The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
EP 013 - Retirement Account Strategies for Real Estate Investors with Dan Kryzanowski
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Listen to Dan and I discuss utilizing your retirement accounts to reduce taxes, build wealth and invest in real estate. Contact Dan at: Dan@rocketdollar.com
Free Discovery Session: mark@markperlbergcpa.com
Okay. Welcome everybody. We are live here to talk about retirement account strategies for real estate investors. Now, the topic of real estate of real estate investing and retirement account planning, a lot of real estate investors realize that there's lots of tax advantages to investing in real estate with losses flowing through. But a lot of times we can overlook all these additional opportunities to build wealth and save money on our taxes with retirement accounts. And we'll talk about this later, but this strategy, these strategies are going to become more and more valuable over time for you because of certain things in the environment that we'll talk about with upcoming changes in the tax code. Now, the self-directed IRAs and 401ks are available for you, obviously, to do more than just invest in securities, but you could actually invest in leveraged assets like real estate. So think about getting 8% on just your cash on a security and stocks or whatever index funds. Think about what you can do if you're getting 8% on leveraged assets. So you're also making money on other people's money. So you can do a lot with a self-directed 401k and IRA. For some of you guys who have left your jobs, you can take that self, that IRA. I'm sorry, if you have an IRA, most of you have 401ks from your former employers, and you can roll that 401k into a self-directed account. And certain banks, such as Rocket Dollar, we're about to talk to Dan from Rocket Dollar, will allow you to use those funds to invest into real estate. So you can do it, but we also want to consider the tax implications and potential traps if we don't have a proactive tax plan in place. We also want to consider the restrictions on what activities we can and cannot do with our real estate that is managed by our retirement accounts. So the agenda for today, and I'm really excited to have this because I get tons of inquiries on this topic. First, we're gonna, I'm gonna have Dan walk us through uh what he does with Rocket Dollar. He's a co-founder and they're a great resource. Their customer, sorry, customer support team is fantastic, such a great resource in educating me and my clients and get helping them understand what you can do and how to leverage this strategy. I'm gonna sprinkle in some tax strategies as Dan is talking and talk about some of the things that I'm doing with my clients, with retirement accounts. And uh then I want you guys to put your questions into the chat. So if you guys are tuning in live on Facebook, Facebook, register for the event in Zoom because I'm looking at the questions in Zoom. I'll try to see stuff on Facebook, but we got a lot of screens going on right now. Put in your questions after Dan has done his presentations. We're gonna answer all your questions and give you an idea of what kind of opportunities are available for you. Uh, so before I get into Dan, uh into introducing Dan, uh, I just want to let you know some updates on the practice. Uh, you know, as some of you prospective clients, you know, are getting a little antsy because we're so busy and the demand exceeds our manpower to onboard everybody at once. So you're waiting and waiting for us to be available. We're gonna start onboarding new clients in July. So hang in there. Uh, we are onboarding top talent to build the most efficient and effective uh team to provide the best tax strategies for real estate investors and business owners. So hang in there. And also, as I said, I'm building a team, and we're at the point where I'll be hiring, we'll be hiring throughout the year. So anyone who finds a qualified resource will get a $1,000 referral fee for me if I hire them. So if you know someone who wants to be part of an exciting team, let me know. A lot of great opportunities. And without further ado, I'm gonna introduce Dan. Dan, can you tell us a little bit about yourself and your background and what you're working on? And then let's go into some of the slides we prepared to talk about what you can do as a self with your retirement accounts as a real estate investor.
SPEAKER_01Awesome, Mark. Uh, it's so great to be here. And uh yeah, super excited. I feel this is kind of the uh the summer energy that we have going here, and there's so many great things to do with your self-directed IRA. Uh, I like to share, because I know Mark from North Carolina, how I got into this. Fun backstory. Uh, I was co-best men in a wedding about a dozen years ago. Gentleman was from North Carolina. I was wearing my powder blue. So sorry for the dookies out there, even though uh Coach Kay and I are uh, you know, I guess brothers from another mother, as they say. And I asked him what he does. And he says, I clip houses. I said, Oh, that's great. What does that mean? He said, 15%. My ears sprung up. And then he said the magic words, did you know you can use your retirement dollars? And for me, this was uh a mind-blowing experience because I was used to logging into my fidelity or elsewhere and only having like 10 or 12 choices. And when it came to real estate, you know, hardly a choice. So for me, this was truly uh in many ways, shapes, or forms, you know, life-changing and something that I feel frankly is going to allow me to retire, um, you know, pun intended with my retirement accounts a few years early. So, you know, with that said, I'd love to just uh bring a few slides up and please, please, please, uh, and if you have some drinks with you, I get it it's Thursday night. I think that's the most fun way, but let's keep this uh interactive here as questions come through. Uh you know, love to make this a very interactive dialogue. So Dan Krasanowski, uh founding VP at Rocket Dollar. Uh, I'm assuming a lot of folks here are real estate investors in some way, shape, or form. Even if you own your own house or take care of one of your parents, um, you're a real estate investor. And likewise, uh, my guess is everybody here has some sort of retirement. Even if um, you know, I'm early 40s, even if some folks are in the 20s on the call, you probably at the very least have a 401k with your current job. So uh this should be pretty impactful, I think, for a majority of us here. So the fun stuff for my multifamily friends, uh, I like to say I like to channel my inner Rod Khalif here. Uh and Rod's amazing if you ever hear him speak and he talks about life uh a bit more than multifamily. But the three easy, easy things uh I like to share is hey, the morning meditation. I literally do a 180, put my feet up the wall, and get the blood flowing back into my head. It's a great way to start the day, even if I'm not brave enough to go for a jog in the morning. The other two I actually learned during COVID. Uh, one was uh you call it a cheesy Netflix, but uh the Gratefulness Circle. It's real cute with my five-year-old son. We go around in a circle, say what we're grateful for. And trust me, I think there's a big delta on the days that we do it and the days that we don't. Uh, and then of course, I have to throw in a Kardashian reference here. Uh, what I read about Kim is she writes a letter to her son every year, which uh I think is actually a really great thing to do, you know, particularly after the year we had last year. So it's a fun little exercise. So, with all that, if you gain anything out of this session, or if you have to log off in 30 seconds, um, this slide alone and the next slide, I think is gonna be your money's worth. So listen, tonight is all about you. Our most precious thing after our health is our time. So I want you to know that you can use your retirement dollars to invest in real estate. Um, it's it seems simple, but I'm gonna take a pause here once again. It's all about you for your retirement dollars for real estate. Now, twisting it a little bit, but just as important for all my friends that are raising money, did you know that your investors, all of our other friends that are on the call here tonight, can use their retirement dollars to invest in your real estate? Um, I'm not gonna show the big macro sides, but I'll say from IRAs alone, and we'll talk about the difference between IRAs and SOMA 401k. But just the quote unquote little bucket of IRAs is 10 trillion. That's trillion with the T. That's more than all the stimulus. Uh, you know, it goes, I'm from Philadelphia, so it kind of goes toe to toe with our national debt. But this is a number in the trillions that only about a hundred billion, so about 1% is actually used. And as we go through the call tonight, you'll see the main reason was that it was kind of an old stodgy process. Well, now it's a very streamlined, simple, very kind of 21st century fintech friendly process. Um, so you can access your money at all times. I I won't bore you with my introduction here, but we do live in a hashtag world. And, you know, one thing that's been really important to me was the solo 401k, uh, and also the different niches within real estate. I know most folks are aware, lived in an apartment, bought a house. There's a whole lot more out there. And, you know, Mark mentioned just the ability to leverage in other people's money and frankly, other institutions' money. A lot of times you as an investor can piggyback off that and get a huge benefit, uh, particularly through the self-directed accounts. So, you know, with all that, I my guess is if we were sitting around the campfire, we would come to the same conclusion where our head and our heart is at today. I like to say, you know, your parents sold 60, 40 stocks and bonds, set it and forget it. You know, these days are long, long gone. Uh, you know, stocks are at a peak, uh, bonds actually go down. Last time I logged into one of my legacy accounts, I was shocked to see a bond actually went down 6% in a quarter. That was actually a little scary. And, you know, the big thing, um, when you get those flyers in the mail, say, do you want to attend our annual meeting? Sure, but you're really not going to have that one-on-one interaction with, frankly, anybody at the company. That just doesn't play. You know, for myself, I think for you folks on the call, there's a lot more respect for our time, our money, uh, that the old way of doing it is just not getting us there. So, what are the benefits of a true diversified portfolio? I call this 21st century diversification. Uh, the big thing here is real estate. I'm not going to read up and down this, but as you know, it's a hard asset. Uh, it pays distributions, it paid sale proceeds, aka yield upside. We'll talk on that. And of no surprise, I think a lot of us, um, you know, I know there's a lot of great New Yorkers on the call. I said I'm from Philly, I grew up in Scranton, lived all over the country. Uh, fortunate to be in Miami for a lot of these family office shows and high net worth shows. And guess what? These folks will be real open. They'll say, listen, I generated my wealth through real estate and tax advantage accounts. So it's no secret, it's legal, it's been around for dozens, frankly, hundreds of years, especially here in the US. Uh, and it's a great opportunity for us. So, with that, I'm gonna start with the sizzle and then you know, I'll pull it back a little bit. Uh, what can you invest with with your self-directed IRA or solo 401k? So, without knowing all of your backgrounds, uh, some of this might seem a little elementary, some of it might be a little bit heavy. Uh, please stop, you know, ask questions. I see a chat coming in here. Mark, do you want to take that one? Yeah, absolutely.
SPEAKER_00Oh, I was just saying hi to my buddy Dan. Hi, everybody. Awesome.
SPEAKER_01Hey, we got two Dan's on the call. It's gonna be a good evening. So I love it. I love it. Awesome. Well, for Dan, too, out there, you know, he probably knows better than me that it's not just real estate. Um, you know, it's startups, it's loans, it's crypto, it's even international. I do want to point this out. I take that we have a you know a crowd with a good global mindset here. Um you know, as long as you have a US address that's not a PO box, you can open a self-directed account and invest internationally. The only thing I would caveat to say is cannabis, um, the product itself has not received the big check mark from Washington, DC. That said, let's say you own a strip mall and there happens to be a hemp factory, uh, you should be in the clear with that sort of investment.
SPEAKER_00Yeah, so check this out. So uh when we talk about combining our tax strategies with investment strategies here and thinking about how this fits into the picture. One of my clients, she inherited a lot of real estate and she was gonna get the real estate professional tax status. She also had some of her own real estate. So, what we had the opportunity to do was with the real estate professional tax status offsetting all of her income. She was at a $0 tax bracket, no taxable income, and potentially some cost segregation studies. If necessary, what we're doing is we're gonna roll over all of her funds from her former bosses, 401k, into a Roth IRA. That Roth IRA is gonna grow tax-free, and she's really interested in crypto. So she's gonna actually invest into cryptocurrencies with a Roth IRA. That money is gonna be untaxed for the first $12,500 for a standard induction. I believe it's $12,500 for 2021. It changes every year a little bit. Um, but around that amount is gonna grow tax-free, uh, and it's not gonna be untaxed when we put it in. And the amount that is taxed, the first marginal rate of that is gonna be taxed at 10%. So not bad at all. And then think when we think about this compared to just investing in cryptocurrency with our ordinary accounts, uh, the tax consequences are gonna be far less. We're not worried about any changes in the capital gains tax code because we've been proactive with the retirement account strategy.
SPEAKER_01Yeah, Mark, that that's dynamite. And I love the way that you share that. And uh, you know, another way, like I share with my five-year-old, it's you know, it's it's the seed versus the tree. And I think particularly with great planning, like Mark just shared, and if you have a little bit of a runway too, you know, let's just assume everybody's 40 here. Um you know, you can have quite a run in 30 plus years when we're just talking a seed to a tree, you're talking a whole forest here. You know, that 12.5, um, you know, it's some pretty wise investments. That can easily be a buck 25, 250, uh, you know, even more. So it's uh I'll give a final shout out to our folks in Florida here, and I'm here in Texas tonight. Uh, these tax-free states, I gotta tell you, if you got to move somewhere for six months in one day, um, it's a really, you know, there's a lot of nice places to live to do your Roth conversion. So kind of with I think the flexibility that some of the employers might give us for a while, uh, there's just a whole lot of good stuff. I think we're in a great place.
SPEAKER_00Never thought of that idea. That's a great strategy.
SPEAKER_01I've been here for a while. So please, anybody can take it. I love it. All right. So I I gotta bring it down. Sorry, kids. But okay, so on the flip side of all that wondrous stuff is the prohibited. So I say this half-jokingly. What's really nice about self-directed accounts, and I'm going to give an analogy to lead into this, is that for those of you that have a health savings, an HSA, the government, what's nice is a government tells you what you cannot do. So, for example, you fall, you break your arm, you have to go to the ER, you swipe your card. That's fine, that's an eligible expense. You know, you want to go out and um, you know, who knows what, uh, buy a new pair of Nikes because that's going to help you run and be healthier. Sorry, that doesn't count. In a very, very similar aspect, uh, there's three things, and primarily one that you cannot do with uh self-directed accounts. Uh no, no life insurance, okay? No collectibles. So, you know, pick on your collection of air jordans here. And the big thing is no self-dealing. So, what this means, think of yourself and your linear family. So your kids, your parents, your grandparents, um, oddly enough, not brother and sister, but we'll talk on that in a minute. What this means is that you cannot, your IRA is a disqualified person, you and yourself, so you cannot, for example, invest in your own company. Um, you know, I spent a summer in Ocean City, Maryland. I'm sure we've all had a wild college weekend there. Let's say you cannot buy an apartment in OCMD and have your kids stay on it at the weekend. Once again, up and down your linear family, you're disqualified. Now, I did mention, you know, brothers and sisters are not that said, you have to be careful. Let's say you are gonna have 10 investors in your company, you cannot give your brother or sister a sweetheart deal. They have to be treated just as equally as every other investor. Uh, and you know, for some of us that like to get our hands dirty, uh, be cautious. Now, once again, uh obviously, if you had a rental house, let's say you can still, meaning your IRA is the owner of the rental house, you can still collect the rent payment, but you should have a third party that goes in and changes the light bulbs and does some of the managerial work. So the nice thing, especially with the checkbook control account, uh the likes that Rocket Dollar provides, all of that is gonna be documented, um, just as you would if you had your own personal account, uh a separate account for a property. So I'm just gonna pause there, Mark. Did you have anything else on you know on the expense side?
SPEAKER_00Um, you know, that's that's all great stuff. So, you know, when we think about active businesses, that's where we run into challenges with with um retirement accounts. Now, there are some complex workarounds. I don't want to take you down too many rabbit holes, but there are some strategies. Um, if you want to look up the blocker C Corporation, where instead of you, your C Corp invests in active businesses and your retirement account has stock in the C. But that's you know, when we think about those advanced strategies, you really gotta be um, you really gotta be ambitious and have some, it's gotta be the juice has got to be worth the squeeze on those types of executions.
SPEAKER_01Awesome. Hey, Teresa, I see your question. Can a husband or wife do the repairs? Dynamite question, and the answer is no, um, because once again, um you, your spouse, uh, is part of the linear sort of equation here. Uh, so you would have a third, uh, you would want to have a dedicated third party that is not part of your linear family that would even do some things that you may, you know, consider basic. Cool, cool. All right. Now, here's what I'm really uh excited about next is 21st century diversification. So I know there's a bunch here, I know you see my fancy graphic in the middle, but I'm gonna take a few minutes because I think a lot of us have a similar sort of portfolio, and I really want to touch on uh because I know the the spirit tonight was for fellow real estate investors. So I'm happy to, you know, kind of open up uh a little bit here to share what how I view things. Um and hopefully some of these tidbits help a little bit. So, you know, ultimately, uh, and this is not an exact percentage, and don't take it for the these are may or may not be exact deals, but you know, starting from kind of five o'clock, when you think of a 21st century diversified portfolio, I still think yes, there's a place for stocks and ETFs. Corporate bonds, frankly, at the moment, I just don't think it's worth it. Um you know, crypto, great, as Mark mentioned, a great reason why we have self-directed accounts and private loans. Um, you have a college buddy, uh, she is starting her first business. You can do a private loan, you can do the terms. You know, I I caution sometimes do you want to play lawyer or not? But you can have a collateralized loan, just as what you do with your piggy bank checking account, you can now do with your retirement dollars. So you can be greatly impacting um, you know, a friend, uh, an ex uh collegiate, uh, an ex-coworker, as you know, they start the business of their dreams. Super powerful, super awesome. Uh, you know, working counterclockwise, all of us have probably put a chip in a startup. Generally speaking, you know, even the big ones, they take time. So I think 10x in 10 years is a realistic, um, more so the 10 years part is what I do want to represent. Why, frankly, once again, retirement accounts, you cannot withdraw before you're 59 and a half without really withdrawal penalty. Let's assume everybody on the call is 40 years old. You know, a startup could be a pretty good uh investment because you know you can't touch the uh investment anyways. You know, final thing on the right side of the slide here, why I say upside is because, yeah, a lot of these are for the upside gain. It's not for the yield. I I threw out self-storage, I was in a similar investment. Um, you know, storage, much like any sort of real estate asset class, could have both yield and upside. So I'm not saying this as an absolute, this is a model portfolio. Uh, but what's great here is something like a storage, something like a development that's going to take time, generally speaking, is going to be an equity only. It's not going to pay dividends, which, you know, for your liquid account, that might get you a little antsy. Once again, the benefit of an IRA, having the time before you can pull out with early withdrawal, you might say, great, you know, for a 20 IRR, this is fantastic. And I'm, you know, I'm even 55 years old. Uh that 100K is going to be 200. I have a 12 year old at home. You know, when I can pull this money out in five years, he or she's going to college, I can now cover the cost of private school. And as Mark mentioned, if this is in a Roth, even better because you will not be paying taxes on a 200 on the back end. So You know, the right side I like to say is my my upside. The left side here is uh yield. You know, you can pick your asset class, uh senior living, because I saw a deal like this. This is real simple math. I like to joke and I'll pick on all my IV friends here, or you know, my smart Stanford friends, etc. For the real smart folks or doctors or lawyers, this is very simple math. Guess what? It's a 12-pref, meaning 1% monthly. You put in 100 grand, you get $1,000 a month. I share this because particularly if you're raising money, as I, you know, I half joke, but the smarter the folks on the outside, they may have a tough time grasping IRR, uh, whole bunch of things here. Something as simple as this is like, hey guys, here's $100, you're getting a dollar back a month. Super, super simple. Um, and there's certain offerings that do this, whether it's on the crowdfunding side or a specific deal that, you know, could make sense. Uh, for those brave, I don't say brave enough, but if you do your diligence uh with hard money loans, uh, meaning basically a real estate chef that'll deal with an individual, not deal with the bank for their debt, uh, and you're basically being the bank to them, you should expect a double-digit return, even with an experienced real estate sponsor. So that's more on the yield side. And then finally, kind of in the lower corner here, um, and I've been I've become more intimate with industria over the past year, this is where you get the best of both worlds, as I say, the yield and the upside. So, you know, the yield, especially something like an industrial that just prints money, you can get paid monthly. You get a bump on the back end. So, what does that mean from a math perspective? Great, you know, hey, I'm getting a few hundred dollars a month, and I'm also gonna get my principal back in a bump. So I'd like to share, particularly for folks, maybe if you're quasi taking care of your parents' finances and they're over that 59 and a half bump, they may say, great, I'm gonna put in this 100K, but as the dividends come, because I'm over, you know, I'm 65 years old, I'm gonna take this out without the early withdrawal. And as Mark alluded to, if it's a Roth, this is all gravy. And I've seen many retirees, this is their strategy here. Um, because they know that they can live off of, let's say, in small town America, the 583 or, you know, at a zero if you live on the coast, but then you're also getting that bump on the back end. So this is kind of what I've been drawn to over the past decade. Uh, I find it greatly beneficial and exciting. Even today, before the call, I looked and I had uh three distributions hit my account, which means I can invest in something new. You know, that extra just $1,500 or $2,000 means you know I cross another threshold, another minimum where I can invest into a new deal, which is really exciting to me. So that was a bunch. I just want to take a pause if there's any questions, you know, happy to put on my real estate hat or you know, Mark, if you have anything else you want to touch on in the spirit of IRAs or just you know, in general for real estate, I think this would be for time.
SPEAKER_00Well, I'm curious, uh how one of the strategies that I've that sounds appealing to me, but um, and I've been thinking challenging my clients to think about this is uh what do you think about hard money lending with with you know, if you're knowledgeable about that industry and have friends who are doing that, uh what are your thoughts on the profitability of hard money lending uh among these these different uh strategies you're talking about?
SPEAKER_01Yeah, I think it's great. Like anything, I I mean, I think it's you know, diligence, frankly, I think it's a gut feel. I I would say with hard money loans, um you want to meet the person in person uh and probably do it again. Or, you know, my and I won't go into a rabbit hole, but my um my least fun investment was a hard money loan. Uh I say we have baby bliss. You know, my wife was the one that was physically pregnant, but I was in whatever mental state. And I said, Oh, this is great. It's going to be a three-month term. Um, and I tried to kind of play lawyer and dock it up myself. Uh, three months it didn't happen, three more months it didn't happen. Then I learned about Texas laws where uh chronic, you know, when the loan was placed or who placed it, it it didn't really matter. Uh, so I was totally on, I was lucky to get a few cents back on my dollar. Uh and you know, frankly, I with that I would say, you know, if you do a spouse to trust your friend for hard money, or just in general, it's always getting a second voice on anything to make sure you're not enamored with, you know, the location, this and that. And I'd say just a good blanket statement. Hopefully, this is no surprise. I think a few years ago it may have been, is that uh there's a limited supply of folks that want to do certain construction. So, you know, the big entities, the big multifamily, the corporates, they're gonna have their teams, they're gonna have their subcontractors. Uh, you know, somebody, even if he or she is a great person, if this is their first time flipping a house, um, they may have those construction folks on the first week, but then maybe not the second week or the third week. And that hard money gets really expensive. Um and so you have to just recognize, I think, even if it's your best friend, recognize the macro situation before you do that first check. And like anything, I would suggest, especially on like a hard money side, you know, whatever is the minimum, even if it's 5K or 10K, uh, you know, maybe you go in from that level. Um, and then a la IRA, once again, I would suggest doing your diligence so you feel fully warm and fuzzy inside, but maybe do pre-tax because worst case stuff hits the fan. Well, this is pre-tax money you never pay tax on.
SPEAKER_02Yeah.
SPEAKER_01Um, not saying you ever want to lose money, but you know, what is the best worst case scenario? That's a good way to test the waters. And as we talked about the solo 401k, we can talk about the benefits of the pre-tax bucket and the Roth or post-tax bucket.
SPEAKER_00Great stuff. Yeah.
SPEAKER_01Awesome. So, you know, two more slides of just what the real estate had. I just say, so let's assume, you know, you we're comfortable with uh, you know, let's pick on industrial in Texas, because that's where I am. So let's say when those boxes are kind of checked, I think the next question is, you know, do you want yield, do you want upside, or do you want both? And the easy answer is both, but you know, as I said, maybe that double digit yield is great. Maybe the potential for 20% plus upside is great. Uh, you know, here is uh I like to call a home run deal. So if we have any UTA or TCU grads, uh, you know, give yourself a big shout out now. Uh but yeah, this is um in many ways a very attractive sort of offering because and I won't go into deep detail, but you're looking at, you know, an 8% pref. That's a I'd say a really strong return in this environment. Uh, you're getting some back end split too. So a waterfall, and I won't go into deep detail, but uh, you know, usually when you see numbers like 70, 30, 80, 20, this means the investor is getting the bulk of it. The sponsor, the person putting the sweat equity is going to get this the smaller part. Well, if they do a rock star job, that might say, hey, after a 20% IRR, maybe it goes to 60-40. So the sponsor gets a little more on that, much like when you have a marginal tax rate, um, the sponsor would benefit if this, you know, this is a rock star sort of deal. So uh, you know, side note for folks that are considering geographies, uh you know, Texas is hot. I'm down here, I'm happy to talk offline on that. And you know, separately, student housing, one thing I learned last week is that unlike traditional multifamily where you kind of lease on an ongoing basis, and student housing, if you don't have the lease assigned six months before you know the next fall semester, you're SOL. I mean, you can literally be in the teens for your occupancy, which means you're going to default on your loan and have to give it back to the bank. So going Mark, I think one of the earlier questions we had is, you know, who do I invest with? What do I consider? I think you look the benefit here, you know, you really win on the buy. So who can you buy from, especially in the sizzly hot market across the country? Who can you buy from? Um, you know, first of all, off market, probably not through a broker. And also where it's one of these situations where the bank or the lender, who's ever holding it's like hot potato, they just need to get rid of it. So you're gonna buy at a much more discounted rate. You know, and the other thing, and everybody's board can look different, but I I do think um, you know, take a little emotion out of this, and you know, here's what this is just a cute little tic-tac-toe board, but you know, what is your investor mandate? And I'm not gonna go into everything, but I do think it's fair. Uh, because I mean you can go bonkers just, you know, looking at the different sort of multifamily deals, but I would say, you know, starting with the center square, hey, how important is geography, asset type tenant? Um, do you have a minimum distribution? Do you have a need for is it quarterly, is it monthly? Uh, do you get skittish if the loan to value is above a certain rate? Um, you know, from the leasing, do you want it to be triple net? So, and then, you know, I think duration is also something that, you know, when we talked before about yield and upside, I think duration is also something. Is it kind of a sub-three year, is it a five year, is it a seven to ten year plus? And, you know, especially in IRA land, as Mark says, when you look holistically, when you're looking to retire, when you're going to give up that W-2 income, uh, it could be important the duration, because you might be pulling out um, you know, some of the principal from your IRA, or you frankly might want it to go on longer to have that uh lengthier dividend stream. So uh I Mark, I'd love to get your take if there's anything kind of in your tic-tac-toe board or you know, anybody else on the call that they you know look at as part of their due diligence.
SPEAKER_00Yeah, does anybody uh anybody want to tune in? See what we got here. How about Brian? I guess we're a little shy right now.
SPEAKER_01All right, all right. Well, we're we're I'm gonna put back on my IRA hat here and uh I'll move pretty quickly. But you know, uh, and you friends, uh, you will have this deck to you offline too. So uh don't feel like you have to screenshot and such. So all right, self-directed accounts, you know, title up here. Uh self-directed. A lot of people think they self-direct. This is capital S, capital D. We're gonna talk traditional Roth and then the solo 401k. Big thing here, another big takeaway is checkbook control. As it sounds, you have access to your money 24-7 to invest in what you want and when you are. The reason I believe SDIRAs, which once again have been around in legal since the 1970s, have not been, as I say, country club cool, is that it was a hassle to access your money. You know, let's say Mark flips houses, or I'll pick on Brian Miller here, you know, and I send him a check for 25K every quarter. It's ridiculous that both Brian and I would be on the phone with some third-party custodian for purposes of filling out their paperwork. Once again, this eliminates all that. This is as if you're investing through your piggy bank checking account. Super powerful for both the investor and the sponsor. 60 seconds or less, probably do it in 30 because I think you guys are pretty proficient here. Traditional means pre-tax. Um, and I'll let Mark you know share some sizzle on this, but from the IRA land, you know, whether it's in the SDIRA or the solo 401k, traditional is pre-tax. And then Roth, as you know, think of the seed versus tree sort of example here. Uh, you know, this is this is gonna be great on the back end. Mark, I don't know if you have anything else.
SPEAKER_00Oh, absolutely. So um here's something, uh a strategy that I love to think about. Now remember, you know, with the Roth, obviously you're not reducing your taxes right away, but when, you know, once it's in that Roth, you're not gonna be getting taxes on it. Well, there are some other circumstances which we don't have a whole lot of time to go into what UDFI is unrelated to finance income. But at a high level, if if you're looking for a great strategy here, if you own property in your Roth IRA and you eventually pay off the mortgage, you eliminate the leverage on that. We eliminate any of the taxes on this Roth. And if you are investing in property in a highly appreciating market, so let's say you get an Airbnb in California where the margins are fantastic, and the properties are appreciating it at value at a rapid rate here, right? Some of you guys are worried about the 1031 going away or the bump up of the capital gains tax rates. And you know, in the future, you're anticipating you'll be in a higher tax rate. You pay off the mortgage of that property that you owned in your Roth IRA, you can sell that property tax-free. So uh that's a wonderful opportunity right there with the Roth.
SPEAKER_01Yeah, and a follow-on, folks, and I know um, you know, some folks I feel they play the fear card a little bit with UBIT UDFI. For me as an investor, you have different buckets of money. You have your your liquid and your retirement. And it kind of says, well, my retirement, I might be earning 2% in a bond fund versus real estate, even um, and personally, I've not been remotely impacted by UBIT UDFI. I've never turned down a deal, even if there was that potential. Because let's say it's paying, you know, like that 12 pref, you know, it's still a lot better than the 2%. So that's that's great color. Thank you, Mark.
SPEAKER_00Yeah, and even if you have UDF UDFI, that's the only only income attributed to the leveraged part of your income. You're still seeing the benefit of leveraging your accounts with retirement accounts instead of just putting into a mutual fund and getting whatever. What's it? What do you think you're gonna get from a mutual fund? You're gonna pay fees, and you may get somewhere from like a seven to 10% return on your own cash. You know, you may be paying some taxes on it, but you're making profits on uh the uh the leveraged assets, other people's money. You're leveraging the banks, and uh also you still have depreciation and other other ways that we can offset a good chunk of that real estate income.
SPEAKER_01Yeah, and and folks, there'll be there'll be some stuff in the slides. Plus, there's a there's a I guess it's it's almost seven o'clock, so we'll say kick-ass, uh, you know, not FAQ, which we call a knowledge base that really goes into deep detail. So you all have access to that. Um, I won't go in deep here, but this is you know, this is kind of the nuts and bolts of checkbook control within a self-directed IRA. Basically, you're funding your IRA, a custodian in the background, honors the IRA, the LLC as the asset, and then you can have multiple investments. So, point here is it gives you checkbook control. Um, the beauty here, and I'm gonna for the solo 401k, also known as the QRP, individual 401k. Uh, and the basis here to open this account is that you know, the sphere to have qualified self-employed income. So, once again, what's nice, the government says, well, this is not. It's not day trading, it's not collecting a rent check. What it is, is you're a one-person consultant, you're a husband-wife team without W-2 employees. Uh, you know, even if say, hey, you like to Uber drive on the weekend, you know, that qualifies you to open this account. And then within here, what I love is that we talked before kind of the pre-tax and post-tax. You can have two unique, I like to call them checking accounts to delineate between your pre-tax and your post-tax, whereas in IRA land, you would need two separate accounts, separate every separate, you know, EINs, et cetera, two separate fee payments. All this is under the umbrella of one solo 401k. And once again, being that it's checkbook control, just like you go click a button in online banking, you know, let's say you're going to invest in the next uh, you know, pick your stock, Apple for Tesla, et cetera, you can do that, uh, you know, basically move the money, do a raw conversion on the fly. And then whatever money you move from pre-tax to post-tax, you'll pay, you know, next year's tax year for a conversion. But these are just some of the super, super powerful um points. And there's there's four, you know, kind of two other things with contribution rates and loaning to yourself. But before getting to that, Mark, was there anything else you wanted to touch on?
SPEAKER_00This is good.
SPEAKER_01Awesome. All right. So so many good things in the solo K. Uh, I'll just give you a little teaser here. And the two things I want to talk about is the high contribution rate and to loan to yourself. So let's get right to it. Um, once again, solo 401k. Anybody at any time, you can do, you know, five, six, seven thousand into your IRA. With the solo 401k, it's actually in the 50s. So let's break this down a little. Let's say you're a solo consultant, much like your W-2 friends, it's the 19.5 right off the bat. In addition, and this is a genius of this account, you can do 20% of your net earnings. So let's just use round numbers. You have 100k as a consultant, the 19.5, the other 20,000, 39.5, boom. So it's a lot more if you were W-2'd. Let's say, you know, a husband-wife team, actually, flower shops make a boatload of money. Um, I know some folks that probably gross half a million as a husband-wife team. Guess what? Right off the bat, 19.5, 19.5, boom, that first 39,000, and then the 20% of share. They're putting away over 100,000. And if you're over 50 years old, add another 6,500 to it. So, once again, particularly as folks, whether you choose or life may take you, like, wow, I'm a consultant, you know, my W2 time is kind of over. Um, you know, this is no joke. This 60,000 plus is what you could contribute every year. Lower your AGI, your taxes now to go into the future. It's um just a tremendous benefit of the solo cat. Awesome. And then, excuse me, one final one. Um, so this is for all you know, my fellow startup founders out here. You can loan to yourself. Um, you know, kind of in the with your day job 401k. Usually it has to be a hardship. Beautiful thing about the solo 401k, there's no restrictions. You want to go on a boat, you want to go on vacation. Um, you know, the most common thing I think is sometimes, you know, frankly say, listen, I need to be liquid for something else I'm doing on the side. This becomes cash. It's not restricted cash. You can do what you want with it. Um, so let's think if say I have an idea for a startup. I don't want to go to friends and family yet. If it works out well, my company will pay me back. If not, I'm gonna go to W-2 in a year anyway. So you can borrow 50k or half the value of your plan. See many startup founders do this. Um, some folks from real estate also do this just almost as a slush fund. So as long as you pay yourself back over five years. So, once again, super powerful. Um, and there's even, you know, we may not have time tonight, but strategies marked knows of that different ways, whether it's the backdoor, the mega Roth, different ways to frankly boost up your balance, your principal amount um in your IRA, I'm sorry, in your solo 401k by taking advantage of this loan.
SPEAKER_00Yeah, so here's something that um when you're talking about borrowing, which I think is a wonderful idea because a lot of my clients just quit their jobs. And when you just quit your job um to get, you know, to go full-time into real estate, and when you're maybe in your earlier stages, one of the greatest bottlenecks is access to capital. So what they don't realize is you can borrow from these 401ks, uh as you as you just discussed. And you know, when you take this money out is a non-taxable event. And sure, you're paying you're paying interest, but you're paying interest back into your self-directed 401k, and it's going to grow in that tax deferred bucket. And so I had a client recently, and he's he's uh you know, he's asking how we can, you know, some ideas on how we can get together some capital to fund a six million dollar short-term rental project. And and we said, I said, Hell, how much do you have from your former job that you just quit? And how much does your wife have because she just quit her job? And between you know, just being resourceful and thinking about all of these strategies, we were able to free up enough capital to put into this property. And what are we gonna do with that property? We're gonna run the cost segregation studies, and we're gonna offset other sources of income and drive down the taxes.
SPEAKER_01Amen. Sounds fantastic. All right, two more quick slides. Um, and then hopefully we have a bit of questions here. Uh, as I said, the the benefit here with the likes of a rocket dollar, and there's others out there, uh, it's country club cool. You know, uh to say we're better than Geico. You can sign up in five minutes or less. If you wanted the details behind it, it really is basically all that it is personal information, picture of your driver's license, credit card. You e-sign a few things, a few things happen over the next few days. Uh, it's super, super simple, whether it's a solo K or the uh self-directed IRA. So uh rocketdollar.com slash learn. As you can see just on the left side of the page, I mean, this is this was actually an award-winning knowledge base. Um and this is really good. So from a self-education standpoint, this is powerful. And if you're raising money, we would never expect that you would know you know the deepest details here, but you do have access to it in one click. Uh I saw a question. Oh, there you go, Mark. I love it.
SPEAKER_00Uh also, and and Dan on that topic. So we're talking about what you can do with your retirement accounts and what you can invest your retirement accounts into and take some funds out potentially for your own endeavors. But can you tell me also about how you can partner? Let's say, you know, you have you're trying to raise capital and you know some people with deep pockets. You know, how can you partner with people with retirement accounts and present, you know, and and present to them, you know, some opportunities where you they can be in on your deal and you can get some capital with them to fund some projects.
SPEAKER_01Yeah, I mean, as we shared at the beginning, and you know, close your eyes for a minute here. Uh, we're gonna go backwards a little bit. So, you know, the biggest takeaway here if you're raising money is that your investors are aware that they can use their retirement dollars. Now, how you get this message? Um, gentleman here in town, uh, a buddy Tommy Pratt, and for years he shared with his folks on his monthly newsletter, he said, Did you know you can use your retirement dollars? Did you know on my next deal? On this Deal on my past deal. You know, just a little sentence. And guess what? 15 to 20% of his funds came from retirement dollars. And the beauty of it was there were times when somebody said, Wow, I have three kids in college. I'm broke, but I worked for you know GE for 30 years and I have a million dollar 401k. I'm gonna roll that into a self-directed. Now I can invest in your next deal. Fantastic. That's kind of the golden story. Otherwise, I think through this education, you know, Rocket Dollar and others, you know, for sponsors that do engage, there's a fair amount of education that goes here. You know, I think all parties like it. Uh, you know, there's many, I'd say, you know, I do commend the folks across a fair number of the legacy custodians are having um, you know, open sessions. And they don't care if you're an investor, if you're raising money, if you're a vendor, everybody talks, you know, you get your 30 seconds on stage, but it's very collaborative to once again expand the education. But the biggest thing is just something as simple as a sentence here. I would say, um, and this will lead us into the I think Rocket Dollar's offering here is that you know, Rocket Dollar being very tech friendly, there is a private Facebook um page for investors. And like anything, if somebody sees that investor, you know, with ABC Real Estate is sharing education to the you know, thousand plus people that have access to this Facebook page, it is possible then that these people are going to inquire or talk offline. So, you know, just to be fair, rocket dollars are others, it's not a crowdfunding side, it's not an asset manager. Um, but what it is, let me go back to the slide here, it's a checkbook control. So, you know, kind of my final slide here of the evening. Uh, this isn't something crazy I did during COVID here on the right side. This is the true fee schedule for some of your legacy folks. Like, wow, such a headache. Um, and you know, do I really want to tell my friends about this? Whereas on the, as I'm looking, maybe your right side, my left here, the checkbook control, it's very simple. It's a one-time sign up. It's $15 a month flat. And that's regardless if you're moving over, you know, $20K for one investment or a million dollars, and you're gonna put 100K in 10 investments. Um, and as an added thanks tonight, uh, you know, as I like to joke, if you can spell it, you can get it. Uh, I'll put this in the chat also. So $50 off, you know, for any future Rocket Dollar accounts with my personal code here. And just for reference, also, outside of just the headache of, you know, all the fine print, um, I'd say the likes of Rocket Dollar more fintech friendly shops, probably about a half or so of the price than the legacy players out there. So with that, um, to Mark and friends, I, you know, I greatly appreciate your time. Uh, very open to talk offline. LinkedIn's a great place. Uh, please reference that. You know, we kind of met here. Uh, you see my email also. I think rocketollar.com slash learn is another great resource. Um, particularly for folks raising money, uh, if you did want to have a deeper chat, uh, you know, let's book a time and uh and we'll go from there.
SPEAKER_00Yeah, absolutely. And and Dan, so anything else you want to just can you give us, if there's anything else, uh it sounds like we have all your contact information and your calls to action. And so uh, you know, everybody, you know, Dan's been a great resource, and Rocket Dollar has been fantastic in simplifying the process. Uh, you know, if you have any follow-up questions, and also for some of you guys, there's there was a lot to take in. So I'm going to send the link to the recording of this uh to anyone who has registered for the event. It's also going to be on YouTube and Facebook, as I said earlier, and on my website. Uh, reach out to Dan. You have his info. Uh, or you, you know, if you if you miss the slides, you can always replay him through those resources. And uh, Dan, any closing words? Any anything else? Any final calls to actions?
SPEAKER_01No, and sorry I didn't do this at the beginning, but if folks don't mind chiming on, how many folks are you know an investor, and how many folks are on the other side raising money? And how many are both?
SPEAKER_00We have uh so we got Phil is raising money right now, okay. There we go. Um raising money.
SPEAKER_01Awesome. Hey, wow, this is awesome.
SPEAKER_00Great subject.
SPEAKER_01So um, yeah, so you wanted to talk touch on that and raising money and yeah, I mean if if I want to respect folks' time, but briefly, I mean, uh I said the I I don't lead. I mean, once again, you want to make sure it's right for your investors, but uh, because I said what you're gonna find out is on a regular basis, it may not be uh them. It might be, you know, I talked to one guy and it's gonna be his brother. You know, it really it is real, you know, folks in their mid-50s, a few kids in college, but was corporate for a while, really wants to get into these sort of deals. Uh, so you know, that's fantastic. And uh yeah, Philip, I don't know if I'm playing both sides of the coin. I I do the same. You know, from a fundraising standpoint, um what I I mean, you know, we're in a social media world, even if you're kind of a Luddite like me. Uh I I video is is exponentially more impactful than just words these days. Uh I was uh, you know, I was boots, it was 100 plus degrees, I was boots on the ground in Arlington uh and Fort Worth last week. I I think it's pretty powerful when you can talk to say, listen, student housing is not animal house. It's actually something, frankly, that wow, I'd say most folks in their 30s making six figures would love to live in. Why? Well, because this is a private school. And then you look at something in Arlington, why is this a great property? Well, it's kind of like old school brick, it's very secure and it has all the amenities inside, so you have the safety and walkability. I just told you that, but when you see it of a video and I'm walking by, pretty powerful. Um, I have three people today say, I like your CRE post. And I'll be honest with you, I probably I'm posting only 10 or 20 percent of the time versus when I was full time with Rocket Dollar, you know, when we first launched the product. And I'm still getting people saying, Thank you for the education, thank you. And um, you know, I I I always try to give something to say, hey, you know, this is kind of real deal. This is what you look at. Here's some real numbers, and um you know, for me that's really helpful for folks that raising money. If you know your niche is uh, you know, self-storage, I would post so much about that. I mean, a lot of stuff when you're close to the fire, it's gonna be in your head, even if it's like, hey, I'm doing workforce housing in Baltimore, uh, you know, then you know, share that niche. I mean, that's amazing. So, like I said with myself, I had the benefit at Rocket Dollar to talk to 500 sponsors um across the country. And I invested in probably 10 or 15, and I became most comfortable with BV Capital. Why is that? Everybody I felt had a very like very strong superpower. For example, one of the partners uh literally has banked the whole state, took Washington Mutual, you know, back in the 2000s. So I'm dating myself, but in a good way here from sub billion to eight billion, particularly in industrial. I never heard of industrial. I didn't realize, you know, when we think of retail multifamily, it's one, three, five miles. When you talk industrial, it's an eight-hour circle, um, super powerful uh from that standpoint. And guess what? Texas isn't going anywhere, Mexico's not going anywhere. You know, the port's coming in. Uh, you know, industrial in Texas, you know, when you look at risk return profiles, this is as close to risk-free as you get out there. Uh, you know, so we partnered with who we felt, uh it's a company called Archway, the top industrial shop. Flip side, uh, you know, if you think that we talked about the 60-40, the barbell strategy. So what's the sizzle? What replaces the stock? It's having the relationships to buy something off market where you're buying at, you know, quote unquote X cents at the dollar, or you know, you're buying at a six cap, and even though it's trading at a five cap rate. Um, and this is what we do, you know. And uh a final thing, I feel our offerings it works for the individuals, it works for registered investment advisors, and it also works for the family offices and pensions. Because once again, you're either buying at such a favorable cap rate, or you have something where say, hey, it's a 15-year fund or 15-year triple net lease versus a five-year fund. And when you look at that and know these are mission critical properties and really know what mission critical means, um, you're gonna get investment advisors really excited, and that moves a lot of money. So uh I know that's a bunch, and I'm hopping a little bit here, but if any of that you know resonates, uh please reach out offline, especially my fellow fundraisers. I'm happy to, you know, kind of fully share of where I go, what I learn. And um, there are some masterminds out there that I think have a reasonable sort of buy-in. Um, you know, and I can I'm happy to share kind of my experiences with them, maybe based on where you are in your journey. So um I'll even pop in my cell phone here. So, you know, if somebody gets real excited, you can uh call me on the drive home. So uh it's all good.
SPEAKER_00Yeah, and and another thing is um, you know, so Dan is not only has he, you know, been part of Rocket Dollar, but he's also raising capital and communicating with retirement account investors. So he's a great resource to look at things on both sides or you know, potentially if you're looking for a place to park some of your capital into uh a self-direct from a self-directed account into real estate, he's a great person to potentially form a relationship with. Also, if you're looking to partner with people, consider uh the requirements and the compliance issues regarding having passive investors into your real estate investments because now these are regular, we got to think about the SEC regulations and whether they are sophisticated or accredited investors. You need a good attorney to write this off and do it the right way. So you want to talk to your CPA and or your and definitely get an attorney involved so you're maintaining compliance and protecting yourself and the investor. Uh, like my best that's my best resource as an attorney has been Dugan Kelly on this topic, who works with lots of syndicators.
SPEAKER_01Yeah, and Mark, that's that's sage advice. Um, and for once again, my my friends raising money. First of all, Dugan's best in breed. So, you know, Mark's relationships are top notch. Second, um, you're gonna find folks that, and I'll pick on kind of my engineering friends that uh, you know, they're too humble because they're like, oh, well, you know, I only made 190, and you know, my spouse only made 145. I'm like, guys, that totals to 300. Or, you know, oh, I don't want to tell you I'd have a consulting thing on this, I'm you know, solopreneur also on the side. I'm like, that gets you over a certain amount. Um, so real quick on a credit that you know, 200, 300 if you file jointly and a million dollars net worth outside your primary asset. Once again, we're talking IRAs here. Your IRA can be included in that million dollars. So for folks raising money, and frankly, if you're talking to W-2 buddies and you guys have been around 20 years, they're probably gonna have a very sizable IRA. And you know, as the walk of life plays out, they're gonna be inheriting a lot of money. A million is frankly not as huge of a number, particularly if you're on the coast and big cities, you know, combined. So once again, and I think it's great that I would use Mark as a resource. Uh, Mark, you can share more of me about just the process and the form, but it's awesome that this natural relationship is here. So I'd say, you know, for you know, Philip, Teresa, Brian, you guys are many steps ahead of other folks just for the comfort level as you're bringing newer credited investors, you know, to the window.
SPEAKER_00Fantastic. I think that so uh so you got our information. I hope you guys got a lot of value on this conversation. There are so many different ways we can look at it, as you can tell. Uh does anybody, you know, so I'm unless you have any other questions, we're about to wrap this up. Thanks a lot for your time, everyone. And to all you guys listening to the recorded version, I hope you found a lot of value in this video. Lots of great opportunities to consider here. Uh, you have my information. If you want to do a discovery session, usually that is free, and we will talk about, we can assess uh what opportunities are available uh if you were to implement a tax strategy. Just email me if you're interested. Uh love to talk to you, or just if you want to just keep in touch, you have our information. Thanks again for your time. I think now is a good time to wrap it up. And to everybody, I'm about to end the recording. Thanks for tuning in, and we'll keep in touch.