How To Buy Real Estate in Your Self-Directed IRA

WEBVTT
00:00:06.480 --> 00:00:09.039
Welcome everybody to the Directed IRA podcast.
00:00:09.119 --> 00:00:14.160
My name is Mark Kohler, and I'm here with the CEO of Directed IRA Trust Company.
00:00:14.320 --> 00:00:22.000
Directed Trust Company, the one and only author of the book, The Self-Directed IRA Handbook, second edition, Matt Sorensen.
00:00:22.160 --> 00:00:22.640
Yeah.
00:00:26.480 --> 00:00:26.719
Thank you.
00:00:27.920 --> 00:00:29.920
Do you want me to call you up tomorrow morning at 7 a.m.
00:00:30.079 --> 00:00:30.640
and do that again?
00:00:31.120 --> 00:00:31.920
I would appreciate it.
00:00:32.000 --> 00:00:35.200
It only happens here and only there was one person clapping.
00:00:35.679 --> 00:00:37.840
Two of you count me clapping for myself.
00:00:38.479 --> 00:00:40.240
Not even Tristan in our studio.
00:00:40.479 --> 00:00:40.640
Yeah.
00:00:40.719 --> 00:00:40.960
Yeah.
00:00:41.039 --> 00:00:41.679
Thank you, Tristan.
00:00:42.240 --> 00:00:42.960
Thanks for jumping in on that.
00:00:43.200 --> 00:00:47.679
But if I can just clarify one one really important thing, one misstatement in what you said.
00:00:48.000 --> 00:00:48.479
Oh, geez.
00:00:48.719 --> 00:00:51.920
Well, don't look at gift horse in the mouth, as they may say.
00:00:53.119 --> 00:00:56.560
The third edition of this self-directed IRA Handbook is out.
00:00:56.719 --> 00:00:57.600
Oh, is it out?
00:00:57.759 --> 00:00:59.200
It just went live yesterday.
00:00:59.439 --> 00:01:00.000
Well, how was I?
00:01:00.479 --> 00:01:01.600
This is my masterpiece.
00:01:01.759 --> 00:01:02.079
Okay.
00:01:02.240 --> 00:01:04.560
The first was good, the second was great.
00:01:04.799 --> 00:01:06.239
This one is the masterpiece.
00:01:06.640 --> 00:01:07.599
What's the cover look like?
00:01:07.680 --> 00:01:08.560
Have I seen the cover yet?
00:01:08.640 --> 00:01:09.120
Do you have it here?
00:01:09.359 --> 00:01:11.519
Yeah, I put I mean, are you following at Matt Sorns?
00:01:11.760 --> 00:01:14.079
Oh, your own part, your own part, or does it even get a copy?
00:01:14.159 --> 00:01:14.319
Yeah.
00:01:14.799 --> 00:01:15.280
Unbelievable.
00:01:16.000 --> 00:01:17.599
I don't have the physical ones here yet.
00:01:18.400 --> 00:01:21.280
Probably today, but you can buy it right now on Amazon.
00:01:21.439 --> 00:01:21.920
Get over.
00:01:22.239 --> 00:01:22.719
It's incredible.
00:01:22.799 --> 00:01:23.359
It's 20 bucks.
00:01:23.439 --> 00:01:24.719
It's for it to go by a penny.
00:01:25.120 --> 00:01:28.079
Do I'm am I supporting the Matt Sorensen Foundation if I go buy it?
00:01:28.319 --> 00:01:29.439
It would it would help.
00:01:29.680 --> 00:01:30.879
Every purchase counts.
00:01:30.959 --> 00:01:32.480
I'm trying to make the bestseller list.
00:01:32.799 --> 00:01:33.599
Okay, it is true.
00:01:33.840 --> 00:01:38.000
But in all seriousness, this book is the most widely used book in the industry.
00:01:38.079 --> 00:01:39.840
It's already sold over 50,000 copies.
00:01:39.920 --> 00:01:43.840
You can look at the reviews on the first and second edition, and the third's even better.
00:01:44.560 --> 00:01:45.519
Ooh, I like that.
00:01:45.680 --> 00:01:46.560
A black cover.
00:01:46.879 --> 00:01:47.599
That looks good.
00:01:47.760 --> 00:01:48.799
Add to cart.
00:01:48.959 --> 00:01:49.599
There you go.
00:01:50.319 --> 00:01:52.480
I can't request the signature of the author.
00:01:52.640 --> 00:01:53.840
Well, I'll have to just track you down.
00:01:54.400 --> 00:01:55.040
I'll sign up for it.
00:01:55.280 --> 00:01:58.319
Okay, I'll buy, I'm gonna buy two or three just to help the cause.
00:01:58.560 --> 00:01:58.719
Okay.
00:01:58.799 --> 00:01:59.120
Thanks.
00:01:59.280 --> 00:01:59.840
Okay, there we go.
00:01:59.920 --> 00:02:00.879
I'm gonna go to check out.
00:02:00.959 --> 00:02:01.599
This is so good.
00:02:01.760 --> 00:02:03.760
Okay, well, everybody, today is a big show.
00:02:03.920 --> 00:02:12.479
We are excited about talking about buying real estate inside your IRA, your Roth, your 401k, your HSA, all the above.
00:02:12.639 --> 00:02:18.400
If you want to buy real estate inside a tax-preferred account, we know the path.
00:02:18.560 --> 00:02:19.199
We know the way.
00:02:19.360 --> 00:02:25.599
We're gonna show you how to pack your bags and load up your suitcase and take the happy train to real estate in your IRA.
00:02:25.759 --> 00:02:25.840
Yeah.
00:02:26.000 --> 00:02:27.599
Woo! We're not telling you where to go.
00:02:27.759 --> 00:02:28.560
That's up to you.
00:02:28.639 --> 00:02:30.479
That's the property you decide.
00:02:30.800 --> 00:02:33.840
Um, but yeah, we've got all the resources to help you be successful.
00:02:34.000 --> 00:02:35.759
So, Mark and I have done this ourselves.
00:02:35.919 --> 00:02:39.599
We've bought real estate with our own retirement accounts, our own tax advantage accounts.
00:02:39.759 --> 00:02:46.560
We've helped thousands, tens of thousands of clients and have tens of thousands of clients buying real estate with their IRA at directed IRA.
00:02:46.639 --> 00:02:51.599
Now, this is the most popular asset, and I want to make a couple of broad strokes for any of you that are new.
00:02:51.840 --> 00:02:56.080
You're probably familiar with an IRA that can buy a mutual fund or you can buy stock.
00:02:56.240 --> 00:03:00.479
You buy$100,000 worth of Facebook stock and you sell it for$150,000.
00:03:00.560 --> 00:03:02.639
You have a$50,000 profit, right?
00:03:02.800 --> 00:03:07.680
When you sell that for$150,000, the whole$150 goes back into your IRA, no taxes, right?
00:03:07.759 --> 00:03:13.759
That's one of the benefits of traditional or Roth IRA accounts is you're making money in the account, you don't pay any taxes.
00:03:14.000 --> 00:03:15.840
Well, the same thing happens with real estate.
00:03:16.000 --> 00:03:30.560
If I buy a property for$300,000 and it goes up to$400,000 and I've been collecting rent and cash flowing at$1,000 a month, all of that cash flow and gain, all of the appreciation when I sell for$400 goes back into the IRA.
00:03:30.639 --> 00:03:32.319
So now my account's worth$400.
00:03:32.479 --> 00:03:39.120
So what we've seen is clients who have been frustrated with mutual funds, ETFs, the stock market, that they don't understand.
00:03:39.199 --> 00:03:40.800
And they're not growing their account.
00:03:40.879 --> 00:03:41.680
They're fed up.
00:03:41.759 --> 00:03:44.080
And they're like, wait, I know real estate.
00:03:44.240 --> 00:03:47.280
I've done well in real estate, but I think it's a better asset class.
00:03:47.439 --> 00:03:49.680
How can I let my IRA invest in that?
00:03:49.840 --> 00:03:53.599
Because I want to grow my IRA to be the biggest account possible when I hit 65.
00:03:53.759 --> 00:03:54.879
And that's what we're talking about here.
00:03:54.960 --> 00:03:59.759
And we're talking about like the rental property down the street, like the single family property.
00:03:59.840 --> 00:04:03.840
We're not talking about like some publicly traded real estate company.
00:04:04.080 --> 00:04:05.039
You know, I'm sitting right here.
00:04:05.199 --> 00:04:06.639
You just want to boot the whole podcast?
00:04:06.879 --> 00:04:07.039
Yeah.
00:04:07.199 --> 00:04:11.439
I mean, I just bought your book and I don't even get some airtime here.
00:04:12.479 --> 00:04:12.800
Please.
00:04:13.680 --> 00:04:15.120
I was hoping you keep buying more.
00:04:15.360 --> 00:04:17.120
Um, you you do have a microphone.
00:04:17.279 --> 00:04:18.639
Yeah, you know, it's turned on.
00:04:18.879 --> 00:04:19.920
Okay, I think I didn't want to cut you off.
00:04:20.560 --> 00:04:21.600
You know, I didn't want to cut you off.
00:04:21.759 --> 00:04:23.199
No, that was an awesome summary.
00:04:23.279 --> 00:04:28.800
And I'm I'm glad you summarized it seriously right out of the gate because uh I think everybody needs to know what the hell are you talking about?
00:04:28.959 --> 00:04:38.720
And yeah, so uh buying, and I'd like your example too of that little rental property down the street could be owned by your IRA, but you did drop the S-word, syndication.
00:04:38.959 --> 00:04:39.759
Yeah, yeah.
00:04:40.079 --> 00:04:46.399
Yeah, you could, you know, a lot of private funds out there are doing multifamily, bigger deals, commercial.
00:04:46.560 --> 00:04:48.639
Yeah, those fall in the category.
00:04:48.879 --> 00:04:57.600
I I think um I'm gonna take another perspective here at the moment and say what this doesn't mean you can do, just for a moment, yeah, to give you some context.
00:04:57.759 --> 00:04:59.839
So Matt kind of summarized what you can do.
00:05:00.000 --> 00:05:07.439
I'll say what you can't do is you can't buy a rental property, like a commercial building in your IRA and rent it to your business.
00:05:07.600 --> 00:05:10.319
So you may be like, oh, I want this is awesome.
00:05:10.399 --> 00:05:18.399
I'll use my big old 401k from my prior job, buy a building or a little unit, and then rent it back to my business.
00:05:18.639 --> 00:05:20.639
No, that would be prohibited transaction.
00:05:20.720 --> 00:05:22.240
Get back to our last podcast.
00:05:22.639 --> 00:05:31.199
Number two, oh, I'll take my IRA and I'm gonna buy a cool rental property down by the university, and my kid can stay there while they're going to college.
00:05:31.519 --> 00:05:34.720
No, your family members can't stay in that rental property.
00:05:34.879 --> 00:05:36.160
You could rent it to someone else.
00:05:36.240 --> 00:05:37.680
There's a lot of other students in town.
00:05:37.839 --> 00:05:40.800
Run it away, run away, but your kid can't stay there.
00:05:40.959 --> 00:05:44.480
And then you may even think, oh, I'm gonna buy a rental and I'm gonna go fix it up.
00:05:44.560 --> 00:05:45.360
Oh, this is awesome.
00:05:45.439 --> 00:05:46.800
I love doing fixer uppers.
00:05:46.959 --> 00:05:52.720
I'm gonna go put my tool belt on and do this fixer upper, and my IRA can buy it and I'll fix it up.
00:05:52.879 --> 00:05:54.399
No, you can't work on it yourself.
00:05:54.560 --> 00:06:02.879
Now you can manage it and you can hire handyman and subcontractors to do it and still make a great return, but you're not gonna have that sweat equity opportunity.
00:06:03.040 --> 00:06:09.759
So there's boundaries, yeah, but I think looking at it from both angles gives you there's a clear path and there's a highway.
00:06:09.920 --> 00:06:11.519
I mean, it's not a little road here.
00:06:11.600 --> 00:06:12.959
There's a lot of options here.
00:06:13.199 --> 00:06:16.480
Are you gonna yield the balance of your time or Tristan?
00:06:16.560 --> 00:06:17.120
Did you record?
00:06:17.199 --> 00:06:18.319
You know, do we have a timer?
00:06:18.720 --> 00:06:21.279
Do we have to have like a little thinking what's going on today?
00:06:21.360 --> 00:06:23.120
We are both so like feisty.
00:06:23.279 --> 00:06:23.600
Feisty.
00:06:24.240 --> 00:06:26.000
Mark's probably on his third rock star.
00:06:26.240 --> 00:06:31.120
I did an energy drink and a latte this morning, not recommended, apparently.
00:06:32.319 --> 00:06:33.519
I was like, Do you have Parkinson's?
00:06:33.600 --> 00:06:34.800
You're a little gibbery over there.
00:06:34.879 --> 00:06:37.439
Yeah, a little early, yeah, early onset.
00:06:37.600 --> 00:06:38.720
I'm just so excited about this.
00:06:38.879 --> 00:06:39.199
I know.
00:06:39.279 --> 00:06:40.720
We both could just talk about this.
00:06:40.959 --> 00:06:42.079
Um, we want to keep this fun.
00:06:42.160 --> 00:06:42.959
We like doing this show.
00:06:43.120 --> 00:06:44.079
Love being with you, Mark.
00:06:44.240 --> 00:06:48.480
But um, but but I want you to think about it this way.
00:06:48.720 --> 00:06:50.240
Why would you do this?
00:06:50.480 --> 00:06:54.959
And Mark gave all the reasons what you can't do, which are kind of reasons why you shouldn't do it.
00:06:55.040 --> 00:07:01.279
We're not talking about personal use and a place where you can stay or your business is benefiting.
00:07:01.439 --> 00:07:05.360
What the goal here is, is how do I build my retirement account fast?
00:07:05.600 --> 00:07:08.800
Get a better ROI return on investment than you tell.
00:07:08.959 --> 00:07:09.519
That's why you're doing it.
00:07:09.600 --> 00:07:10.079
Can you know what?
00:07:10.160 --> 00:07:15.519
I'm gonna just hijack it here, and I want you to tell us your example of your first real estate deal.
00:07:15.680 --> 00:07:16.399
I love that example.
00:07:16.480 --> 00:07:17.600
Was it Minneapolis?
00:07:17.839 --> 00:07:20.319
Indianapolis, close same place, same thing.
00:07:20.560 --> 00:07:21.279
It's all the same.
00:07:22.079 --> 00:07:22.480
Midwest.
00:07:22.879 --> 00:07:25.439
I just offended, you know, three million people, but that's okay.
00:07:25.600 --> 00:07:25.759
Okay.
00:07:27.040 --> 00:07:27.519
All right.
00:07:27.759 --> 00:07:30.000
So which which group did you offend?
00:07:30.079 --> 00:07:32.000
The group group in Indianapolis or Minneapolis?
00:07:32.160 --> 00:07:32.639
Probably both.
00:07:33.680 --> 00:07:34.639
They're both like, we don't want to be.
00:07:35.040 --> 00:07:35.920
Yeah, you're an idiot.
00:07:36.959 --> 00:07:37.600
Okay, all right.
00:07:37.680 --> 00:07:39.680
So I bought this property in Indianapolis.
00:07:39.759 --> 00:07:43.759
This was a three-bedroom, one and a half bath rental property.
00:07:43.920 --> 00:07:45.680
I bought it for$84,000.
00:07:46.160 --> 00:07:47.920
You had$84,000 in your IRA?
00:07:48.160 --> 00:07:48.639
It took me time.
00:07:48.720 --> 00:07:48.800
Okay.
00:07:49.120 --> 00:07:50.639
This is building up, right?
00:07:50.720 --> 00:07:56.160
You're contributing and um saving$84,000 rental property in Indianapolis.
00:07:56.240 --> 00:07:57.279
So you bought a little meth lab.
00:07:57.519 --> 00:07:59.839
Yeah, and it was renting for$900 a month when I bought it.
00:08:00.000 --> 00:08:00.240
All right.
00:08:00.399 --> 00:08:00.639
Okay.
00:08:00.879 --> 00:08:04.319
I went by the time I sold it, I owned it for about four to five years.
00:08:04.480 --> 00:08:06.240
Um, my rent was$1,200 a month.
00:08:06.319 --> 00:08:06.480
Okay.
00:08:06.560 --> 00:08:08.480
Okay, rents have gone up, which is great.
00:08:08.800 --> 00:08:13.120
And but I sold the property for$185,000.
00:08:13.279 --> 00:08:13.759
Ooh.
00:08:13.920 --> 00:08:14.240
Okay.
00:08:14.639 --> 00:08:16.319
Um, I bought this in 2017.
00:08:16.399 --> 00:08:18.000
I sold in about 22, 23.
00:08:18.079 --> 00:08:19.519
That was a good period of real estate, right?
00:08:19.600 --> 00:08:22.639
Real estate can be cyclical, and that was I bought at the right time.
00:08:22.800 --> 00:08:28.000
And so uh And you had all the rental income a long way, less management fees, maybe a little repair here and there.
00:08:28.240 --> 00:08:29.360
I had a property manager.
00:08:29.439 --> 00:08:31.199
So, okay, all right, here's what I did.
00:08:31.360 --> 00:08:32.960
I had a real estate broker friend of mine.
00:08:33.039 --> 00:08:34.720
He's a client of ours, Steve, great dude.
00:08:34.799 --> 00:08:36.639
He spoke at our self-direct IR, Steve Olson.
00:08:36.960 --> 00:08:41.759
Um, he's still in the real estate real estate game, but he was buying rentals for himself in Indianapolis.
00:08:41.840 --> 00:08:46.720
And whenever I know like a professional that does something for their self themselves, you know, you're like, let's get on that trip.
00:08:46.960 --> 00:08:50.159
Yeah, I'm like, all right, this is what you're doing with your money, you know.
00:08:50.559 --> 00:08:51.120
What are you buying?
00:08:51.200 --> 00:08:53.279
And he's he's getting, I'm like, dude, get me one of those.
00:08:53.440 --> 00:08:54.159
Okay, so I did it.
00:08:54.240 --> 00:08:57.519
So I set up an Indiana, Indiana LLC.
00:08:57.840 --> 00:09:03.759
Now I had my self-directed account, my self-directed retirement account, and it owned an LLC 100%.
00:09:04.399 --> 00:09:06.480
That LLC went and bought the property.
00:09:06.559 --> 00:09:10.320
Now we have other shows on the IRA LLC, sometimes called Checkbook IRA.
00:09:10.480 --> 00:09:14.639
You could buy the property directly in your IRA, but I use the LLC structure.
00:09:14.879 --> 00:09:20.799
And so, but I acquire the property, and the lease, the property is in the name of the LLC.
00:09:20.879 --> 00:09:24.080
The rental income is going to the LLC bank account and it's building up.
00:09:24.240 --> 00:09:27.759
Now I have other money in this in the market, of course, not doing as well.
00:09:27.840 --> 00:09:31.039
I mean, it was still decent stock market returns, but not like this.
00:09:31.440 --> 00:09:33.440
So how long did you own it about?
00:09:34.000 --> 00:09:35.840
About four and a half years, I'd say.
00:09:36.080 --> 00:09:42.000
Okay, and so you had rental income of about$800 a month, let's say on average, after management fees over the four years.
00:09:42.240 --> 00:09:44.559
Now I had a property manager charging me 10%.
00:09:45.039 --> 00:09:45.120
Okay.
00:09:45.519 --> 00:09:48.480
I had a little bit of tenant turnover where I missed a month of rent.
00:09:48.559 --> 00:09:50.879
I probably had that twice over that period.
00:09:51.200 --> 00:09:54.879
And I had because I had three different tenants over that four to five year period, sadly.
00:09:55.360 --> 00:10:01.679
And your rent went up, but I'm just gonna say a lower average of$800 a month for for 12 months times four.
00:10:01.759 --> 00:10:03.519
That's 38 grand in rent.
00:10:03.600 --> 00:10:05.519
Yeah, plus it went up about 100 grand.
00:10:05.840 --> 00:10:06.000
Yeah.
00:10:06.159 --> 00:10:13.679
So you had a hundred and thirty-eight thousand dollar return over um four years.
00:10:14.399 --> 00:10:22.080
Um I probably had about a couple, I had a couple thousand in repairs that I had to do on the property when one of the tenants trashed it and I had to chase him down.
00:10:22.320 --> 00:10:24.879
That's a 70% return, but over four years.
00:10:25.039 --> 00:10:25.120
Yeah.
00:10:25.440 --> 00:10:32.639
So if we take 70% and divide it by four, you averaged a 17.5% return.
00:10:32.879 --> 00:10:33.039
Okay.
00:10:33.519 --> 00:10:34.240
It was a little better than that.
00:10:34.320 --> 00:10:35.200
I ran the math on it.
00:10:35.279 --> 00:10:35.679
But yes.
00:10:36.000 --> 00:10:37.440
So around 20, maybe.
00:10:37.600 --> 00:10:37.759
Okay.
00:10:38.080 --> 00:10:40.720
I think I was about a 30% annual rate of return when I ran the number.
00:10:40.879 --> 00:10:41.840
Oh, when you ran the number of money.
00:10:42.000 --> 00:10:45.519
When I ran the actual numbers of what I got on rent, cash flow.
00:10:45.919 --> 00:10:47.120
But that's also what I sold it for.
00:10:47.200 --> 00:10:47.360
Yeah.
00:10:47.679 --> 00:10:49.360
I'm getting 25% in my mutual fund.
00:10:49.600 --> 00:10:49.679
Yeah.
00:10:49.759 --> 00:10:50.799
Now I left out an important detail.
00:10:51.039 --> 00:10:51.840
That was a joke, by the way.
00:10:52.000 --> 00:10:52.320
Oh, yeah.
00:10:53.360 --> 00:10:56.000
I left out an important detail because you started running the math.
00:10:56.159 --> 00:10:57.679
Okay, because I was trying to keep it simple.
00:10:57.840 --> 00:10:58.080
Yeah.
00:10:58.240 --> 00:11:00.720
I got a non-recourse loan when I bought this property.
00:11:00.960 --> 00:11:02.720
I actually only put in$40,000.
00:11:03.120 --> 00:11:03.600
Oh, okay.
00:11:03.759 --> 00:11:04.399
There you go.
00:11:04.799 --> 00:11:08.000
Now I double this because that's now that 17 and a half goes over 30.
00:11:08.159 --> 00:11:08.320
Yeah.
00:11:08.480 --> 00:11:08.879
There you go.
00:11:09.440 --> 00:11:12.000
So I had the bank lend me the other 45.
00:11:12.480 --> 00:11:12.799
Okay.
00:11:13.279 --> 00:11:18.879
And um, but now that affected my cash flow a little bit, but my mortgage payment was like 320 bucks a month or something.
00:11:19.039 --> 00:11:19.279
Yes.
00:11:19.360 --> 00:11:20.399
Now I've been that much.
00:11:20.559 --> 00:11:20.879
There you go.
00:11:21.360 --> 00:11:23.600
And but I was still cash flowing right out of the gate.
00:11:23.679 --> 00:11:25.039
So, but I went and did that.
00:11:25.120 --> 00:11:29.759
And I decided I'm going to do this with my own account because I've always done better in real estate.
00:11:29.840 --> 00:11:31.039
I've made money at real estate.
00:11:31.279 --> 00:11:33.360
I feel like I have a competitive advantage.
00:11:33.440 --> 00:11:35.039
I have more control and more say.
00:11:35.440 --> 00:11:36.879
I just enjoy it more.
00:11:37.039 --> 00:11:39.200
And so that's what my retirement account did.
00:11:39.279 --> 00:11:44.559
It modded boring, three-bedroom, one and a half bath rental property.
00:11:44.799 --> 00:11:45.919
It cash flowed.
00:11:46.000 --> 00:11:46.720
It took some work.
00:11:46.879 --> 00:11:51.840
It was more than just typing in a ticker, but I use other professionals, an agent to help me buy and sell it.
00:11:51.919 --> 00:11:54.240
I use a property manager to manage the property.
00:11:54.399 --> 00:11:56.080
I never even went to the property.
00:11:56.320 --> 00:12:00.240
Now, I and some of you may have been like, whoa, Mark, you threw me off.
00:12:00.320 --> 00:12:01.759
You were jumping into the math real quick.
00:12:01.919 --> 00:12:03.360
Matt was trying to keep it simple.
00:12:03.519 --> 00:12:05.200
But let me point out why I did that.
00:12:05.519 --> 00:12:14.559
Because all of us should be looking at what is the opportunity cost, or what is my next best alternative, or what is my other option?
00:12:14.720 --> 00:12:16.240
Those are thoughts you should be having.
00:12:16.399 --> 00:12:31.840
When you're trying to build a retirement account, you're gonna say, okay, I challenge all of you, go open that envelope you haven't opened in months that shows up every whenever, or maybe it's in your email of how your 401k is doing, your old 401k from your prior job, or a CIRA.
00:12:32.159 --> 00:12:37.519
Open it up and look at how much you invested in there and how much you've been making.
00:12:37.679 --> 00:12:39.279
What's the overall return?
00:12:40.080 --> 00:12:45.519
If it's less than 10%, you're in 80% of what most Americans get.
00:12:45.919 --> 00:12:50.320
If you're getting anywhere between five to 10%, you are in the far, far majority.
00:12:50.480 --> 00:12:51.840
And that's not terrible.
00:12:52.000 --> 00:12:52.960
That's okay.
00:12:53.120 --> 00:12:55.679
Yeah, but we would love you to do better than that.
00:12:56.000 --> 00:12:58.879
And so you want to compare it against the alternative.
00:12:59.039 --> 00:13:03.360
So you may go, well, I don't want to pay a property manager and I don't want to pay a handyman and all that.
00:13:03.519 --> 00:13:05.440
Look at Matt paid a property manager.
00:13:05.679 --> 00:13:08.480
He used leverage and he did over 30%.
00:13:09.759 --> 00:13:12.799
Um, okay, compare that against what you could get.
00:13:13.279 --> 00:13:14.639
That's what we're asking you to do.
00:13:14.799 --> 00:13:16.480
Think about I don't know what you want to invest in.
00:13:16.720 --> 00:13:17.600
What are you good at?
00:13:17.919 --> 00:13:19.840
You know, we got there's a hundred things.
00:13:19.919 --> 00:13:21.200
Today we're talking about real estate.
00:13:21.279 --> 00:13:26.000
But if you know real estate, holy crap, compare it against your next best choice.
00:13:26.320 --> 00:13:28.480
Yeah, perfectly said.
00:13:28.720 --> 00:13:34.879
And um, and sometimes it's just also some people want a little diversification, they want to do something a little different.
00:13:35.120 --> 00:13:46.879
They're sick of seeing their entire investment portfolio go all up or down together because it's all in the stock market, you know, and so having a little bit of variety in there can be good for you.
00:13:47.039 --> 00:13:49.200
Um, so do you want to do my example now?
00:13:49.279 --> 00:13:50.320
Yes, let's do mine.
00:13:50.399 --> 00:13:50.799
Yeah, okay.
00:13:50.960 --> 00:13:53.679
I'd love to I I know yours, but yeah, the audience does not.
00:13:54.000 --> 00:13:55.120
They do not, they may not.
00:13:55.440 --> 00:14:03.679
So uh so I had a health saying I did not have 40, 50, 80 grand, 100 grand like Matt Storenson.
00:14:03.759 --> 00:14:04.879
He's been a better saver than me.
00:14:04.960 --> 00:14:08.320
That's a whole other podcast where we've talked about where do you take your business profits.
00:14:08.399 --> 00:14:11.600
That's a whole other topic, but I hand it to my partner here.
00:14:11.840 --> 00:14:16.960
He was saving while I was reinvesting in different business um projects.
00:14:17.120 --> 00:14:18.000
So whatever.
00:14:18.159 --> 00:14:21.200
I did not have that nesting.
00:14:21.440 --> 00:14:23.519
Some of you may, some of you may not.
00:14:23.600 --> 00:14:24.639
So, what did I do?
00:14:24.879 --> 00:14:26.639
Well, I had a health savings account.
00:14:26.799 --> 00:14:28.559
This was like 14 years ago.
00:14:28.720 --> 00:14:29.519
Oh my gosh.
00:14:29.679 --> 00:14:33.919
The health savings accounts were just the hottest, coolest thing I and I still think they are.
00:14:34.080 --> 00:14:36.799
But I put put 4,500 bucks.
00:14:36.960 --> 00:14:42.320
This year you can put in almost 9,000 as a family, but back then it was around 4,500 bucks.
00:14:42.960 --> 00:14:45.200
And I funded my health savings account.
00:14:45.279 --> 00:14:54.240
And I was like, darn it, I want to buy a rental property like Matt, but who's gonna loan me enough money with$4,000 down to buy a freaking rental property?
00:14:54.480 --> 00:15:01.120
Well, at the time, and I just texted him this morning, Chris Albin, he's a real estate educator, he's just an awesome dude.
00:15:01.279 --> 00:15:07.039
He's out in Chicago, and he has been in real estate his whole career and a high school.
00:15:07.200 --> 00:15:10.399
Um former high school teacher, turned real estate investor.
00:15:11.039 --> 00:15:19.679
And so he built up over 300 rental properties while he was a high school teacher during his early career.
00:15:19.759 --> 00:15:20.639
It was just phenomenal.
00:15:20.720 --> 00:15:23.759
Now, these were all low-income housing project properties.
00:15:23.919 --> 00:15:26.320
The average purchase price was 30 to 40 grand.
00:15:26.799 --> 00:15:35.600
Uh, section eight properties, federal subsidized rent areas, kind of scary places you don't want to walk around and hang out in with and say hi to your tenant sometimes.
00:15:35.759 --> 00:15:37.279
But he had cracked the code.
00:15:37.360 --> 00:15:40.320
So I called Chris and I go, Hey, I got 4,500 bucks.
00:15:40.559 --> 00:15:41.440
Is that an option?
00:15:41.679 --> 00:15:42.720
Can I get into something?
00:15:42.799 --> 00:15:43.519
He's like, Yeah.
00:15:43.679 --> 00:15:45.679
He goes, I got this little property in Elgin.
00:15:46.159 --> 00:15:52.320
I think I can get you for to it get you into it for under 30 grand, 10% down is around$3,000.
00:15:52.399 --> 00:15:53.919
The seller's carrying the note.
00:15:54.080 --> 00:15:56.240
I'll put it on my property management pool.
00:15:56.399 --> 00:15:56.879
Let's go.
00:15:57.039 --> 00:15:59.759
I'm like, I opened an LLC like Matt did.
00:15:59.919 --> 00:16:01.360
My HSA owned it 100%.
00:16:01.679 --> 00:16:08.480
I dropped in the$4,500, and I literally had three enough$3,000 to buy this little rental property.
00:16:08.639 --> 00:16:11.120
And rent was back then about$450.
00:16:11.600 --> 00:16:15.919
Um, and then it went up and seven, eight, now it's around$900,000.
00:16:16.320 --> 00:16:22.240
But this little rental property um I've had for over 10 years, but it was in my health savings account.
00:16:22.320 --> 00:16:36.879
Now, here's the cool part for me when that rent came in, I could take the rent from the LLC and send it back to directed IRA to my health savings account and then request a distribution to pay for my kids' braces.
00:16:37.360 --> 00:16:39.360
For a and that's what I did.
00:16:39.440 --> 00:16:43.840
I used it for dental for the most part because I had regular health care, but I never had dental insurance.
00:16:43.919 --> 00:16:50.000
So I used my HSA rental income to pay for kids' dental stuff, you know, over the years.
00:16:50.320 --> 00:16:51.919
And that's how I used it.
00:16:52.080 --> 00:16:54.960
I did I didn't have to wait till I was 59 and a half or whatever.
00:16:55.120 --> 00:16:56.559
I could just take that profit and put it in there.
00:16:56.639 --> 00:16:59.519
So I called Chris this last week and said, Hey, I'm ready to sell that sucker.
00:16:59.679 --> 00:17:04.799
I want to go buy more cows with my and he goes, Yeah, I think I can get about 45 for it.
00:17:05.119 --> 00:17:07.920
I mean, it's still a you know, low-income housing area.
00:17:08.079 --> 00:17:14.079
But he goes, You paid down the mortgage a little bit, and he goes, because we had to fix that, you know, roof and this and that.
00:17:14.160 --> 00:17:17.359
And I mean, it's a little low-income property.
00:17:17.440 --> 00:17:18.480
Yeah, it's older, you know.
00:17:19.039 --> 00:17:23.279
Um, not the you know what I found out I've had the same tenant the whole time.
00:17:23.519 --> 00:17:23.920
That's cool.
00:17:24.079 --> 00:17:29.119
This little old lady, uh section eight housing, um, federal subsidized.
00:17:29.200 --> 00:17:31.680
And he's like, She just won't move, she's gonna live there forever.
00:17:31.759 --> 00:17:33.279
And he goes, What do you want to do?
00:17:33.359 --> 00:17:34.559
I'm like, let's sell it, you know.
00:17:34.640 --> 00:17:40.480
So another buyer that's buying a bundle of these little low-income projects, uh, is interested.
00:17:40.640 --> 00:17:42.240
So he's sending me some paperwork.
00:17:42.319 --> 00:17:43.359
We're hoping to close the deal.
00:17:43.440 --> 00:17:50.400
But I'm gonna take the profit from that, put it back in the LLC, and redeploy it, I think, in some livestock or some ranch type stuff.
00:17:50.640 --> 00:17:50.960
Yeah.
00:17:51.200 --> 00:17:52.480
That's been awesome.
00:17:52.640 --> 00:17:53.599
See, there you go.
00:17:53.839 --> 00:17:57.200
So um, two quick examples of what you can do.
00:17:57.359 --> 00:18:02.480
Your IRA or HSA, whatever this tax advantage account is, can buy property.
00:18:02.640 --> 00:18:05.759
Now we did holds, we both held those as rental properties.
00:18:05.839 --> 00:18:06.720
You could flip it.
00:18:06.880 --> 00:18:13.279
We have lots of clients whose IRAs will go and buy a property, they'll pay a contractor to rehab it, and they'll flip it.
00:18:13.440 --> 00:18:15.680
Your IRA could just wholesale contracts.
00:18:15.839 --> 00:18:22.880
And you generally use the IRA LC, it's getting property in our contract, and you're wholesaling the contract, making a small little profit too.
00:18:22.960 --> 00:18:27.200
Um, as you go, you could be doing options on real estate, you could be buying land.
00:18:27.519 --> 00:18:28.960
Um I've got another good one.
00:18:29.039 --> 00:18:29.200
Yeah.
00:18:29.359 --> 00:18:33.519
So some of you might have an influencer you're following that's doing a syndication.
00:18:33.680 --> 00:18:36.160
They're like, hey, we're raising money for this multi-unit.
00:18:36.319 --> 00:18:39.039
In fact, I'm on real wealth tomorrow with Kathy Fetke.
00:18:39.359 --> 00:18:43.920
They've always got uh a new project going on in a multifamily scenario.
00:18:44.160 --> 00:18:53.599
And if you're an accredited investor and you're like, hey, I'd like to invest in this little syndication real estate deal, you can't call Merrill Lynch and do that.
00:18:53.680 --> 00:18:57.440
You can't call Fidelity and say, hey, I want to invest in Kathy Fetke's project.
00:18:57.519 --> 00:18:58.640
They're not gonna go for that.
00:18:58.799 --> 00:19:02.400
So um that's not they don't make a commission on that, they don't sell that stuff.
00:19:02.559 --> 00:19:19.119
So for any of you that want to get into some private real estate projects, you just roll that money over to directed IRA, open the type of account that you're using, could be a Roth, a 400K, IRA, whatever, bring that money over and say, Hey, I'm gonna send over those syndication documents.
00:19:19.200 --> 00:19:21.039
I want to be in that real estate project.
00:19:21.200 --> 00:19:26.559
And you're probably gonna do better than a REIT or something that Wall Street can manufacture for you.
00:19:26.640 --> 00:19:27.680
And so that's an option.
00:19:27.839 --> 00:19:28.160
Yeah.
00:19:28.319 --> 00:19:28.559
Yeah.
00:19:28.720 --> 00:19:31.039
So I mean, you know, we don't have any advice here.
00:19:31.119 --> 00:19:35.440
What's our purpose is not to give you investment by about what to invest in or who to invest with.
00:19:35.599 --> 00:19:37.839
This is what you're doing with your self-directed IRA.
00:19:38.000 --> 00:19:43.200
It's the Meth Lab rental in Illinois, it's the property in Apple somewhere.
00:19:43.440 --> 00:19:44.720
You're talking about my rental or your rental?
00:19:45.839 --> 00:19:47.119
That's personally offensive, you know.
00:19:47.359 --> 00:19:50.000
I mean, I you know, I don't, I don't know what was happening there.
00:19:50.160 --> 00:19:53.359
So it doesn't, you know, the rent was paid in cash, whatever.
00:19:54.000 --> 00:19:55.680
Yeah, little bag of cash every week.
00:19:55.759 --> 00:19:56.559
The guys were great.
00:19:56.640 --> 00:19:57.279
Lots of blame.
00:19:57.519 --> 00:19:57.920
Loved them.
00:19:58.000 --> 00:20:00.160
Her son was their grandsons were great.
00:20:00.319 --> 00:20:01.279
Yeah, really helped out.
00:20:01.519 --> 00:20:04.559
Yeah, so anyways, I was trying to keep it light.
00:20:04.640 --> 00:20:11.039
Um, but these could be big projects, this could be small projects, syndications, it could be a little partnership of five or six people coming together.
00:20:11.119 --> 00:20:16.799
Yeah, some people with IRAs and individual cash to take down a real estate deal, probably in an LLC type structure.
00:20:16.960 --> 00:20:18.160
You can do private lending.
00:20:18.240 --> 00:20:24.960
We'll have separate episodes on that where your IRA is the lender on other people's real estate deals, getting interest and points back.
00:20:25.119 --> 00:20:28.880
The key thing here is there's really two key points and takeaways, but we want to leave.
00:20:29.039 --> 00:20:31.519
One, you need a self-directed IRE to do this.
00:20:31.599 --> 00:20:34.160
You're not doing this at Merrill Lynch or Fidelity, like Mark said.
00:20:34.240 --> 00:20:34.480
Okay.
00:20:34.559 --> 00:20:40.960
They they're broker dealers, they let you invest your account with them and what they happen to sell, publicly traded securities.
00:20:41.200 --> 00:20:59.680
The second point is you would do this, or this is a good idea if you believe in real estate as an asset class or even a particular class within real estate, and you think you have a right deal opportunity better than, as Mark said, the next alternative, or or think about what you're currently invested in with your retirement account.
00:20:59.839 --> 00:21:02.559
If that speaks to you, you should take action.
00:21:02.799 --> 00:21:08.640
Get going on this, take control, open up a self-directed IRA, book a call with our team at directed IRA.
00:21:08.720 --> 00:21:10.000
We can help answer all the questions.
00:21:10.079 --> 00:21:14.640
We have tons of educational resources, summits, webinars, newsletters.
00:21:14.799 --> 00:21:20.960
We have it all to get you set on the straight path and uh be just part of the journey here because you're taking control of your retirement.
00:21:21.200 --> 00:21:26.240
I wish we could go into more detail on the IRA LLC or some of the actual We have other podcasts to do that.
00:21:26.400 --> 00:21:27.519
Yeah, we have other podcasts to do that.
00:21:27.759 --> 00:21:28.720
So yeah, so don't worry about that.
00:21:28.960 --> 00:21:31.599
I want to bring up one last topic, and I love it when you talk about it.
00:21:31.680 --> 00:21:34.160
I'm gonna hijack it, is the rule of 72.
00:21:34.559 --> 00:21:38.240
So Matt was averaging over 30% on his deal.
00:21:38.400 --> 00:21:39.039
God bless him.
00:21:39.119 --> 00:21:39.920
That was amazing.
00:21:40.079 --> 00:21:42.079
And um, I love Steve Olsen too.
00:21:42.160 --> 00:21:43.599
I I need to say hello to him.
00:21:43.680 --> 00:21:46.559
My daughter used to babysit for him when she lived near him.
00:21:46.799 --> 00:21:52.160
Um and uh my little project probably averaged around 20% when it was all said and done.
00:21:52.640 --> 00:21:59.119
So let's just say you're getting 8% on your mutual fund or ETF.
00:21:59.359 --> 00:22:07.599
If you've Never heard of the rule of 72, what it means is it helps you figure out how quickly that money is going to double.
00:22:07.759 --> 00:22:09.359
So let's say you've had a hundred grand.
00:22:10.240 --> 00:22:15.920
You know, I hope that's the case, some of you out there,$100,000 and you put it in an ETF and make 8%.
00:22:16.640 --> 00:22:19.680
You take$72 and divide it by eight.
00:22:20.079 --> 00:22:23.279
That$100,000 will double in nine years.
00:22:23.599 --> 00:22:29.440
So$72 divided by eight tells you how many years until that hundred grand turns into 200 grand.
00:22:30.240 --> 00:22:32.880
Well, let's say I'm going to just throw it out.
00:22:33.039 --> 00:22:37.440
You you have some insider knowledge, you've got some insider skills on real estate.
00:22:37.599 --> 00:22:39.920
You take that 100 grand and buy some real estate.
00:22:40.000 --> 00:22:41.599
And let's say you average 22%.
00:22:42.000 --> 00:22:44.799
I know that maybe some of you are that's that's heresy.
00:22:44.880 --> 00:22:49.759
You're gonna put, you know, you're gonna put comments out there that Mark's Kohler's crazy.
00:22:49.839 --> 00:22:50.640
We see it all the time.
00:22:50.799 --> 00:22:55.200
Some of you can do it with your own money, doesn't mean you can't do it with your IRA, but let's just say it's 22%.
00:22:55.920 --> 00:22:59.839
72 divided by 22 is approximately three years.
00:23:00.319 --> 00:23:03.920
So that 100 grand is gonna double in three years and turn into 200 grand.
00:23:04.240 --> 00:23:06.720
Then in three more years, it's gonna double and turn to 400 grand.
00:23:06.960 --> 00:23:13.119
And then in three more years, the same time period, that nine years, you have eight hundred thousand dollars.
00:23:13.839 --> 00:23:23.519
The rule of 72 would tell you that that 22% in nine years is gonna turn to 800 grand, or you can get an 8% return and it'll turn into 200 grand.
00:23:24.160 --> 00:23:25.599
That is the magic here.
00:23:25.759 --> 00:23:27.359
You get to choose what you invest in.
00:23:27.519 --> 00:23:31.519
I don't know if you're gonna get 22% return, but probably more than eight.
00:23:32.240 --> 00:23:32.720
Yeah.
00:23:32.960 --> 00:23:34.480
So, and this is up to you.
00:23:34.559 --> 00:23:41.440
And I say self-directing is not for everyone, but it's for sure as hell more for more people that aren't doing it and don't even know it's possible.
00:23:41.519 --> 00:23:43.279
Yeah, and that's who we're here for.
00:23:43.519 --> 00:23:46.640
So uh we've got a lot of other educational resources.
00:23:46.720 --> 00:23:48.319
You can get directediary.com.
00:23:48.400 --> 00:23:51.200
Again, book a call with our team, tons of resources there.
00:23:51.359 --> 00:23:53.039
The third edition of my book that we mentioned.
00:23:53.279 --> 00:23:53.920
Oh my gosh, dude.
00:23:54.480 --> 00:23:55.119
Plugged it again.
00:23:55.440 --> 00:23:56.319
You know what I found out?
00:23:56.480 --> 00:23:58.160
Yours is$19.99.
00:23:58.319 --> 00:24:00.559
My book is$20.25.
00:24:01.200 --> 00:24:02.079
I don't know what's going on.
00:24:02.240 --> 00:24:04.079
Yeah, I don't know what that says.
00:24:04.319 --> 00:24:07.039
Is yours worth more or is uh are people overpaying?
00:24:07.279 --> 00:24:08.400
I can get mine overnight.
00:24:08.480 --> 00:24:10.240
Yours is not gonna come for a couple more days.
00:24:10.319 --> 00:24:11.759
So I don't know, maybe that's what you're paying for.
00:24:12.000 --> 00:24:14.720
That's because no one's buying yours, so it's just sitting on the shelf there, right?
00:24:15.119 --> 00:24:16.000
Unbelievable.
00:24:16.160 --> 00:24:18.000
You know, I just bought three copies.
00:24:18.960 --> 00:24:20.480
You know, you know, it hurts.
00:24:20.559 --> 00:24:20.960
It hurts.
00:24:21.920 --> 00:24:23.599
Mine's just flying off the shelf, you know.
00:24:23.839 --> 00:24:24.799
Yeah, yeah.
00:24:25.440 --> 00:24:26.319
Anyway.
00:24:27.039 --> 00:24:27.839
Oh, whatever.
00:24:28.000 --> 00:24:30.799
Well, everybody, thanks so much for listening today.
00:24:30.880 --> 00:24:34.880
And I will endorse the Matt Sorensen third edition without even reading it.
00:24:35.039 --> 00:24:35.920
I will endorse it.
00:24:36.000 --> 00:24:37.359
I just bought three copies myself.
00:24:37.440 --> 00:24:48.799
Get to Amazon, buy a copy, uh, give it to your best friend, your neighbor, your parents, and uh dive in to the beautiful world of self-directing.
00:24:48.960 --> 00:24:50.240
We'll be here every week.
00:24:50.480 --> 00:24:56.960
Make sure you give us a like, two thumbs up, five stars, and be here to continue learning about how to self-direct your retirement account.
00:24:57.039 --> 00:24:57.759
Thanks, everybody.
00:24:58.000 --> 00:24:59.440
And thank you everyone for listening.
00:24:59.599 --> 00:25:14.559
A quick disclaimer and reminder: this presentation does not constitute an attorney or CPA client relationship, and it is always in your best interest to consult competent legal and tax professionals when conducting your own personal transactions.
00:25:14.799 --> 00:25:18.960
We also want to make sure you know this is not investment advice or financial advice.
00:25:19.119 --> 00:25:25.440
We're just trying to give you education, ideas, and strategies you can take to your professionals or conduct your own research on.
00:25:25.599 --> 00:25:26.960
We'll see you next time.