2013.4.2 david coe presentation slides
TRANSCRIPT
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the power of REAL ESTATEinside your
RETIREMENT ACCOUNT
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Proprietary & Confidential, Property of Freedom Growth
who we are
Real EstateInvestment Advisors
Self Directed IRAConsultants
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Proprietary & Confidential, Property of Freedom Growth
what we do
Self Directed IRA
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Proprietary & Confidential, Property of Freedom Growth
agenda
Intro to self-directed retirement accounts
Actual Client Case Studies
Final Exam
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Section 1
Introduction to Self-Directed
Retirement Accounts
Text “Freedom” to 24587
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Art
Proprietary & Confidential, Property of Freedom Growth
investment restrictions
Collectibles
Life Insurance
S Corps
Prohibited Assets
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Proprietary & Confidential, Property of Freedom Growth
disqualified persons
Certain family members cannot do business with your IRA
• YOU!• Your Spouse• Your Parents• Your Grandparents• Your Children• Your Grandchildren• Spouses of Lineal
Descendants• IRA Fiduciary
IRA
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Proprietary & Confidential, Property of Freedom Growth
what can go into an ira
IRA =Special Safe
Real Estate
Superbowl Tix
Private Biz Bonds
Cash StocksMutual Funds
Precious Metals
Foreign Currency
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takeaway #1
Self-Directed =
Unrestricted
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Proprietary & Confidential, Property of Freedom Growth
types of retirement accounts
Traditional IRA.....................................................Roth IRA...............................................................SEP or SIMPLE IRA...............................................401(k)..................................................................Pension Plan.........................................................Individual 401(k) or Solo(k)..............................529 College Plan.................................................Educational Savings Account or ESA..............Flexible Spending Account or FSA.................Health Savings Account or HSA......................
YESYESYES
MAYBEYESNOYESNOYES
MAYBE
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Proprietary & Confidential, Property of Freedom Growth
3 step process
1. Open Account
2. Fund IRA
3. Invest
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takeaway #2
#1 Set up SD IRA#2 Find an Investment
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Proprietary & Confidential, Property of Freedom Growth
the players
CUSTODIANS PROFESSIONALS INVESTMENTS
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Section 2Case Studies
Jim - SD IRA
Barbara and William - SP LLC
Gabby and Michael - Solo(k)
Text “Freedom” to 24587
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Proprietary & Confidential, Property of Freedom Growth
case study #1
Jim - Medical Professional
Age 47
$85K in previous 401(k) plan
Looking for cash flow and growth
Wants to be moderately passive
Willing to leverage
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takeaway #3Start by Saving
YOU CAN’T INVEST MONEY YOU DON’T HAVE
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Proprietary & Confidential, Property of Freedom Growth
how it works
Traditional IRA
$200,000-$85,000$115,000
$85,000-$80,000
$5,000
$36,000
Rental House
Self DirectedIRA Custodian
$11,000
Trust Deed
$33,000
Note
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Proprietary & Confidential, Property of Freedom Growth
taking title in an ira
Owner Investment
Another Party in Escrow
IRA takes title
“IRA Custodian Name FBO Client Name #XXXXXX”
IRA “owns” property
Client can manage the investment
Self DirectedIRA Custodian
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Proprietary & Confidential, Property of Freedom Growth
taxes on iras
Unrelated Business Income Tax - UBIT
Tax on non-taxable entities that make profit unrelated to their “purpose”
Applies to fix-and-flippers using retirement accounts
Needs to be a hobby, not a business
Unrelated Debt Financed Income - UDFI
Tax on leveraged profits for a non-taxable entity
Profit taxed based on % leveraged
•A 40% loan will require that 40% of profits are taxed
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Proprietary & Confidential, Property of Freedom Growth
case study #1
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Proprietary & Confidential, Property of Freedom Growth
sd ira real estate - pop quiz
Owning real estate inside of your IRA doesn’t make sense if there are no tax breaks, right?
NoIf I buy the property in Mammoth, can I use it for one
week a year?
NoCan I rent it to my son if he pays full market rent?
No
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Proprietary & Confidential, Property of Freedom Growth
sd ira real estate - pop quiz
Do I have to hire a property manager if I want to hold real estate in my IRA?
NoCan I get a loan to create leverage?
YesIs it possible to avoid or minimize UDFI if I take a loan?
Yes
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Proprietary & Confidential, Property of Freedom Growth
case study #2
Barbara - Nurse, William - Auto ProfessionalAge 65 & 67Recently retired
Barbara from large hospital groupWilliam from auto dealership
Barbara, pension vs. lump sum distributionLooking for cash flow and capital preservation
Utilizing cash flow for living expensesWant to be completely passive
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Proprietary & Confidential, Property of Freedom Growth
setting up a special purchase LLC
Both opened a SD IRA
Attorney created LLC
LLC has separate bank account
Make investments via LLC
Check writing capabilities• Checkbook IRA or Real Estate IRA
IRA owner is Manager
SP LLC
Wife
Husband
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Proprietary & Confidential, Property of Freedom Growth
checkbook ira investing
Self-Directed IRA
$350,000-$350,000
$0
$350,000-$250,000$100,000
$250,000-$245,000
$3,000
SP LLC
Special Purpose LLCPension Plan
$50,000TD Fund
$25,000Note Fund
Note$42,000
MHP Fund$50,000
Fund Flip$75,000
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Proprietary & Confidential, Property of Freedom Growth
flip renovations
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takeaway #4
No sweat equity is allowed
The IRS ProhibitsNon-Cash Contributions
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Proprietary & Confidential, Property of Freedom Growth
case study #2
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Proprietary & Confidential, Property of Freedom Growth
sd ira real estate deal- pop quiz
If I’m a real estate agent, can I take a commission on the purchase or sale?
NoIt’s OK if I do some of the work, right?
NoMy brother is a contractor. Can I hire him to do the work?
Yes
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Proprietary & Confidential, Property of Freedom Growth
sd ira real estate deal- pop quiz
If I hold it for more than a year, can I avoid capital gains?
YESHow many properties can I safely flip before UBIT kicks in?
~THREEIf I run out of money, can I transfer more money to my IRA?
YES
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Proprietary & Confidential, Property of Freedom Growth
case study #3
Gabby - Realtor, Michael - AttorneyAge 54 & 56Gabby long time self-employed
Entering her primeMichael long time employee at a firm
Recently started his own practiceWant to limit exposure to the stock marketTwo kids in college
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Proprietary & Confidential, Property of Freedom Growth
solo(k)s are awesome
SEP on steroidsContribute as employer and employee
Who’s eligibleSolo business owners with no full time
employees
AdvantagesHigher contributions for moderate earnersFaster to $50K per yearNo income limitations on RothLoans- can be used for college!UDFI exempt
Custodian not necessary!
Individual 401(k)or
Solo(k)
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Proprietary & Confidential, Property of Freedom Growth
how it works
$300,000-$190,000$110,000
$190,000-$184,000
$6,000
Self DirectedSolo(k)
Old 401(k)
Note$43,000
Note$41,000
$50,000TD Fund
Fund Flip$50,000
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Proprietary & Confidential, Property of Freedom Growth
case study #3
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Proprietary & Confidential, Property of Freedom Growth
final exam - real estate in your IRA
When deciding on an investment, I should always look for the highest possible return?
No!Should I wait to find an investment and then open up a
self-directed retirement account?
NoWhat’s more important, the operator or the investment?
The OperatorWhat’s the most important thing to learn about being a
real estate investor?
Evaluating Risk
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takeaway #5
WHO YOU INVEST WITH
MATTERS MORE THAN
WHAT YOU INVEST IN
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Thanks!To get a copy of this presentation
Text “Freedom” to 24587
David [email protected]
www.freedomgrowth.com
https://www.facebook.com/FreedomGrowth