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WelcomeWebinar – How to
Lend with Your IRA
www.theentrustgroup.com
Office in Chicago and Fort Myers
Who We Are…
Dave Owens, CPA, CES
Entrust is the largest Self Directed IRA administrator in the United States – Offices through out the United States.
The Entrust Group, and its franchisees ("Entrust") do not provide investment advice or endorsements based on information included in this workbook.
All information and materials contained are provided for educational purposes only. All parties are encouraged to consult with their attorneys, accountants and financial advisors before entering into any type of investments.
Specialize in 1031 Exchanges and Self-Directed Retirement Plans
Educate customers
Provide clients with the necessary tools and information to enhance their investments
Encourage their desire to control their own investment decisions
Review potential transactions
The Entrust Group
What we do…
1. You may be able to deduct your contributions in whole or in part, depending on the type of IRA and your circumstances.
2. Generally, amounts in your IRA, including earnings and gains, are not taxed until distributed, or, in some cases, are not taxed at all if distributed according to the rules.
Advantages of an IRA
Self Directed Assets
What do our clients invest in?
So… You can invest in
Real Estate (All Types)
(including Tenant in Common Interest)
Notes/Mortgage Receivable
Real Estate Options or Contracts
LLC or closely held stocks
and on and on. . . . .
Think of it as a restaurant, where every known kind food is available.
On our menu is every known, permissible investment that is available.
Individual Retirement Arrangements
Traditional– Tax Deferred
Roth– Tax Deferred and Tax Free
IRAs established by Employers, using traditional IRAs
SEP-IRAs and SIMPLE IRAs
Educational savings plan and Health Savings Accounts
Coverdell Education Savings Accounts
Employer Based Qualified Plans
Individual K Plans
Each has its advantages depending on your personal circumstances
Types of Retirement Plans
PROHIBITED TRANSACTIONS (check IRC 4975)For your tax deferred/tax free, health and well being, there are a few rules that
you MUST observe.
Gems, works of art, antiques, stamps, certain collectible coins, carpets, and wine (other items specified by the Secretary)
In addition your plan can't deal with you personally or members of your family, which are specified as ascendants and descendants and spouses thereof. Also, you cannot deal with Corps., businesses, or trusts that you control, any plan fiduciary, or anyone providing services to the plan.
You cannot purchase property you already own
Ownership is flexible; you can own a percentage interest in an asset with anyone including yourself (i.e. Tenant in Common Ownership)
You cannot use investment for personal use
Self-Direction: What are the Rules?
How to Open a Self Directed Account
3 Easy Steps to becoming truly diversified
Step 1: Open a Self-Directed IRA
Step 2: Fund Your New Account (Contribution/401k Rollover/Transfer)
Step 3: Find the Asset
Private Lending
Typically facts Large down payment (30-50%) Short Terms (0-2 years) Higher Interest Rate (8-14%) Borrower pays all costs
Appraisal, attorney fees, doc stamps
How to Lend Money Using Your IRA
Investment Options
Case Study #1Buddy buys a property in his IRA on 11/26/07
for $13,000
Buddy sells the property for $25,000 w/$3,000 down, balance to be paid to his IRA 8% with monthly payments of $400, balloon in 6 months
Promissory Note
Promissory Note – Issues
Case Study #2
Bill Jones and his buddies have been doing private money lending in Cape Coral for about 10 years outside their IRA
Bill’s neighbor built a house with a construction loan for $300,000. When the house was complete, the bank did not want to do the Permanent loan
Bill steps in with his friends and loans $100,00 to his neighbor with a first mortgage.
All three names are on the mortgage. Bill uses his IRA, neighbors use regular cash.
Terms were 10% for 2 years, interest only
Bill’s attorney draws up all documents but neighbor pays for the costs.
Case Study #2
Case Study #3 Lisa and Bill are friends
Bill would like to purchase real estate in his IRA, but needs nonrecourse financing
Bill gets a contract with IRA, to purchase a house for $50,000
Bill only has $25,000 in his IRA
Lisa’s IRA will loan $35,000 to Bill’s IRA to purchase the house
Extra $10,000 will be used for fix up
Bill submits a buy direction form to us
We facilitate his IRA purchasing the property
Case Study #3
IRA purchases the house
They fix the house up and sell it for $100,000
At sale the loan is paid back – Lisa loan terms were 12% with a $3000 prepayment penalty
Case Study #3
Purchase Price 50,000Fix up 10,000Basis 60,000
Sales Price 100,000
Gain 40,000
Prepayment Penalty to Lisa IRA $3,000
Case Study #3
Stonehenge Lending
Local Mortgage Brokers helps puts deals together
Finds Investors and they all purchase a portion of the note
For Example - $500,000 mortgage on $1,000,000 property
Five Investors each loan $100,000 Five Names on the Mortgage (pmts made to Stonehenge)
Individual K - Lending to Yourself Must be Self Employed
Transfer your IRA to and Indy K
Can borrow up to $50,000 or 50%of the account balance can be borrowed
Pay yourself back over 5 years with interest
Call a local office today
www.theentrustgroup.com
239-333-1031 Florida
312-235-3200 Chicago
How to Learn More
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