Build Your Business with Self- Directed IRAs

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Build Your Business with SelfDirected IRAs
Connection
Wednesday, August 29th, 11:30 CST
objectives
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•  WHAT – are self-directed IRAs
•  WHEN – can retirement accounts own real estate
•  WHY –real estate make sense for retirement accounts
•  HOW– can REALTORS® use SD IRAs to earn revenue
Proprietary & Confidential, Property of Freedom Growth
who we are
Self-Directed IRA
Consultants
Real Estate
Investment Advisors
!"
legal disclaimer
Freedom Growth is not an attorney or financial advisor.
We do not administer legal opinions or financial planning
advice. We are licensed REALTORS® in CA (#01825618.)
All information and materials are for educational purposes
only. All parties are encouraged to consult with their
attorneys, accountants and financial advisors before
entering into any type of investment.
HISTORY LESSON
WHAT are self-directed IRAs
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post pension plan era
•  Pension Plans were standard
!  Employer responsible for retirement
•  ERISA passed in 1974
!  Birth of IRAs and 401(k)s
!  Individual now responsible
•  Wall Street seized control
!  Financial institutions became custodians
!  Limited investments to those they sold
!  Marketed as “traditional” with huge budgets
Proprietary & Confidential, Property of Freedom Growth
total retirement market assets ($billions)
Non-Traditional assets currently 3.5% of market
•  Growing at 20% per year
•  By 2014, we estimate nearly $900 Billion in real estate
• 
Sources: DOL, ICI, U.S. Census Bureau, Federal Reserve, PBGC, Cerulli Associates. Guidant Financial. Pensco Trust.
self-direction defined
•  A retirement account in which the
individual investor is in charge of
making all investment decisions
•  Greater opportunity for asset
diversification outside of the
traditional stocks, bonds and
mutual funds
•  All securities and investments are
held in an account administered
by a custodian or trustee
benefits of self-direction
•  Take control:
!  Make your own investment choices
•  Diversification:
!  Invest in what you know &
understand
•  Tax savings:
!  Contributions may be tax
deductible
!  Tax-deferred or tax-free growth
investment restrictions
Prohibited Assets
Art
Antiques
#$"
•  Collectibles
! 
! 
! 
! 
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any work of art
any rug or antique
any metal or gem
any stamp or coin
any alcoholic beverage
•  Life Insurance
•  S Corps (S corporations do
not allow IRAs to invest in them)
Liquor
Exception
US Government Minted Gold Or Silver Eagle, Gold
and Palladium Bullion
disqualified persons
Certain family members cannot do business with your IRA
Your Spouse
Your Parents
Your Grandparents
Your Children
Your Grandchildren
Spouses of Lineal
Descendants
•  IRA Fiduciary
• 
• 
• 
• 
• 
• 
Your IRA
##"
prohibited transactions
Some examples of prohibited transactions
between a disqualified person and an IRA are:
•  Selling, exchanging or leasing any property
•  Lending money or extending credit
•  Providing goods, services or facilities
•  Transferring income or assets
•  Using the income or assets for personal gain
•  Use of property by any ascendants, lineal
descendants and any spouse of a lineal
descendant
Proprietary & Confidential, Property of Freedom Growth
finances and taxes
•  Leverage
•  Non-Recourse Loans
•  IRA is the Borrower
•  30%-40% Down
•  Investment Rates &
Terms
•  Partnerships
•  Multi-Member LLCs
•  TICs
•  Taxes
•  Earnings Stay in IRA tax
free
•  Taxed at withdrawal
•  Roth vs. Traditional
•  Less restrictive than 1031
•  UDFI
•  Based on % Financed
•  Normal Tax Advantages
IRA REAL ESTATE TRANSACTIONS
WHEN can retirement accounts
own real estate
Proprietary & Confidential, Property of Freedom Growth
the players
CUSTODIANS
PROFESSIONALS
INVESTMENTS
Proprietary & Confidential, Property of Freedom Growth
the ira real estate transaction
Owner
IRA
Investment
•  Another Party in Escrow
•  IRA takes title
• 
The Entrust Group FBO Client Name #XXXXXX
•  IRA owns property
•  Client can manage the investment
managing the investment
•  Expenses must be
paid from IRA
•  Revenue must be
deposited into IRA
•  Property manager is
recommended
plan types
Most Common:
Traditional IRA
Roth IRA
Individual (k)
401(k)
SEP & SIMPLE
#%"
Other Special Plans:
Educational Savings
Account (ESA)
Health Savings Accounts
(HSA)
Funds from a Qualified Plan, including 401(k),
403(b), 457 plans can be rolled into an IRA.
#%"
Proprietary & Confidential, Property of Freedom Growth
the special purpose llc
Owner
IRA
SP LLC!
•  LLC takes title and owns property
•  Check writing capabilities
• 
Investment
Also known as a Checkbook IRA or Real Estate IRA
•  Owner is Manager of the LLC. IRA is the Member
Proprietary & Confidential, Property of Freedom Growth
individual 401(k)s
Owner
Solo(k)
•  Solo(k) plan takes title and owns the investment
•  “Apple Enterprises LLC 401(k) PSP” (Company)
•  “John J. Client 401(k) PSP” (Sole Proprietorship)
•  Checkbook control of account
•  Owner is the Trustee of the plan
Investment
Proprietary & Confidential, Property of Freedom Growth
solo(k) specifics
•  SEP on steroids
!  Contribute as employer and employee
•  Solo business owners with no full time employees
!  Higher contributions for moderate earners
!  Faster to $49K per year
!  No income limitations on Roth
!  Loans
!  UDFI exempt
•  Custodian not necessary!
REAL ESTATE AS AN ASSET CLASS
WHY real estate make sense for
retirement accounts
Proprietary & Confidential, Property of Freedom Growth
real estate ideal for IRAs
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+
3.
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5.
vs
&!"
investments allowed
•  Single family and multi-unit
homes
•  Trust deeds
•  Apartments
•  Precious metals
•  Condominiums
•  Limited liability companies
•  Commercial property
•  Limited partnerships
•  Developed and undeveloped
land
•  Unsecured/secured loans
•  Mortgages/lease options
•  Foreign property
•  Leveraged property
•  Joint ventures
•  Life settlements
Proprietary & Confidential, Property of Freedom Growth
typical real estate deal
•  Rental property in Memphis, TN
•  Cost: $74,800
•  Rent: $975 per month, $10,764 per year (-8% vacancy)
•  Annual Expenses: $3,654
•  Profit: $7,111
•  COC Return: 9.37%
•  Value: $88,000
Proprietary & Confidential, Property of Freedom Growth
how it works
Traditional IRA
$100,000
-$80,000
$20,000
Self-Directed IRA
Investment
$80,000
-$76,000
$4,000
$76,000
After 5 Years
Income: $37,388
+
Value:
$18,851
+
Initial
$76,000
IRA Value $132,239
REVENUE FROM SD IRAs
HOW can REALTORS® use selfdirected IRAs to earn revenue
Proprietary & Confidential, Property of Freedom Growth
self-directed IRAs = opportunity
•  You Have A Competitive Advantage!
•  Market It
•  Existing Clients
•  Stay relevant
•  Reason to connect
•  Opportunities beyond primary residence
•  New Clients
•  Additional way to begin the relationship
•  Listings
•  Does it cash flow?
next steps for
Take Action
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REALTORS®
&'"
On Our Website
Write or record a blog on
what you’ve learned
Info on Plan Types
Send out a newsletter
informing your network
Turnkey Investments
Add “IRA eligible” to
listings that make good
investments
Links to Custodians
Call prospects likely to
have old IRAs or 401(k)s
E-newsletter
Set up your own selfdirected account
FAQs
Thank You
David Coe
[email protected]
office: 888.843.0256
cell: 310.466.0021
www.FreedomGrowth.com