIRA.com
uDirect IRA Services, LLC
2522 Chambers Road, Ste 100
Tustin, CA 92780
6. • Stay to the end for a FREE report
• Using a Solo 401k to avoid UDFI
7. Begin with end in mind
RELATIONSHIPS
IDEAS
OPPORTUNITIES
NOT a sales pitch
NOT investment, legal, or tax advice
9. “Stress / distress is not created by a property;
it is created by an owner’s relationship to a property.”
-David Campbell
10. DO YOU HAVE
MISMATCHED?
expectations
resources
team
philosophy
emotional stamina
time horizon
strategy
tactics
11. Essential Resources
★ cash Typical IRA
★ cashflow
★ credit
THIS IS WHERE
★ equity THE PROFITS ARE
★ time and why we self-direct
★ talent
★ strategic relationships
★ control of an opportunity
12. www.HasslefreeCashflowInvesting.com
“Main Stream” Sources of Passive Income
are Not an Option
Bonds and CDs do not outpace inflation
Stock market risky & unpredictable
(ERISA withdrawal/ manipulated)
High risk of hyper-inflation
14. Cashflow in your IRA?
IRA CASHFLOW SUCKS
Higher cashflow = lower ROI
Investing transaction expenses
IRA transaction expenses
Decision making / time cost
Your contributions = cashflow
15. Cashflow in your IRA?
IRA CASHFLOW ROCKS
great for distribution era
better than bonds / CDs
balancing a negative cashflow
ordinary income tax deferral
16. Cashflow in your IRA?
Cashflow
Does NOT
necessarily
correspond
with RISK
17. Deferred Down Payment
When you don’t have a down payment
When you don’t need cashflow but the
seller does
When the leverage enhances your returns
18. CAP > interest rate
• $100,000 price
• $7,000 NOI
• 7 CAP
• $100,000 debt at 5% = $5k
• $7k income = $2,000 profit
21. What about amortization?
• $100,000 debt at 5% = $5,000 interest
• $7,000 NOI - $5,000 interest = $2,000 PROFIT
• If amortization is less than $2,000 then positive
cashflow
• If amortization is greater than $2,000 then
negative cashflow
22. What situation is appropriate
FOR YOU?
• There is no such thing as a
good property or bad
property / investment
• There is only appropriate
and inappropriate ownership
and timing.
23. Pitfalls of low money down
inside your IRA
Increased probability of cash call
Inability to meet cash call = LOSS
Unrelated Debt-Financed Income Tax
Maximum contribution limits
Inability to deduct losses in current year
Less benefit from high depreciation
24. Non-recourse = higher rates
Getting non-recourse debt at low rates
IRA debt needs to be non-recourse TO YOU
Investment partners
Group investments
Seller financing
Installment sale
Investment grade
tenants
Blended interest rates
25. • How to Self-Direct Your Retirement Savings
• uDirect IRA Services, LLC is not a fiduciary and does not render tax, legal,
accounting, investment, or other professional advice. If tax, legal, accounting,
investment, or other similar expert assistance is required, the services of a
competent professional should be sought.
26. Self-Direction
Why Haven’t I Heard About This?
•Few attorneys are knowledgeable
– About self-directed plans
•Few CPAs are knowledgeable
– About self-directed plans
•IRS rules have allowed self-direction since
IRAs were created in mid-1970s
27. What’s the Difference?
• Typical IRA Self-Directed IRA
• Stocks • Rental Property
• Bonds • Notes
• Mutual Funds • Private Stock
• CD’s • LLC’s
• Tax Liens
• Foreign Property
• Raw Land
• Etc.
28. What About Losses?
• Losses
• Cannot be written off taxes
• Cannot be replaced in the retirement plan
29. What Are The Limits?
• A Self-Directed IRA can invest in anything EXCEPT
1. Life Insurance Policies
2. Collectibles
1. Artworks
2. Coins
3. Collectible Cars
4. Antiques
5. Gems
6. Stamps
7. Rugs
30. What if your funds are with your
current employer?
Your plan will probably NOT allow you to self-
direct
Must wait until you leave the company
To rollover retirement plan
You can request an “in-service” transfer
from your current plan administrator.
31. Prohibited Transactions
(IRS Publication 590)
• Borrowing money from the IRA
• Selling property to it.
• Using it as security for a loan.
• Buying property for personal use (present or
future) with IRA funds.
32. Disqualified Person
• Disqualified persons include your fiduciary and
members of your family (spouse, ancestor, lineal
descendant, and any spouse of a lineal descendant).
34. Prohibited Transactions
•Neither you nor any disqualified people may
benefit from IRA
•Cannot buy, sell or exchange property
between plan and
– Self or
– Disqualified people
•Cannot provide goods, services or facilities
36. Buying Real Estate With Your IRA
• Pros
1. Capital gains are tax free
2. Positive cash flow is tax free
3. No time limit for holding property
4. IRA can borrow money
– Leverage your investment
5. Potential to earn a larger rate of return on
invested capital
37. Buying Real Estate With Your IRA
• Cons
1. No tax advantages of owning real estate
2. No deduction for capital losses
3. You are solely responsible for all gains or
losses
4. You cannot replace losses
38. Your IRA Can Take A Loan!
•Loan must be
• non-recourse
– Upon default, lender can seize subject property
only
•Upon default, lender cannot
– Seize other IRA plan assets
– Seize your personal assets
39. Non-Recourse Loans
•Few lenders to choose from
– Must be a portfolio loan
– Cannot be sold on the secondary market
•Larger down payment required
– 40% to 45%
•Cannot personally guarantee the loan
40. Personal Guarantees
• Personal guarantees by the IRA owner not permitted
• Can be personally guaranteed by a third party
– Must not be a “disqualified” person
– Disqualified people are
• Ascendants
• Descendants
• Spouse and self
• And others
41. UDFI
•Unrelated Debt Financed Income tax
•Any property held to produce income is debt-
financed property if at any time during the
tax year there was acquisition indebtedness
outstanding for the property.
42. UBIT
•Unrelated Business Income Tax
•If a tax exempt entity engages in a business
that is unrelated to its primary purpose, any
income derived from such business will be
subject to UBIT
•IRS Pub 598
•UDFI & UBIT are reported on form 990-T
43. Buying Real Estate - The Process
• Open a self-directed account
• Shop for a property
• Remember, it’s the IRA that is the buyer
• Custodian to sign “Offer to Purchase”
• Submit a Buy Direction Letter for earnest money
deposit
• Funds wired to closing from your IRA
• Fund & Record
• Rents are made payable to your IRA
44. What if the IRA depletes its
reserves?
1. Make your yearly contribution
2. Liquidate other assets in the IRA
3. Transfer money from other retirement
accounts
4. Bring on a partner
– Not a disqualified person
5. IRA can get a loan
6. Sell the asset
45. IRA-Owned LLC
“Checkbook IRA”
•IRA purchases shares of a newly-formed LLC
formed for this purpose
•LLC receives funds in it’s checking account
•LLC follows same rules as IRA for investing
46. 3 Types of Plans
• IRAs
– Individual Retirement Accounts
– What you are doing for your own retirement
• Qualified Plans
– ERISA controlled
– Typically, what an employer provides you
• Other Plans
– Education
– Health
47. Types Of Self-Directed Plans
IRAs Qualified Plans Other Plans
Traditional 401K/ 457/ 403b Coverdell
Health Savings
Roth Defined Benefit
Account
SEP Profit Sharing
Simple Individual K
Spousal
48. How Do I Self-Direct?
1. Complete an application
1. Provide copy of driver’s license
2. Copy of statement
2. Fund your account
1. Annual Contribution
2. Transfer
3. Rollover
3. Tell us what you want to invest in