Using a self directed ira to create hassle free cashflow
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Using a Self-directed IRA to Create Hassle-free Cashflow
David Campbellwww.HasslefreeCashflowInvesting.comKaaren Hallwww.uDirectIRA.comDavid Campbell
Former high school & college band director Professional investorSelf-made multi-millionaireReal estate developerReal estate brokerReal estate & business advisorFinancial mentorOver $800 million of real estate experience Houses, condo-conversion, multi-family, winery, resort, office, retail, medical office, commercial development, home buildingCalifornia, Texas, North Carolina, Mexico, and BelizeKaaren Hall, PresidentuDirect IRA Services, LLC(866) 538-3539KHall@uDirectIRA.com
uDirect IRA Services, LLC2522 Chambers Road, Ste 100Tustin, CA 92780
3Begin with end in mindNOT a sales pitchNOT investment, legal, or tax adviceNOT a securities offeringMy Philanthropy: helping other people live more abundant lives through hassle-free investments by giving the knowledge and support for our others to invest with mental tranquility. WHAT THIS IS !This IS a service to our existing clientsThis IS an opportunity to introduce other people to the possibility of living more abundant lives through hassle-free investments by giving the knowledge and support for our others to invest with mental tranquility. This IS a job interview
Compelling WHYDeployment PhaseIf your desired monthly expenses are less than1% of your liquid NET worth$500,000 cash x 1% ROI per month = $5,000 If your desired monthly expenses are greater than1% of your liquid NET worthAggregation Phase$100,000 cash x 1% ROI per month = $1,000 If your desired monthly expenses are greater than1% of your liquid NET worthAggregation Phase$100,000 cash x 1% ROI per month = $1,000 cashrate of returnexpectationEssential Resourcescashcashflowcreditequitytimetalentstrategic relationshipscontrol of an opportunityLIMITEDINFINITELIMITED and INFINITEHow To Use SD IRA to Retire Younger Than You Thought Possiblecashcashflowcredit (other peoples)equitytimetalentstrategic relationshipscontrol of an opportunityTraditional IRASelf-Directed IRA 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.
Self-DirectionWhy Havent I Heard About This?
Few attorneys are knowledgeable About self-directed plansFew CPAs are knowledgeableAbout self-directed plansIRS rules have allowed self-direction since IRAs were created in mid-1970s
13Whats the Difference?Typical IRAStocksBondsMutual FundsCDs
Self-Directed IRARental PropertyNotesPrivate StockLLCsTax LiensForeign PropertyRaw LandEtc.14What About Losses?Losses
Cannot be written off taxes
Cannot be replaced in the retirement plan
15What Are The Limits?A Self-Directed IRA can invest in anything EXCEPTLife Insurance PoliciesCollectiblesArtworksCoinsCollectible CarsAntiquesGemsStampsRugs
16What if your funds are with your current employer?
Your plan will probably NOT allow you to self-direct
Must wait until you leave the companyTo rollover retirement plan
You can request an in-service transfer from your current plan administrator.
17Prohibited Transactions(IRS Publication 590)Borrowing money from the IRASelling property to it.Using it as security for a loan.Buying property for personal use (present or future) with IRA funds.
18Disqualified PersonDisqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).
19Qualified PersonsAunts & UnclesCousinsBrothers & SistersUnrelated friendsNieces & Nephews
20Prohibited TransactionsNeither you nor any disqualified people may benefit from IRA Cannot buy, sell or exchange property between plan and Self or Disqualified peopleCannot provide goods, services or facilities
21Self-Directed IRA - StructureYou
22Buying Real Estate With Your IRAProsCapital gains are tax freePositive cash flow is tax free No time limit for holding propertyIRA can borrow moneyLeverage your investmentPotential to earn a larger rate of return on invested capital
23Buying Real Estate With Your IRAConsNo tax advantages of owning real estate No deduction for capital lossesYou are solely responsible for all gains or lossesYou cannot replace losses24Rule #1There is no such thing as a good property or bad property. There is no such thing as a good investment or bad investment. There is only appropriate and inappropriate ownership and timing.
Inside IRAOrdinary income
Short term capital gains unable to 1031
Syndications that are active
Debt relief faster than amortization
High equity properties (form of asset protection)Long term capital gains with ability to 1031
Real estate with depreciation that creates an immediately USABLE passive loss
Get as much low rate high LTV financing as you can FIRST
Positive cash flowing assets w/ no tax bill
No equity propertiesOutside IRAYour IRA Can Take A Loan!Loan must be non-recourseUpon default, lender can seize subject property onlyUpon default, lender cannotSeize other IRA plan assetsSeize your personal assets
27Non-Recourse LoansFew lenders to choose fromMust be a portfolio loanCannot be sold on the secondary market Larger down payment required40% to 45%Cannot personally guarantee the loan28Personal GuaranteesPersonal guarantees by the IRA owner not permittedCan be personally guaranteed by a third partyMust not be a disqualified personDisqualified people areAscendantsDescendantsSpouse and selfAnd others
29Getting the Best IRA Financing PossibleRecourse to your allowed partner and non-recourse TO YOUGroup investmentsSeller financingSwap debt with an non-disqualified investorBlended interest rate
UDFI Unrelated Debt Financed Income taxAny 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.
Unrelated Business Income TaxIf 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 UBITIRS Pub 598UDFI & UBIT are reported on form 990-T32Buying Real Estate - The ProcessOpen a self-directed accountShop for a propertyRemember, its the IRA that is the buyerCustodian to sign Offer to PurchaseSubmit a Buy Direction Letter for earnest money depositFunds wired to closing from your IRAFund & RecordRents are made payable to your IRA
33ExampleFather & Son buy a house
Father: 50% CashSon: 50% Traditional IRA
Title reads as:Custodian FBO Sons IRA 50%, Father 50%, TIC
34Disqualified?Before the dealFather has no ownershipSons Traditional IRA has no ownershipBecause this is a new dealFather and son do not have to worry about the disqualified person rule
35Disqualified?After the dealThe disqualified person rule comes into effectNeither Father nor Son can live in the condoNo one who is disqualified to either of them can live in the houseAscendants, descendants, etc.
36After the deal.After the dealNeither Father nor Son can ever buy out each others ownershipThey are disqualified to each otherExpenses and profits are split50% to Father Taxable50% to Sons Traditional IRATax-deferred
37What if the IRA depletes its reserves?Make your yearly contributionLiquidate other assets in the IRATransfer money from other retirement accountsBring on a partnerNot a disqualified personIRA can get a loanSell the asset38IRA-Owned LLCCheckbook IRAIRA purchases shares of a newly-formed LLC formed for this purposeLLC receives funds in its checking accountLLC follows same rules as IRA for investing
393 Types of PlansIRAsIndividual Retirement AccountsWhat you are doing for your own retirementQualified PlansERISA controlledTypically, what an employer provides youOther PlansEducationHealth
40Types Of Self-Directed PlansIRAsQualified PlansOther PlansTraditional401K/ 457/ 403bCoverdellRothDefined BenefitHealth Savings AccountSEPProfit SharingSimpleIndividual KSpousal41How Do I Self-Direct?Complete an applicationProvide copy of drivers licenseCopy of statementFund your accountAnnual ContributionTransferRolloverTell us what you want to invest in
42Retiring Earlier Than You Thought PossibleHigher YieldsDistributions without depletion of principalLaddered strategies: liquid and non-liquid real estate
Avoiding the early withdrawal penalty before 59 1/2 Retirement Distributions at Any AgeNO early withdrawal penaltySubstantially equal payments for 5 years or until 59 years oldEarly withdrawal penalty EXEMPTION IRS 72 t$500,000 principal x 20% ROI = $100,000 annual profit
$50,000 profit distributed and TAXED as ordinary income$50,000 income remains in IRA and is TAX DEFERRED
Rule #1There is no such thing as a good property or bad property. There is no such thing as a good investment or bad investment. There is only appropriate and inappropriate ownership and timing.
9 CAP rate based on actual performance15% cash on cash return from leveraged returnCompare this to stock market risk / rewardCAP RATE9%9%Cash on Cash Return9%15%Purchase Price$1,000,000$1,000,000Debt$0$700,000Equity$1,000,000$300,000Net Operating Income$90,000$90,000Debt Service$0$45,000Cash Flow$90,000$45,000FREE video training: www.HasslefreeCashflowInvesting.com
must take house
Paid $30,000Rehab: $