The Advantages Of A Self Directed IRA For Investment Real Estate. Presented By Bob Malecki

Transcription

1 The Advantages Of A Self Directed IRA For Investment Real Estate Presented By Bob Malecki

2 Contents Facts and History Benefits of Self Directed IRAs SDIRA Types & Setup Investment Options Guidelines

3 My IRA Background Started Roth IRAs for both my spouse and self in Created LLC owned by IRAs to flip homes in First property flipped with $18,000 net profit. Self Directed IRA now owns 5 rental properties in Memphis and San Antonio.

4 IRA Facts Over $5.4 trillion invested through IRA s in % of U.S. retirement assets. 49M or 40% of households owned at least one type. 20M of these are Roth IRAs. Baby boomer rollovers will add trillions more to IRAs. Less than 3% of IRA assets are invested in real estate. Source: Investment Company Institute

5 What is a Self-directed IRA? An Individual Retirement Account (IRA) is a savings account that provides tax-deferred or tax-free gains. Self-directed means that the IRA owner chooses the IRA s investments. Such as real estate. Self-directed means YOU manage your IRA s investments. Generally requires a custodian to deploy investments under your direction

6 History Employee Retirement Income Security Act ERISA enacted in 1974 to shift retirement account responsibility from employer to employees Created IRA s and investment parameters Provide tax deductions in most cases Why haven t I heard about this before? Brokerage community & mutual funds 98% of all IRA assets are sold by Wall Street Huge income stream from fees

7 Typical Brokerage Allocation

8 Diversification Diversification is NOT investing in multiple versions of the same assets. True Diversification allows you to invest in different asset classes such as: - Real Estate - Mortgages & Notes - Private Businesses - Brokerage Account

9 Truly Diversified Portfolio

10 SDIRA Overview Requires a licensed custodian or trustee Maintains assets and records Files IRS reports Advises account holder

11 SDIRA Overview Types of accounts: Traditional (tax-deferred) Roth (tax-free) Simplified Employee Pension (SEP) Solo K (401K) Health Savings Account (HSA) Coverdell Education Savings Account (ESA)

12 The IRA LLC LLC is created with your IRA as the owner The LLC is formed in the state in which the LLC is to be operated. It is a business entity combining aspects of both a partnership and a corporation. The IRA is afforded LLC protection. The Manager of the LLC can enter into contracts and agreements on behalf of the LLC. IRS compliance responsibility.

13 The IRA LLC Checkbook Control IRA invests funds into LLC. Business checking account is opened and funded by IRA. Funds can be deployed into an investment by writing a check. Profits are kept in LLC account for redeployment. Eliminates delays associated with an IRA Custodian (DOI).

14 Using Leverage Non-recourse Loans IRA uses leverage to purchase assets. Magnifies ROI, reduces risk. You do NOT personally guarantee the debt. Asset based, usually 65% of value or less. Generally over $50K min. loan.

15 Investment Paths Active You invest directly in the asset of your choice You manage the asset to control profit You are responsible for IRS compliance Passive You invest with another company that manages the assets Your IRA collects income as profits are distributed

16 Recap Of Benefits True Diversification - allows you to include real estate and other non-traditional assets You choose and control the deals. Increase your buying power through leverage You may be able to experience a higher return on your investment.

17 Guidelines Alternative Assets All types of Real Estate Trust Deed & Mortgages Tax Liens & Certificates Equipment Leasing Private Notes & Business Loans Domestic & International Vacation Rentals Currencies

18 Guidelines Prohibited assets Life insurance contracts Collectibles (rugs, works of art, stamps, coins) Prohibited transactions IRA s meant to provide benefit only at retirement Can t borrow from IRA Can t pledge IRA assets to secure loan Can t utilize credit or guarantee to obtain loan for IRA Can t benefit any disqualified person

19 Guidelines Disqualified person You Family members Ascendants Descendants Siblings OK Company if disqualified person owns greater than 50% of stock Company if you are officer, director, HCE

20 Resources Reading list: IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment Paperback by Patrick Rice Leverage Your IRA: Maximize Your Profits with Real Estate by Matt Allen Online

21 The Advantages Of A Self Directed IRA For Investment Real Estate Presented By Bob Malecki