Self Directed IRA Investing

I get email from Alex Gurevich on different Real Estate topics and the last one he sent me was going to be where he interviewed Mr. Dick Desich the Founder of Equity Trust Company  . They are an IRA Custodian that I listed in one of my last posts.   Here’s a little blurb about Mr. Desich on Alex’s page.  I signed up and listened to the interview,  among several topics that Mr. Desich talked about, there were 2 that I think were best ideas. 

Of course the Interview was also touting Mr. Desich’s seminar where he goes into more details, which I would most likely attend if I could get the time off of work.  Here’s the link to hear it yourself…..

The 2 takeaways I liked the most from the Interview were:

1. The idea of a Private Bank.

      The idea of a private bank to me is a conceptual idea, not actually opening a physical location, in that if you and all your friends, relatives, and others that you know and trust open Self Directed IRA accounts.  Then you can Pool your money to get into bigger transactions. 

It could also work if there is one real active investor that knows a lot of other Passive investors.  The active guy, a guy like me,  he goes out and finds good secure property, Notes, or whatever the group likes.  He then pitches the deal to the passive folks and they all pool thier money to invest in it if they like it.  Of course this is just a high level overview of the Private Bank idea but I think it could have some tremendous benefits for those retirement accounts involved.  

I’m working on this myself and have done something similar where 3 different parties went together to lend money.   Now I’m working to find those folks who want to do it regularly, not just once in a while.  If my next Note deal works, I’ll go in on it 50-50 with a good friend of mine and I’ll post the details if we do it.

2. Using your SDIRA Account to help create and shelter cash even after you retire.

  To me this was a golden nugget that I really never thought about before, but it really only pertains to those with Self Directed ROTH accounts.  Before retirement you think in terms of saving and investing for when you no longer work.  No one I know of, thinks that after you retire that you can and should still invest using your IRA, eveyone thinks in terms of liquidation.  Now that you have an Self Directed IRA account why not use it and continue to do a transaction in with it so that once you gain your profit it’s all TAX Free.  Here’s an example, Mr. Desich used I believe.  Your 70 now and have to withdraw cash from your IRA, why not take that cash and invest in something you know like flipping houses and create some cash, and withdraw that new cash out of the IRA as a required distrubution.  You’re making money tax free using your IRA account. 

Here’s a link to the whole recording in case you want to hear it all.  I get nothing from it, just thought it would make a good post to my blog.

Will

For my first book review I decided to read Patrick Rice’s “IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment”.   I had heard about the book from some friends and wanted to add it to my RE book collection. 

The begining of the book starts out with 7 Rules that are easy to follow.  Some are common sense but nevertheless it’s good to remember them.   They are:

1. Set -up Self Directed IRA
2. Transfer 401k money if possible to it.   
3. Learn the IRS rules that govern IRA’s
4. Learn all you can about RE Investments
5. Do your Homework
6. Be Prepared to Act
7. Invest new money into your IRA every year.

I followed them before I knew them all as rules and I’d argue there needs to be 1 more.  Number 8. Use a Roth IRA whenever possible for tax free distributions. 

Rice’s analogy of an investor being the Captain of your own ship really hits home with me.  I can completely identify with that by having my own “Crew” help me navigate the RE Investment waters.  He keeps this theme through out the book and to me that helps make the book easy to read and not become a tired and boring book of IRS regulations.

He describes when to use the different people in your team, which is helpful to remember that it’s easier to do this with the help of others than by yourself.  One Team member I think he may have left out is a good “Note Servicing Company”.  They help collect payments and send it directly to my IRA which makes this more of an automated process.  When a payment is late they tell me.

Rice goes in to some decent details about how you can work with family members while investing the funds of your self directed IRA.  His descriptions of what makes a true Prohibited transaction is very helpful in figuring out who in your family is eligible to invest with.  I think that part of the book is the best explanation I’ve read to date and one of the most useful parts of his book.  The chart is on page 132 fig 7.1.

Another technique that I am actively seeking to use with my next few Note purchases is T-I-C or Tenancy in Common.  On page 71 Rice describes how this could help get bigger deals done by partnering up with others.  With this the partners are in the same Position in the Note but hold a percentage of it based on how much they contributed to buy the Note.  You could then split the cash flow based on the percentage of ownership or in the case of buying a Rental Property on the sale the profit would be split in the % each T-I-C has.   

To me the single most important reason I like this book is that it opened my eyes a little wider.  I have to confess I buy Notes for my Self Directed IRA for the cash flow they provide because I’m building up reserves right now.  However Mr. Rice describes a way for someone to Buy a piece of property for retirement not just cash flow.  You buy a piece of property that you will want in your retirement years, like someplace in Sanibel Island Florida, Jackson Hole Wy, Seattle, WA with your IRA funds.  Rent it out until you retire for the cash flow and then on retirement take the property as a distribution.  Now you have your vacation home paid for and can use it as you like without any worry of prohibited transactions. 

To me understanding this and reading it is worth the price of the book and why I think everyone should get Patrick Rice’s IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment.  Today!

 

http://self-directed-ira-bookshop.com/ is now alive.  Stay tuned for how I use my Self Directed IRA to invest for my retirement.  I’ll share with you what I’m currently doing, ideas I have and how you can do it too.    Along with that I’ll write some reviews of books on the subject. Will