Self Directed Investor Talk: Alternative Asset Investing through Self-Directed IRA's & Solo 401k's

It was big in 2016 – and will be even bigger in 2017.  What is “IT”? CROWDFUNDING, of course… and I’ve brought in a special expert to discuss this whole CROWDFUNDING PHENOMEMON with us… and his opinion is… shall I say… something DIFFERENT than the conventional wisdom.  I think you’ll love it.  I’m Bryan Ellis.  This is Episode #235.

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Hello, SDI Nation!  Welcome to the broadcast of record for savvy self-directed investors like you where each day, we help you DECLARE INDEPENDENCE FROM WALL STREET.

Today is show #235 so that means you can get the links, resources and transcripts from today’s show at SDITalk.com/235.  And if you’d like to participate in the discussion about this with us online, you can do that on Twitter or Facebook where you can find us at – of course – SDITalk.

Today I’m sharing a special interview with you I did with Sal Buscemi of Dandrew Partners LLC, a New York-based commercial real estate advisory boutique firm that helps institutional investors place capital into distressed commercial real estate assets.

He’s also a Goldman Sachs alum, having spent 5 years there as an investment banker, so he’s got the big-capital perspective of Wall Street, but the heart of a real estate man.  I’ve known Sal a long time, and while I don’t agree with everything he says.  I absolutely, positively respect his opinion.  I bet you will, too.  But first –

Remember this, folks:  Here at the start of 2017 if you need $50,000 to $250,000 for an investment or your business, there’s one place to go to get that capital at ZERO INTEREST – yes, you heard that correctly – is to visit SDITalk.com/credit.  There you’ll find my friends Ari Page & Mike Banks from Fund & Grow.  Those guys work some special magic to make it possible to acquire long-term zero-percent funding for anybody with good credit… so if that’s you and you need a bit of capital to push 2017 in the direction you need, reach out to them now at SDITalk.com/credit.

Bryan Ellis:                       Sal, this whole thing called crowdfunding, there’s a lot of interest out there in this topic but from my vantage point, there’s a lot of confusion as well. It looks like from my humble but incredibly prescient viewpoint, this looks like amateur hour to me. How is crowdfunding playing out from your point of view?

Sal Buscemi:                    I’ll tell you, I think it’s going to be one of the largest vehicles for wealth destruction in this country. I’ll tell you why, because you’re getting less sophisticated people coming in with the bare minimum investment of $500, $1000. They’re able to get involved in deals but are they really getting good deals and what’s really the driver behind this? Are there interests … In the industry we say, “How are my interests aligned with the operator?”

Bryan Ellis:                       Right.

Sal Buscemi:                    The operator is the person who’s pulling the money, who’s going to buy the investment. You always want to ask the hard questions and a lot of people are just not sophisticated enough going into this knowing the hard questions to ask.

Bryan Ellis:                       Yeah, it looks like basically what’s happened is that crowdfunding’s made it to some degree possible for inexperienced investors to build pools of capital where before they would have at least had to go through maybe the Regulation D type offering at the very least. Now it’s much, much simpler for everybody so the bar’s lower and the dirt is thicker.

Sal Buscemi:                    Yeah, there’s a lower bar to entry, right? The cheapest capital support is the biggest losers. Now you’re going to have people who don’t understand the asset class, they think they’re buying one thing, are they really buying it and really, what is the operator’s experience? My saying in the industry is, “Good operators turn bad deals into good ones and bad operators turn good deals into bad deals.” That’s just the way it goes and I think when the … Especially now where we are in the market right now Bryan, things are capped out. What I mean by that, prices are at the top and interest rates have changed and nobody was doing anything until we saw a change in the election. Now we see interest rates creeping a little bit, it has to do with China, they’re dumping some of the treasuries, I don’t think it’s going to last but that’s going to affect a lot of …

                                         I don’t think somebody getting in it at a price today are going to be able to exit at the same price or more later on if that makes sense. It is no different than buying a house in Phoenix in 2007. It only was really worth at one point $200,000 but people are bidding as high as 350, 400,000 dollars. The only reason why they were able to do that is because there was so much cash readily available through subprime. The same thing is happening here and now you have one guy who decided to wake up one day, he’s tired of his corporate job, he’s a software engineer and he’s going to decide to buy an apartment complex two states away or two time zones away and I’m speaking from experience here. He has no one on the ground to manage it and he’s treating it like it’s a bond or a stock and it’s absolutely not.

Bryan Ellis:                       Right. Sal let’s back up just a little bit, what is crowdfunding?

Sal Buscemi:                    Crowdfunding in its simplest form is you’re able to crowdsource money from people using something that is passed during 2013 during the Obama administration called the JOBS Act, I think it’s title four if I recall correctly. It allows people to go out and raise smaller increments of money whereas before they would have to do something more meaningful using a Reg D. It would be more cost prohibitive, there would be a higher barrier to entry. Now, those barriers to entry have been removed as a direct result of the Jumpstart Our Businesses Act or I think that’s what the acronym is, the JOBS Act. That has made people able to go out there and crowdsource things as it relates to in simplest forms maybe new widgets, maybe new technology but it’s moving over to real estate and that’s really where the scary part is for me as someone who has grown up and been professionally trained as a classical distressed real estate investor his whole life.

My friends, there's a whole lot more of that interview you'll get right here on tomorrow's show.  If you'd like to hear it right now, you're welcomed to do that by going over to SDITalk.com/235 where you'll find the transcript and entire interview if you'd like to get it right now.

In the mean time, invest wisely today and live well forever... throughout ALL of this great new year of 2017!

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In this special Expert Series edition of Self Directed Investor Talk, Daren Blomquist, Vice President of the respected data firm RealtyTrac gives his insights on the suitability of today’s market for house flipping, along with his predictions for what 2017 holds for America’s real estate markets.  I’m Bryan Ellis, your host and I’d like to welcome you to a very special edition of Self Directed Investor Talk.  Please send your questions and comments to us by email at feedback at sditalk.com or on Facebook or Twitter at SDITalk.  With that…

Bryan Ellis:                       Mr. Blomquist, how are you today, sir?

Daren Blomquist:            I'm doing very well. How are you?

Bryan Ellis:                       Very well. Thanks for joining us. Look, I've always or have long been a fan of Realtytrac and what is now ATTOM Data Solutions, and particularly your quarterly home flipping report, because that's one of the businesses that we're in. I had a look at the Q3 2016 report, and it's interesting because it looks like overall, the information's positive, 45,000 flips last quarter with a pretty substantial gross ROI. Some of the other data, such as slowing volume of flips compared to both last quarter and compared to a year ago. At least a significantly the declining percentage of flipped funded with cash. Those things raise my eyebrows as someone who looks at this market. What do you make of those things?

Daren Blomquist:            Yeah, I think the decline in flips is ... Right now, I would consider that more of an aberration that's interrupting a long-term trend upward home flipping, and the market is very favorable to home flippers right now. Now it's becoming tougher because prices are getting so high and flippers are jumping into the market, it's becoming more competitive.

Bryan Ellis:                       Right.

Daren Blomquist:            Still, you have low inventory that's very favorable to flippers. They're providing inventory that the new home builders are not.

Bryan Ellis:                       Right.

Daren Blomquist:            Then you have rising home prices, which is a double-edged sword. It's tough, it makes it tougher for flippers to find discounts on the front end, but it makes it a lot easier for them to sell. It gives them a cushion to some on the back end. All that to say, I think actually we saw a decrease in overall sales in the third quarter, and I think it's partially a reaction to uncertainty around the election.

Bryan Ellis:                       Sure.

Daren Blomquist:            I think we'll see that aberration pick back up in terms of the number of home flips. Now I think we'll see it shift, which we're already starting to see to the flippers are shifting to different markets where they can actually find, still find discounts on properties on the front end, or there's more availability of discounts. A lot of times in the form of foreclosures.

Bryan Ellis:                       Right.

Daren Blomquist:            In terms of the cash piece of it, there's fewer. It's still 68% of flippers are using cash to buy, which compared to the last housing boom, we were seeing about 35% of flippers using cash to buy.

Bryan Ellis:                       Wow.

Daren Blomquist:            Much more of them were using lending. We are seeing that number at an eight-year low, which means there is more availability of funding for flippers rather than having to use their own money in terms of crowdfunding. In terms of other alternative financing sources. That actually is one of the reasons I think we'll see flipping continue is that's going to enable more flippers to jump in. That may not always be a good thing, but it is going to push the market higher I think in 2017.

Bryan Ellis:                       In your analysis or if you guys track this, who buys those flipper properties? Owner occupants or other investors?

Daren Blomquist:            I don't have the exact percentage on that, but the majority is owner occupants. When we look at that ... We look at who's buying basically as a proxy, who's buying the flip, not the flipper buying with cash, but if the person they're, or entity they're selling to, is buying with cash, and we do see a fairly substantial number selling to other cash buyers, which for us is a good proxy likely for investors.

Bryan Ellis:                       Right.

Daren Blomquist:            The majority is owner occupants, but I think you look at markets like Memphis and Cleveland, and places like that where we're seeing quite a bit of home flipping, and a lot of-

Bryan Ellis:                       There's a lot of investor to investor stuff there.

Daren Blomquist:            Those are going to other investors who then are taking those properties and turning them into rentals. They don't want to deal with the rehab portion of it.

Bryan Ellis:                       Yeah. I have wondered if there are any homeowners left in Memphis at all.

Daren Blomquist:            Yeah, it's the top market for flipping and it's also one of the top markets when we look at single family rentals for purchasing those.

Bryan Ellis:                       Right. You recently had an article called "Blue State Buyers Swing to Red State Rentals," which I thought was interesting. It was a discussion of the whole turnkey rental property phenomenon that's going on, which really reflects exactly what's going on with the clients of the Self Directed Investor Society, namely that California investors, and in our case, particularly those in the Bay Area, are finding it really interesting to buy real estate in the Southeast. What's your take on that? Why is that happening?

Daren Blomquist:            Yeah. I think that investors realize that real estate is one of the best places to still get a return in this low interest rate environment. The stock market is good, it has been good, but they want to diversify and they say real estate is a great way to do that.

Bryan Ellis:                       Yeah.

Daren Blomquist:            Investing in their backyard is really a non-starter when you're ... You just can't cash flow property.

Bryan Ellis:                       Right.

Daren Blomquist:            Flipping a ... These are the type of investors who probably don't want to get into flipping. They're professionals, they have a day job. They're going to those markets where you can't cash flow and there's still a lot of lower priced properties available that can be purchased and cash flow very well. I would just mention we're not just seeing it in the South. Southeast is a big center of it, but we actually broke it down for Orange ... I know you look a lot at the Bay Area, but we looked at Orange County, California, which is where we are, and where the top counties were, Orange County buyers are purchasing rental properties basically. Not surprisingly, the first few counties were right in the immediate vicinity, but in the Inland Empire where prices are cheaper. Then after that, you have of course Las Vegas, Phoenix are near the top. Then you have places like Memphis. Memphis was in the top 10.

Bryan Ellis:                       Yeah.

Daren Blomquist:            Shelby County there. Of places that Orange County buyers are purchasing rental properties, you had Wayne County, Michigan [inaudible 00:06:14], which is not really Southeast. That's Detroit. Was one, was in the top 10 for places that Orange County buyers are purchasing rental property. That was-

Bryan Ellis:                       That's interesting.

Daren Blomquist:            That was an eye opener and certainly we see ... Anecdotally, we hear a lot about that as well.

Bryan Ellis:                       Yeah. Daren, in February or so this year, you had an article out that had some housing predictions, some forecast for 2016. I wanted to take a minute to hold your feet to the fire, so to speak. See how things actually worked out in practice. Let's look at the predictions here.

Daren Blomquist:            Great.

Bryan Ellis:                       I'm not sure if these are your predictions or the predictions of the other experts that were cited in the article, but the key ideas here were, number one, the prediction for growing rental rights and moderate home price growth, which should force more people, or motivate more people to look to buy in 2016. The second-

Daren Blomquist:            We did. Yeah. I'll just stop you.

Bryan Ellis:                       Yeah.

Daren Blomquist:            We did see that pretty much play out. The home price growth was stronger than I expected. It's about five percent for the year.

Bryan Ellis:                       Okay.

Daren Blomquist:            It was actually a little bit stronger, but it is moderate and we were at double digit price growth. Now we've come down. Rental rates continue to be strong.

Bryan Ellis:                       Right. That was a definite check mark. The second prediction was mortgage rates will rise, which should help boost the number of buyers out there. It looks like that one was a little less accurate I guess. Started to rise at the end of the year.

Daren Blomquist:            Right, yeah. Get that right if you count to the last couple months of the year, but it really didn't rise ... A year ago ... It feels like Groundhog Day. A year ago, the fed was raising rates in December and predicting that they would raise rates throughout 2016 and it didn't happen. Now they're doing the same thing again. We'll see if that happens in 2017. I do. Really we're off the mark there, but I think more ... The fed has limited control really over mortgage rates.

Bryan Ellis:                       Yeah.

Daren Blomquist:            I think what we saw following the election is more going to be a driver of rising interest rates than the fed necessarily, but I do expect to see that going into 2017.

Bryan Ellis:                       Yeah, I think we're all surprised that rates didn't go higher than they did. Then that third prediction was inventory's expected to remain a problem in 2016. That certainly looks to continue to be true.

Daren Blomquist:            Yeah. It's a major theme, and I think most people view it as a challenge in this housing market, but it's really ... It's a good problem to have because it's keeping ... It's a safety net for this market, even if we are seeing some bubbles forming, overheated markets. Those markets typically do not have an oversupply of inventory, which means even if you see demand fall, there's a safety net of low inventory.

Bryan Ellis:                       Yeah.

Daren Blomquist:            To keep those markets chugging along.

Bryan Ellis:                       Yeah, exactly. Now this leads me to the predictable final question. You did pretty well in predicting 2016. You definitely got two right and the one was flat. What does 2017 look like for you? What do you expect to happen?

Daren Blomquist:            I'll go out on a limb and do, as I mentioned, we will see interest rates rise, and I think we're seeing that already at the end of this year.

Bryan Ellis:                       Yeah.

Daren Blomquist:            I think we'll see more substantive rising of rates in 2017 that will, and then that in turn is an important factor that will start to slow down some of these overheated markets in terms of home sales and home prices particularly. Again, we're at about five percent appreciation this year. I think we'll see it go down to two to three percent appreciation. This is a nationwide number of course.

Bryan Ellis:                       Yeah, sure.

Daren Blomquist:            There's a lot of variance from market to market, but I think in general, we'll see cooling appreciation. We will see I think a surge in home sales early in the year. We already saw it a little bit in November as people try to beat out the higher interest rates. That's going to be an overriding factor.

Bryan Ellis:                       Sure.

Daren Blomquist:            Another prediction that's a little more localized in nature is I think ... I'm very bullish on the Rust Belt.

Bryan Ellis:                       Are you?

Daren Blomquist:            They were a big part of the election, and in determining the election, and there's been a lot of talk by now president-elect Trump to invest in infrastructure, and there seems to be a lot of bipartisan support for that. The cities that need the most infrastructure improvement tend to be in the Ruse Belt.

Bryan Ellis:                       Yeah. They're going to feel the love.

Daren Blomquist:            Places like Flint, Michigan, that have aging water systems and what not. We see that investment happening, that's going to really help housing in those markets and improve the overall value of the housing market.

Bryan Ellis:                       Awesome. Daren, thank you so much for your time. I am very grateful to you, and hopefully we'll get to have you back on and maybe dig a little bit deeper into the single family rental market, because I know that's an area of expertise for you and ATTOM Data Solutions. Thank you so much for being here.

Daren Blomquist:            Yes. I'm glad to be here and happy to come back at some point in the future.

Bryan Ellis:         Awesome. Thank you, sir.

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Ruth Heffron did everything right – she built up an IRA big enough for her retirement, AND enough to leave her daughter nearly half a million dollars.  But the US Supreme Court has different ideas, and it’s bad for Ruth, her daughter, and YOU.  I’m Bryan Ellis.  This is Episode #234.

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Hello, SDI Nation!  Welcome back to Self Directed Investor Talk… the show where I, your humble host, daily throw myself into the lion’s den in proclamation of the Gospel of Self Directed Investing… namely, that you MUST DECLARE INDEPENDENCE FROM WALL STREET and take control of your own capital!

Before we do that… can I just remind you guys about Fund & Grow?  They’re the guys that are just EXTRAORDINARY when it comes to build cash credit for investors, businesspeople and others.  For anyone with decent credit, their specialty is establishing $50,000 to $250,000 or more of ZERO INTEREST credit for you to use on anything you want.  Totally unsecured, too… It’s really amazing.  A great alternative to hard money loans, for example.  Check them out if you need capital.  I endorse them very proudly.  You can reach them at SDITalk.com/credit. 

Ok, let’s jump in.  To participate in the conversation, reach out to us on Facebook or Twitter, or by email at feedback at sditalk.com.

Ruth Heffron must be spinning in her grave.  She opened an IRA and build it up such that, even after using it herself, there was still nearly half a million dollars in there when she passed away.  Mrs. Heffron did what may of us would do in that case… she designated her only child Heidi Heffron-Clark as her beneficiary.

For a while, things were fine.  Heidi was able to withdraw a bit of that money over time, such that she drew it down to a value of about $300,000.  But then something unfortunate happened.  Heidi found herself facing some financial difficulty, and chose to declare bankruptcy.

Now if you’re wondering why Heidi would declare bankruptcy since she had an IRA worth $300,000… well, you’re on the right track.  When one declares bankruptcy, their assets are basically up for grabs by creditors… and so that $300,000 IRA she inherited from dear old mom would seem to be on the chopping block.

Alas… Heidi – or more likely, her bankruptcy attorney – knew that there’s some very special statutory protection for retirement accounts.  With only a few exceptions, IRA’s and other retirement accounts are basically outside of the reach of creditors, even in the case of bankruptcy.  It’s one of the things that makes that type of account truly special… something like a fortress for your financial assets.

So, armed with this assurance, Heidi Heffron-Clark filed for bankruptcy.  But then something wholly unexpected happened:  Her creditors fought back.  They claimed that those protections against creditors available to retirement accounts are available ONLY to retirement accounts… and since Heidi had INHERITED her IRA, and had been using it to pay her life expenses, then that account was arguably NOT a retirement account, and thus no longer entitled to the protections provided by law.

And, lo and behold, when those creditors made these arguments before the US bankruptcy court, the court agreed, and Heidi had lost her $300,000 IRA.  Then the appeals came… she won some, she lost some… you know the drill, until one day, Heidi and the case of her $300,000 IRA land before the U.S. Supreme Court.

And when the judgment on that case was handed down, something unusual happened:  There was a unanimous decision AGAINST Heidi’s claim.  Indeed, the U.S. Supreme Court had decided that by virtue of having INHERITED the account, Heidi’s IRA was no longer actually a retirement account, but was, essentially, a normal financial account, available to satisfy the demands of creditors like any other asset.

Let’s put aside for a moment whether we agree with that decision.  The fact that it was unanimous – which is a rarity at the Supreme Court – suggests that the law is settled, whether we like it or not.

But that raises the question:  How can you make sure that your beneficiaries ACTUALLY receive the money you’re leaving for them, since this IRA protection is no longer available?

And respectfully, my friends, don’t do yourself the disservice of thinking this isn’t relevant for your loved ones.  You might have adult children who are extremely well established financially, and who you can’t imagine would ever declare bankruptcy.  But the issue is broader than that.  I submit for your consideration two additional considerations:

Scenario #1 happens when someone – anyone – is attacked by an unexpected lawsuit.  It could be a car accident that you didn’t intend to cause, but that is nevertheless your fault.  It could be some unforeseen business issue.  No matter… if your beneficiary is targeted by and the victim of a money judgement, then whatever you leave to them in an IRA will be at risk.

And scenario #2 is the all-too-common instance of divorce.  You leave your IRA to your child, and after you’ve passed on, there’s an ugly divorce… and your IRA will be fair game in that proceeding, even though you left it to your CHILD or GRANDCHILD or whoever… and not to their spouse.  That’s just the way it usually works out.

So this is a real issue for everyone… not just those of you who have future beneficiaries who are currently showing signs of financial distress.

So, what do you do?

Well, step 1 – mandatory for everybody – is talk to a competent attorney about this issue.  I, of course, recommend THE GREAT ONE, Tim Berry who you can reach at SDITalk.com/tim.  But no matter who you choose, you MUST work with an attorney who has very specific expertise in BOTH retirement plan law AND in asset protection law, because this issue represents a collision of those two complex areas.

The solution for MOST people will be one or both of these strategies:

#1:  Put a TRUST between your IRA and your future beneficiaries.  I know that Tim Berry is particularly fond of using something called a Charitable Remainder Trust for even greater tax benefits.  Maybe I’ll have him on the show soon to discuss that.

And strategy #2 is to structure the assets INSIDE of your IRA in some sort of asset-protected manner.  This is actually a rather ninja-level strategy, but the basic idea is to structure the assets inside of your IRA such that they are very valuable to you, but practically worthless to anyone else.  There again, I think I’ll have Tim come on and talk with me someday soon about this.

There is one bit of good news though.  Since this Supreme Court ruling came down, several STATES have begun implementing specific protections for inherited IRA’s.  That’s not as good as protection by federal law, but it’s certainly a formidable barrier between the IRA you’ve worked so hard to build and the creditors who would like to take it from you or your loved ones.

That’s all I’ve got for you, except this:  Please, tell your friends about this show… Several ways to listen… on radio via the Wall Street Business Network, on iTunes or of course at SDITalk.com.  I’d appreciate it so much!  Any my friends, invest wisely today, and live well forever!

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Is there ever a time when it is NOT wise to invest your IRA money into a great real estate deal?  You may be surprised to hear it, but the answer is, without a doubt, YES!  I’ll tell you when that’s true… and give you an extraordinary alternative.  I’m Bryan Ellis.  This is Episode #233

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Hello, Self Directed Investor Nation!  Welcome to another exciting edition of Self Directed Investor Radio, the show by savvy investors, for savvy investors where we help you to DECLARE INDEPENDENCE from Wall Street… and help you to build wealth for generations to come.

This is is Episode #233 and you know what that means… you can find the transcript and show notes for today’s episode at SDIRadio.com/233.  And if you have questions or comments, you can post them right there at SDIRadio.com/233 or you can reach out on either Twitter or Facebook at SDITalk.

My friends, a few months ago, a highly esteemed publication – none other than TheStreet.com, a major news source for the whole Wall Street crowd – asked me to begin writing for them, as there’s a very clear appetite on the part of many, many “conventional” investors to look at ways to invest their capital OUTSIDE of the monster known as Wall Street.

The very first article I wrote for them – called “Avoid These 5 Traps When Buying Real Estate In Self-Directed IRA’s” – was promptly awarded an editor’s choice award, which is of course, gratifying, so thank you to the editorial team at TheStreet.com.  But that article and the 5 points within it point to a reality that is somewhat foreign to many investors like me and you who, completely reasonably, see the self-directed IRA and/or 401k as the best thing since sliced bread.  That reality is that:  Sometimes, it’s a good idea to AVOID buying real estate in your self-directed IRA.

Here’s why:

First, it’s actually possible you’ll pay MORE in taxes by doing so.  If you’re using a Roth IRA… no problem, your tax issue is solved.  But if you’re using a traditional account, remember that when you make withdrawals, those withdrawals are taxed at INCOME TAX rates, which are frequently MUCH HIGHER than the capital gains rates you’d likely pay if you did the same deal OUTSIDE of your IRA.  This is a complex issue, and merits some professional advice.

The Second complication with buying real estate in your self-directed IRA is related to LEVERAGE… also known as getting a loan to buy property.  You absolutely CAN do that within a self-directed IRA.  But it’s complicated, and it does subject your IRA to present-day taxes based on a variety of factors we won’t dive into here.  Getting a loan to buy real estate OUTSIDE of an IRA is, by comparison, a rather simple, cut-and-dry sort of thing, so remember that if leverage is key to your strategy.

The Third issue is that if you buy real estate in an IRA, you no longer get the benefit of other great real estate-specific tax advantages that render the IRA less meaningful, such as depreciation and the almighty 1031 exchange.  Those two benefits alone make it worth seriously considering doing a real estate deal OUTSIDE of an IRA rather than inside of it if you have that option.

The fourth big issue for buying real estate in a self-directed IRA is connected with the notion of SWEAT EQUITY… the active investor’s best friend.  You know what I’m talking about… sweat equity is the increase in property value one receives by doing work on the property yourself rather than hiring out to expensive contractors.  But with a self-directed IRA, that issue is challenging because it’s very plausible and very reasonable for the IRS to view the work you’re doing on your IRA’s houses without being paid as a contribution to the plan beyond what’s allowed, and that can cause a big heap of trouble for you should Uncle Sam decide to have a closer look at your IRA.

And the fifth big issue for buying real estate inside of a self directed IRA is this:  You’ve got the freedom to hang yourself.  What I mean is that you are, almost completely, unrestricted in your moment-to-moment activities with the assets of your self-directed IRA.  That’s a good thing… freedom is wonderful, but it can be dangerous, too.  Because if you run askew of the IRS’ rules for how your self-directed IRA can be managed – and those rules are both LEGION and sometimes indecipherable – then the IRS could pin your account with the dreaded “prohibited transaction” label which… in one way of looking at it… probably means that somewhere between half and all of the value of your IRA just went out the door to taxes, penalties and interest because the IRS is NOT PLAYING AROUND on this prohibited transactions thing.

That all sounds rather ominous, doesn’t’ it?  Well… it is.  But only if you’re not well prepared for what you’re attempting to do.

You see, it IS both legal and frequently wise to buy real estate in an IRA.  But there is a generalization that I’d like to recommend to you, which is:

For any given real estate transaction, if you have the option whether to perform he deal EITHER inside OR outside the IRA, my recommendation is that you default to skipping the IRA and do the deal with non-retirement funds.  You’ve heard 5 reasons why so far, but here’s the really big one:

Real estate is, as a legal, statutory matter, extremely tax-favored by the law… much more so than practically any other asset class… certainly more so than stocks.  What I mean is that, even without the benefit of a self-directed IRA, the tax laws are so kind to real estate investors who plan properly that you may actually end up doing BETTER for yourself financially by focusing on the two tax goldmines that exist for real estate investors, which are DEPRECIATION and the 1031 exchange.

Depreciation is a tax strategy that allows many investors to take more in tax deductions than they’ve actually spent.  So it’s a great income tax shelter if you qualify for it.

The 1031 exchange is another marvel of real estate tax law that, in a nutshell, allows you to buy a property, let it blow up in value and become very profitable, and then sell very profitably and pay no tax… as long as you immediately re-invest your proceeds of sale into some other real estate deal.  It’s a way to get the same type of tax deferral that traditional IRA’s offer… but without the threat of prohibited transactions or other risks that are inherent to self-directed IRAs.

But I have one other parting bit of advice for you as well:  Don’t avoid a great real estate deal just because your IRA is the only place where you can fund the deal.  Absolutely not.  I’m NOT telling you that you should NEVER buy real estate in your IRA… only that you should be biased against doing so if you have other alternatives.

And, of course, you need to speak with your own tax counsel about this.  The truth is I know MANY, MANY people who have very successfully navigated the requirements of owning real estate in their retirement accounts… and are very glad they did so.

And, by the way… if you are looking for a GREAT real estate investment… I’ve got some thoughts for you on that, too!  Just text the word SENDBOOK to 44222 to get a free copy of our latest ebook called the SDI Guide To Real Estate Wealth for Busy Investors where you’ll learn how to build a high-quality portfolio of turnkey rental properties that build your cash flow – and your wealth – without your day-to-day involvement… just like it should be for busy investors like you!  Again, just go ahead and text SENDBOOK with no spaces, just one word, to 44222 right now.

Folks, I hope you had a very merry Christmas or are enjoying a happy Hanukkah.  The coming year is going to be an exciting, exciting time for all of us, and for now, I leave you with this bit of advice… invest wisely today, and live well forever!

Hosted on Acast. See acast.com/privacy for more information.

Donald Trump was elected president, and you’ve heard nothing about it from yours truly, the voice of the Self Directed Investor Revolution.  So what does Trumps ascendancy to the Presidency mean for you and me?  And what’s the one thing he’s saying right now that concern me FAR MORE than anything else the press is focused on?  I’ll tell you right now.  I’m Bryan Ellis.  This is Episode #231.

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Hello, SDI Nation!  Welcome to the broadcast of record for savvy self-directed investors like you, where each day we help you DECLARE INDEPENDENCE FROM WALL STREET and build wealth for multiple generations – your generation, and your loved ones, too!

My friends, there’s been a lot going on here at SDI Southern Command in Atlanta, Georgia.  Far from being silent, I’ve been speaking out more than ever before… but in a new, different way than any of you area accustomed to.

You see, the overwhelming success of this very podcast brought to me the opportunity to get the word out to an even broader group of people on conventional radio, and since early December, I – along with my lovely and incredibly brilliant wife Carole – have been featured each day at 3pm Pacific on KDOW 1220 in San Francisco.

So, for any of you in or near the Bay Area, please do join us each day at 3pm!  And of course for everyone else, you can get access to that hour-long show by looking up KDOW 1220 on either iHeartRadio or TuneIn radio.

I’ll get to the primary content of today’s episode in just a moment, which is nothing less than my evaluation of Donald Trump’s stunning victory in early November, but as far as this show going onto traditional radio is concerned, I’ll go ahead and answer a 3 questions I know I’ll get.

First, YES, it’s a tremendous honor to have received this opportunity and we’re having a great time doing the show.  It’s a bit different from this show, as it’s a full hour long and features daily news commentary along with expert interviews, as compared to this show which features only my monologue in episode.  So it’s different, while still maintaining the same viewpoint along with a healthy dose of monologues like you all seem to enjoy.  It was humbling… I was provided with a list of about one dozen major markets across the United States, and chose to start up right there in the Bay Area for a variety of strategic reasons, not the least of which is that so many of you already live in that area.

Second, my broadcasting partner has, after a mere 3 weeks of our being on the air, made it very clear to me that he thinks we have the right stuff to go much broader, and to target additional major markets such as Dallas, Seattle, Boston, Atlanta and Miami… and there are others.  So the possibility that we’ll be on far more major markets in the near future is very high.

And Third… this is the weird one… I don’t yet know how I feel about doing that show.  Honestly, it’s a LOT of work… I mean, a LOT of work.  I haven’t really hit my groove yet as far as being able to do it efficiently.  So while I’m very encouraged by the response I’m receiving so far – which includes a near-record number of downloads of this podcast last week, even though I’ve not produced a new episode in over a month – I’m not yet sure whether this “radio thing” is something we’re going to do long-term.  It’s a wait-and-see, trial basis kind of thing.

But what’s not “trial basis” is my return to this show, and regularly producing great content for you, just as I have in the past.  Great content, such as what I have for you right now in the form of my assessment and predictions for Donald Trump’s presidency and it’s effect on you and me as investors.  That’s right, folks… this is a political topic, but the focus is all about your investments.

So… President-Elect Donald Trump.  I’ve got to say… overall, I’m really, really impressed with the way he’s handled his transition.

Yes, it’s true that he’s selected a swatch of very, very wealthy business people to run practically every department of the federal government.  And yes, I know that’s really not be done before.  But I’ve got to tell you:  I like it.  I like it a lot.  You might criticize them for a lack of government experience, but organizational leadership experience they have in spades.  Take, for example, Rex Tillerson, When Tillerson transitions from his post as CEO of Exxon to his new role as Secretary of State, he’ll actually be taking over an organization – the US State Department – that has only about HALF as many employees as Tillerson had an Exxon.  Furthermore, the guy is reputed to have a personal, first-name basis with dozens of major leaders across the world, because, let’s face it – Exxon is so big that other governments have long had to treat it with respect.  So Tillerson won’t be new to that type of role.

I could go on, as there are really interesting things to say about all of Trump’s selections so far.  Now far be it from me to suggest that they’re all perfect choices.  They’re not.  But overall, I’m really impressed.  Trump is methodically building an organizational dream team.

Will it work?  I bet it will.  I just bet it will.

Of course, Trump has been making waves with his negotiation of the deal to keep all of those jobs from Carrier corporation here in the U.S.  In the grand scheme of things, that’s really only about 1,000 jobs… but we’ve never seen the current occupant of 1600 Pennsylvania Avenue do anything of the sort at all, so it was a special thing.

My overall predication is that Trump is going to continue to face really aggressive opposition from the media, just as during the election.  He’s directly minimizing their relevance by using Twitter so much, and I suspect that will continue.

I also suspect he’ll end up nominating Senator Ted Cruz to the U.S. Supreme Court, and that will set off a firestorm, which will likely ultimately be successful.

And he seems really serious about actually cutting taxes and doing many of the things he said on the campaign trail.  I expected to hear him softening on a lot of his core positions by now, but not only has that not happened, but his selections for his cabinet suggest he’s as determined as ever.

My one big concern is this:  Even though Trump is saying the right things in terms of getting the economy going – namely that we have to have lower taxes, better trade policy and a stronger dollar – the other thing he’s saying concerns me greatly, and that is that he wants to spend money… a LOT of money… in some sort of new stimulus for the purpose of infrastructure repair.

Look, one can make the argument that that is necessary.  But it makes me nervous… government spending is such a dangerous, dangerous thing.  It makes me really, really nervous.

But I’ve got to tell you… overall… I’m excited. I think there’s actual REAL POTENTIAL that the U.S. economy could be truly strong, truly great again… and that’s good for all of us.

My friends… thank you for listening and remember:

Invest wisely today, and live well forever!

Hosted on Acast. See acast.com/privacy for more information.

The RISE Act Proposal is the biggest threat to self-directed IRA investors we’ve ever faced. Two episodes ago, I told you how Mitt Romney’s massive $100 million IRA prompted the creation of the RISE act, which I explained – in all of its terrifying detail – in the last episode.  Today, you see how this is ABSOLUTELY, POISTIVELY connected to the Trump vs Clinton choice we’ve all got to make on election day, November 8.  The next 7 minutes are overwhelmingly important to the future of EVERY SINGLE self-directed IRA investor.  I’m Bryan Ellis. This is Episode #231.

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Hello SDI Nation, welcome to the podcast of record where we help you to declare independence from Wall Street and build a financial legacy for future generations.  Today I’ll show you how the future of the overwhelmingly NEGATIVE RISE act proposal is INTIMATELY connected to the Trump vs Clinton choice.  Remember – right now RISE is just a proposal, but not law.  Today you learn how to make sure it never, ever becomes law.

Just a heads up… in today’s show, you’re going to hear me refer to the show notes page a few times.  That page is SDIRadio.com/231 and it’s got some really important, profoundly relevant things for you, including the links to Part 1 and Part 2 of this 3-part series.  So when you hear me refer to today’s show notes page, know that I’m referring to SDIRadio.com/231.

But first – folks, you’ve doubtlessly heard of my friends over at Fund & Grow.  These guys are absolute magicians when it comes to helping their clients acquire zero-interest lines of credit… lines of credit that are essentially just signature loans, not even secured by real estate or anything else.  Think about that, folks… what if you could finance that real estate deal using a zero percent interest loan?  It’s a game changer, and that’s exactly what my friends Ari and Mike over at Fund & Grow do.  I say they’re magicians, but in truth, they just follow a great, great process that’s very reliable.  For people with decent credit or better, it’s totally achievable to reach $250,000 in zero-interest credit… and my friends, they’ve actually generated over $2.9 million worth of that type of credit for your fellow listeners just this year alone.  So my recommendation?  Check them out, and do it now… at SDIRadio.com/credit.  Again, that’s SDIRadio.com/credit.  You’ll be glad you did.

So in episode #229 I showed you how Mitt Romney built a $100 Million IRA… and how the disclosure of that account may have, in part, cost him the presidency.  And in Episode #230 I showed you how the negative publicity that generated led to the proposal of the RISE Act by socialist Senator Ron Wyden, democrat from Oregon… an act that, frankly, if it passes into law, it will be a catastrophe of cataclysmic proportions for self-directed IRA owners.

So what do we do about this?  We here at Self Directed Investor Radio, and our parent organization the Self Directed Investor Society, are here as YOUR ADVOCATE against government encroachment of your rights.

Frankly, I’ll have a lot more to say after the coming week to guide you about how to respond to this threat, but in the coming week, you have a HUGE opportunity to DIRECTLY impact this particular issue… to cut it off at the knees before it ever takes root.

How?  The way to do that is to WISELY cast your vote, both at the Presidential and at the Congressional levels.

Here’s are 3 things we know for sure:

• First, If Republicans maintain control of both houses of Congress, the RISE act proposal will never see the light of day. As it currently stands, this proposal is little more than political theater to stoke the passions of Wyden’s bleeding-heart, entitlement-oriented constituency.  But if Democrats take both – or even EITHER house of congress – on Tuesday of this coming week, then this proposal stands a very, very real chance of introduction and passage
• The second thing we know is that If Hillary Clinton is elected President, you can bet your bottom dollar she’ll be totally on board to support this proposal. Hillary is no friend of your wallet.  She’s already proposed MASSIVE increases in income taxes and estate taxes, and mark my words:  Your IRA is a juicy target to her.  She famously made – and never, ever retracted – this statement: “Many of you are well off enough that the tax cuts may have helped you.  We’re saying that for America to get back on track, we’re probably going to cut that short and not give it to you.  We’re going to take things away from you on behalf of the common good.”  Think you aren’t wealthy enough to be in her crosshairs?  Think again:  You don’t need to be in the top 1%.  More like the top 20%... and it only takes a family income of $111,000 per year.  Not a high standard, folks.
• The last thing we know is that If Donald Trump is elected, we don’t have any overt indication of where he’d fall on this issue. To my way of thinking, this is Trump’s greatest weakness:  We don’t have profound clarity on his positions because he’s not a politician with a long paper trail.  But what we do have is an overt proclivity in his published position papers IN FAVOR OF capitalism, small business and tax reduction.  That, in and of itself, is a huge positive.  Trump makes me nervous… nervous in a lot of ways.  But he’s definitely SAYING the right things in terms of showing respect for you and your wealth.

So folks, if you’re voting with an eye towards the safety and security of your self-directed IRA… not just now, but for years into the future, then here’s what I recommend you do on election day, Tuesday, November 8:

I recommend you vote AGAINST the philosophy of Hillary Clinton and Ron Wyden that will profoundly damage your self directed IRA by SUPPORTING Donald Trump.  And I recommend you hold your nose and have a bias in favor of Republican candidates for the US House & Senate.  I say that NOT because I’m a Republican.  I am NOT.  I find the Republican party – and the Democrat party – to be utterly negative and nothing more than a voice for the “elites” of this country who think they know how to run our lives better than we do.

But where your retirement savings are concerned – and that means the financial security of your family, and of future generations – there’s simply no plausible argument to suggest that Hillary Clinton or any of Senator Wyden’s fellow democrats have any interest in doing anything with your money other than taking more of it away.  The RISE Act is prima facie evidence of that.  That proposal actually

To vote for anyone who thinks like Wyden or Hillary is to vote against yourself, and to vote against the security of your IRA and retirement savings.

And that, my friends, is the cold, hard truth of how you should vote on Tuesday if your retirement account matters to you.  Hold your nose, and vote for Trump and the Republicans.  Set aside petty concerns and vote to protect your family’s financial security – and your financial legacy – by supporting Trump and the Republicans.

My friends… invest wisely today… and live well forever.

Hosted on Acast. See acast.com/privacy for more information.

In our last exciting exciting episode, you discovered how the specter of Mitt Romney’s 2012 disclosure of his $100 Million IRA still looms large over politics in 2016 with the announcement of the RISE Act Proposal, a legislative objective designed to totally cut off self-directed IRA’s at the knees.  Today, you learn exactly what the RISE Act is and why it’s the worst news for self-directed IRA investors… maybe ever.  And… oh yeah… you’ll learn about the CLEAR CONNECTION to the Trump vs Clinton presidential battle. Buckle your seatbelts, folks.  This one is going to be ugly.  This is episode #230.

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Hello SDI Nation, welcome to the podcast of record where we help you to declare independence from Wall Street and build a financial legacy for future generations.  Today’s show notes page is at SDIRadio.com/230… write that down, because you’ll need it to reference some of the things I’ll tell you about today, that will simply leave you aghast.

But first, folks, I owe it to you to make sure you know about my friends over at Fund & Grow.  These guys are absolute magicians when it comes to helping their clients acquire zero-interest lines of credit… lines of credit that are essentially just signature loans, not even secured by real estate or anything else.  Think about that, folks… what if you could finance that real estate deal using a zero percent interest loan?  It’s a game changer, and that’s exactly what my friends Ari and Mike over at Fund & Grow do.  I say they’re magicians, but in truth, they just follow a great, great process that’s very reliable.  For people with decent credit or better, it’s totally achievable to reach $250,000 in zero-interest credit… and my friends, they’ve actually generated over $2.9 million worth of that type of credit for your fellow listeners just this year alone.  So my recommendation?  Check them out, and do it now… at SDIRadio.com/credit.  Again, that’s SDIRadio.com/credit.  You’ll be glad you did.

So, yesterday in Episode 229, I gave you my presumption about exactly how it is that Mitt Romney was able to build an IRA worth $100 million, totally legally.  You also learned how Romney’s success and the class envy-based reasoning of Senator Ron Wyden, Democrat from Oregon, resulted in the recent proposal of the deceptively named RISE Act – Retirement Income and Savings Enhancement Act of 2016.

So what is it?  And what’s the connection to the Trum p vs Clinton battle?  Let’s dig in now.

The RISE Act Proposal is the work of Ron Wyden, democrat Senator from Oregon.  It offers two mildly positive features:

• A very slight increase in the age where you must begin to take required minimum distributions, and
• Removal of the maximum age for Traditional IRA contributions

Those are good things, but they’re incredibly minor in the grand scheme of things.  But there are 3 features of this proposal – “features” is the wrong word, they’re more like ASSAULTS – and they’re truly horrible… a direct attack against you as an IRA user… these assaults are designed to make sure that the IRA is less valuable in the future than it is now… and one of those assaults is designed specifically to cut the legs out from under savvy users of self-directed IRA’s who invest in real estate, private businesses or any other non-exchange-listed assets.  Let’s take a look:

Assault #1 targets owners of Traditional IRAs whether self-directed or otherwise.  If Senator Wyden’s proposal becomes law, you’ll no longer have the option of converting your Traditional to a Roth.  The Roth account is in the cross hairs of the government because the Roth actually ELIMINATES tax liability rather than deferring it like the traditional IRA.  As such, Wyden proposes to eliminate your right to reduce your tax liability by converting from a al to a Roth.

Assault #2 targets owners of Roth IRA’s, whether self-directed or otherwise.  If that’s you, you’ll now be subject to required minimum distributions – the dreaded RMD.  If you’re not familiar, RMD is a formula for determining how much money MUST be withdrawn from your IRA, even if you don’t want to withdraw it.  Previously, only Traditional IRA’s were subject to this, but not Roths.  Why is Senator Wyden expanding it to Roth IRA’s?  Well, here again, Wyden and his ilk HATE the Roth IRA because it ELIMINATES taxes rather than just deferring them.  Furthermore, the Roth IRA may be the single greatest estate planning tool ever created, because if you leave a Roth IRA to a beneficiary, that beneficiary can take that money out totally tax free at any time… but they can also continue to build that account using the funds you left to them, and the profits from THEIR transactions are also entirely tax free, and also entirely available for withdrawal at any time they want.  In effect, the owner of a well-managed inherited Roth IRA could live their life ENTIRELY income-tax free.  The inherited Roth IRA is astoundingly powerful, and Wyden is doing what he can to make sure that not only do YOU get less benefit from your Roth IRA, but he’s also trying to make sure your Roth IRA is distributed during your lifetime so that your beneficiaries can’t continue benefiting from its income tax elimination features.

Which leads us to Assault #3… and this is the one that really cuts the legs out from under self-directed IRA owners specifically, whether using a Traditional or Roth account.  This one is actually two assaults in one.  First, the assets of self-directed IRA’s will now be required to be formally valued via a “qualified appraisal”.  The meaning of “qualified appraisal” is not defined, meaning that it’s left to the IRS to decide.  At the very least, I suspect this will translate into a requirement for formal independent appraisals.  That, in itself, is a huge, huge issue for some investors.  The cost of appraising certain types of commercial real estate or privately held businesses or other non-exchange-traded assets can EASILY become prohibitive, running to the 10’s of thousands of dollars per asset, creating an astounding burden on the self-directed IRA owner.

But that’s just the tip of the iceberg.  The REAL REASON that valuations are required under Senator Wyden’s proposal is that the RISE act explicitly prohibits you from buying any asset for less than its market value.  Yes, you heard that correctly.  If Senator Wyden gets his way, you’ll no longer even have the option of buying real estate at a discount.  You’ll no longer be able to buy discounted notes or mortgages or any other asset at favorable prices.  You’ll no longer have the ability to do the one thing that real estate investors always aim to do:  To profit on the front end by BUYING RIGHT.  That will, literally, be illegal.

And that’s not the whole story.  There are even MORE assaults against you as an IRA investor.  It’s simply stunning how thoroughly anti-capitalist the RISE proposal really is.  Folks, the tiny, tiny, infinitesimally small benefits offered by the RISE Act proposal are absolutely worthless compared with the tremendous, tremendous damage this act will do to you as a self-directed IRA user, whether Roth or Traditional.

In short, this is PROFOUNDLY opposed to your interests, and it’s opposed to the interests of your beneficiaries, if building a financial legacy matters to you.  There’s just no doubt about it.

So what’s the connection to the Presidential election that rages on right now?  My friends, I’m sorry… I’ve run out of time again for this episode.  But in the interest of making sure you get the information in time, you can hear part 3 – the FINAL part of this URGENT topic right now by going over to SDIRadio.com/231.  

My friends, invest wisely today, and live well forever!

Hosted on Acast. See acast.com/privacy for more information.

You’re a self-directed investor.  Do you think that there’s no difference between a vote for Trump and a vote for Hillary?  Think again, my friends.  A new legislative proposal is out that directly attacks self-directed IRA’s specifically, and this leads to the CLEAR and RATIONAL conclusion that the difference between the candidates is huge.  I’m Bryan Ellis. I’ll spell it out in CRYSTAL CLEAR LANGUAGE RIGHT NOW in Episode #229.

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Hello SDI Nation, welcome to the podcast of record where we help you to declare independence from Wall Street and build a financial legacy for future generations.  Today I’ll do that by helping you to understand what’s at stake in the upcoming presidential election that’s directly relevant to YOU as a self-directed investor.  Just a heads up… in today’s show, you’re going to hear me refer to today’s show notes page a few times.  That page is SDIRadio.com/229 and it’s got some really important, profoundly relevant things for you.  So when you hear me refer to today’s show notes page, know that I’m referring to SDIRadio.com/229.

First – folks, you’ve doubtlessly heard of my friends over at Fund & Grow.  These guys are absolute magicians when it comes to helping their clients acquire zero-interest lines of credit… lines of credit that are essentially just signature loans, not even secured by real estate or anything else.  Think about that, folks… what if you could finance that real estate deal using a zero percent interest loan?  It’s a game changer, and that’s exactly what my friends Ari and Mike over at Fund & Grow do.  I say they’re magicians, but in truth, they just follow a great, great process that’s very reliable.  For people with decent credit or better, it’s totally achievable to reach $250,000 in zero-interest credit… and my friends, they’ve actually generated over $2.9 million worth of that type of credit for your fellow listeners just this year alone.  So my recommendation?  Check them out, and do it now… at SDIRadio.com/credit.  Again, that’s SDIRadio.com/credit.  You’ll be glad you did.

My friends, have you heard of the poorly named Retirement Improvements and Savings Enhancements Act of 2016 – aka the RISE Act proposal?  Probably not… but as a self-directed investor, it’s HUGELY relevant to you, because it’s an all-out attempt to gut your rights to use a self-directed IRA in the ways that work best.  I’ll tell you specifically how in just a minute, but you really need to understand the background.

During the presidential battle of 2012, Mitt Romney made the shocking revelation that he owned an IRA worth as much as $102 MILLION.  When I heard that, I thought WOW!  I want to be like him when I grow up!  But when certain people in Congress heard about it, all they could see was “THE RICH GET RICHER” and “THAT’S UNFAIR” and “he couldn’t do that legally”.

All of these things are, of course, just the typical babblings of intellectually dishonest politicians who – let’s be honest – don’t give one little damn self directed IRA’s or about you.  What they do care about is appearing to their constituents – at least half of whom are below the average national income – that “I’m on your side and I’ll punish those rich guys who are getting rich at your expense.”

It’s absolute garbage… it’s simple-minded reasoning for simple-minded constituents who have been trained by government schools, the media and our self-obsessed culture that success should be attacked rather than emulated.  If you agree with that – that success should be attacked rather than emulated – then you should stop listening to this show right now, because I’m not interested in having you as a listener.

But if you understand, you agree that success is laudable, good and praiseworthy, and you agree that success leaves clues that the rest of us can follow, then listen on as I explain how we got to the threat of the RISE act that we face today.

One particularly class envy-oriented senator, Ron Wyden, Democrat from Oregon, appears to have really gone bankers over the fact that some people had become very successful using their IRA’s… so much so that he demanded that the Government Accountability Office perform a study to find out how big the “problem” was, and how it was that anyone could ever build that much wealth.

That last part is a legit question.  Most IRA’s have a max contribution of 6 grand per year or so, and even if you got a long-term profit rate of 8% per year, it would still take more than 90 years to get to $100 million.  Clearly, Romney isn’t 90 years old, so how’d he do it?

Well, Romney didn’t break any rules.  We don’t really know what he did to accumulate such an impressive sum, but here’s my guess... and that’s all it is is a guess.  Remember that Romney was became rich as a venture capitalist specializing in business turnarounds and restructuring.  In other words, it was his JOB to find companies that were headed towards or already in bankruptcy – and thus essentially worthless – and to turn those companies around in such a way as to make a big profit.  And I suspect, after Romney had been doing this for a while and was very good at predicting which companies could be successfully turned around before it happened, he started to acquire shares of these companies in his self-directed IRA BERFORE he turned them around while they were available at very, very low prices.  You know, a company in bankruptcy is not expensive to buy.  So maybe he’s able to acquire thousands or millions of shares of a company for a few pennies per share.  He then works his magic as a turnaround expert and brings that company back from the brink of bankruptcy and causes those shares he bought for a few pennies to be worth a dollar, or 5 dollars or $100 dollars or more.

And I suspect he did this many times.  And with that, it suddenly becomes very, very plausible to accumulate as much money as Romney did.  Again, that’s just my guess… only Romney really knows… but I bet it’s pretty close to this.

Well, like I said, this revelation drove Senator Wyden insane with class envy. He commissions the GAO study I mentioned to you a moment ago, and what was revealed is that this issue of “mega IRA’s” like Romney’s isn’t a particularly big issue.  There’s a total of about 9,000 IRA’s in the entirety of America with a balance of greater than $5 million, most of whom are formerly high-earning retirees.  There are more than 9,000 people within 5 miles of my house.  That’s a tiny number.  So clearly, there’s nothing to see here in terms of a real problem.  Frankly in my mind, it wouldn’t be a problem if there were a million huge IRA’s… but the way I think is very different from the way Senator Wyden thinks.

Which leads us to the RISE act proposal… and its connection to the Trump vs Clinton battle.  But unfortunately, we’re out of time- past time actually – in this episode.  So let’s do this:  The next episode with the Trump/Clinton connection is up and available RIGHT NOW at SDIRadio.com/230.  Again, that’s SDIRadio.com/230… so please, go there right now and check it out, because nothing could be more TIME SENSITIVE or RELEVANT to the safety and security of your self-directed IRA.

My friends, invest wisely today, and live well forever!

Hosted on Acast. See acast.com/privacy for more information.

My friends, get ready to learn something about a huge limit on your IRA that is TOTALLY OPPOSITE what you’ve been told by everybody else.  This is a big, big deal and a huge risk factor for your self-directed IRA.  I’m Bryan Ellis.  I’ve got the details for you now in Episode 228.

Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you, where we help you take control of your investments and your legacy, and today, I’ll do that by helping you to protect your self-directed IRA in the face of transactions that appear totally kosher, but could be like a nuclear detonation in your retirement savings.

Let’s start the show with a bribe.  Hehehehe  Here goes:

I want you to SUBSCRIBE to this show on iTunes.  That tells the iTunes people that we’re producing good stuff, and in turn they send us more listeners.  So here’s my proposal:  If I teach you something today you didn’t know before, which is DIRECTLY RELEVANT TO THE SAFETY OF YOUR INVESTMENTS either now or in the future, then will you SUBSCRIBE to this show for free when we’re done with this show in a few minutes? 

That’s all I ask.  Deal?  Thanks so much!

Awesome, let’s get to it.  This episode was spurred by an article I saw over at MarketWatch, where a debate broke out concerning whether a self-directed IRA can buy assets from or sell them to a COUSIN of the IRA owner.  The broadly accepted advice on this – spelled out on the IRS website – is that the only family members expressly disqualified are ancestors – like parents and grandparents – along with your descendants and their spouses.  This seems to indicate that other family members – like siblings, aunts, uncles, cousins, etc. are not disqualified and therefore are fair game as counterparties for your self-directed IRA.

So is it kosher for your IRA to do business with a cousin, or other non-lineal family members?  Folks, that’s the WRONG QUESTION entirely, and looking at it that way can DESTROY your IRA.  Let’s look at that right after I tell you how to get 0% interest lines of credit of $50,000 to $250,000 by working with my friends at Fund & Grow.  A quick story – I was recently at the Georgia Real Estate Investors Association meeting, and another member came up to me and said “it works!”  I was really happy to hear this, but I didn’t know this person or what they were talking about… and that’s when they told me they’d listened in to the webinar I did with Fund & Grow… and as a result, this local investor was able to achieve an eye-popping amount of zero-interest credit!  It was really cool because they just approached me randomly… I wasn’t a speaker at that meeting or anything of the sort.  But this guy and his wife sought me out specifically to tell me about their GREAT results of getting 0% interest funding through my friends Ari & Mike at Fund & Grow.   Folks, if you need funding for any of your deals, do yourself a favor and reach out to them.  You can find them at SDIRadio.com/credit, and when you go there, you’ll learn how to have an extraordinary competitive advantage.  I believe in them.  Check them out right now at SDIRadio.com/credit.

So… can your IRA do business with a cousin or aunt or uncle?  Or is that even the right question?  Well, to be blunt, it’s absolutely the WRONG question.

Here’s the thing:  Yes, the IRS does stipulate a limited set of family members who are expressly disqualified from doing business with you through your IRA.  So, for example, if your parents or grandparents or even children owned a piece of real estate, and you wanted to buy it into your IRA, you can’t do it.  That’s prohibited very clearly.  But as far as family is concerned, the answer changes if the owner of the property isn’t your direct ancestors or descendants, but rather a sibling or cousin.  Those, at first glance, seem to be ok… and that’s the broadly accepted opinion.

Alas, there’s more… FAR MORE… than meets the eye, and it’s all legally uncharted waters.  And I’m not giving legal advice here, though I am giving you exceptionally good information, hehehehehe.

In moving forward, keep this little tidbit in mind:  The IRS lists 10 groups of people who are DISQUALIFIED from doing business with your IRA.  That list is linked in the resources for today’s show.  Number 6 on that list is “family members”… and we know from other sections that this only means lineal ancestors and descendants and their spouses.

Ok, that’s great.  Siblings, cousins, aunts, uncles… none of them are listed as disqualified.  So it’s cool to buy from them, right?

Ummm…. Not so fast, sparky.

Family members only make the list at #6.  What’s #1?  That honor goes to anyone who can be described as a FIDUCIARY of the plan.  So what, right?  The custodian is the fiduciary, right?  Yep, that’s right.  But my trusted legal advisor Tim Berry – the Great One, we call him – tells me that Section 4975 of the tax code defines Fiduciary as anyone who has discretionary authority over a retirement plan.

Do YOU have discretionary authority over your retirement plan?  Ummm…. Yes, you do.  Remember, it’s *SELF* directed.

But that only prohibits the IRA from doing business directly with you, right?  You’d think so, but… no.

According to Tim, the examples in that regulation make it arguable that the disqualification extends not just to the fiduciary, but to anyone in whom the fiduciary has an “interest” that could sway the judgment of the fiduciary.  Notice the use of the vague word “interest”.  It doesn’t say bloodline.  It doesn’t say family relationship.  It doesn’t even say “personal relationship”.  It just says “interest”.

Is it arguable that you have an interest in your siblings, your aunts, your uncles, your nieces or nephews?  Sure it is.

So the bad news is this:  The law says YOU are a fiduciary of your plan, and that you – and anyone in whom you’ve got an interest – are disqualified from doing business with your IRA.  That’s a sobering thought.

The good news:  Tim says he’s never seen this authority asserted by the IRS, so maybe their operating definition is narrower than what appears to be stipulated in law.

So there you have it:  Chances are stratospherically high that 7 minutes ago, you thought your IRA could safely do business with siblings or cousins.  You probably also didn’t know you are technically a fiduciary of your own self-directed IRA… and because of that troublesome designation, anyone in whom you have an interest is prohibited from engaging in transactions with your IRA.

Hey – I’m sorry the news isn’t a little better.  My advice:  Before allowing your IRA to do business with ANYONE with whom you’ve ever had a relationship of ANY sort… personal or business… get advice from the Great One, Tim Berry, or some other attorney who REALLY knows self-directed IRA’s.

Tim’s contact information is linked in the resource page for today’s show at SDIRadio.com/228.

So there you have it… did I deliver on my promise to you at the beginning of the show… did I teach you something about self-directed IRA’s you didn’t know which could end up being DIRECTLY RELEVANT TO THE SAFETY YOUR ACCOUNT?  If so, *PLEASE* stop by iTunes and subscribe to this show.  It’s easy and free, and there are directions available at SDIRadio.com/howto.  That’s SDIRadio.com/howto.

Thanks for joining me today – we’ve got a lot more for you coming up as we continue helping you take control of your investments AND your legacy.

My friends, invest wisely today, and live well forever!

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When a candidate for President of the United States is so sick she’s got to leave the 9/11 memorial service halfway through, and then is unable to get into her vehicle under her own power, that’s a person who is clearly unwell.  Regardless of political stripes, we wish Hillary Clinton a speedy recovery.  But her illnesses – and the fact they’ve been so carefully hidden – begs the question:  What about YOU?  Have you prepared your spouse, your kids or whoever will inherit your portfolio all they need to know to understand and succeed with your assets?  And by the way – the potential of severe illness for Hillary has ramifications for your money, too.  Let’s take a hard look right now.  I’m Bryan Ellis.  This is Episode #227.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you where we help you TAKE and KEEP control of your investments.

In the last episode, we talked about Bob, who recently passed away and left his 3 children with an IRA containing real estate.  It was a very valuable IRA, but Bob didn’t plan for the fact that that real estate would have to be divided when he passed away, and the predictable result was bad:  Serious legal strife among his 3 kids.

But the potential for conflict over dividing assets in an inherited IRA is only one challenge when beneficiaries inherit a self-directed retirement account.  The other challenge is brought into sharper focus by recent news of Hillary Clinton’s health challenges.  Now before we proceed, note that this isn’t a political analysis, but a financial one.

We know that Mrs. Clinton is suffering from a severe case of pneumonia and that she’s had a collection of other serious head injuries and illnesses in the past.  There’s also pervasive discussion in the medical community of the likelihood that she suffers from ongoing neurological problems.

Whether those things are true or a product of the political circus we’re all witnessing right now, one thing is true:  Mrs. Clinton – just like you and me – will die someday.  Now unlike me, and most of you as well, Mrs. Clinton and her husband are extremely wealthy, reportedly having a net worth in excess of $100 million.  I don’t know how or whether the Clintons invest their money, but this issue affects them just like it does me and you.

What’s the issue?  Preparing the next generation to handle the money and the assets.

If, God forbid, Hillary and Bill were hit by a train, would Chelsea know how to handle what they leave behind to her?

More importantly, will YOUR spouse or your children know how to handle the assets you leave behind?

It’s important for you to grasp this one central concept:  Your knowledge doesn’t transfer automatically.  Your motivations and plans don’t transfer automatically.  Not even your IRA or 401k transfer automatically.  In each case, you’ve got to DO SOMETHING to make sure that your assets – and the ability to properly manage them – ends up in the possession of your loved ones…

….and nobody can make that happen except for YOU.

Here are some of the things you need to make sure to do to prepare your beneficiaries for a successful succession into your financial assets, and as I go through this list, ask yourself:  Do your beneficiaries have this information for YOUR assets?  Here we go:

1. A clear, detailed list of assets, and the accounts in which they’re held.
2. A clear, detailed status report for your assets, including valuation (and how to update the valuation), any debt, any recurring or expected expenses, most likely unplanned expenses and any risk factors you see
3. Thorough financial records. Think in terms of preparation for an IRS audit, because that could happen after you’re gone, and you won’t be available to lend your knowledge
4. A detailed explanation of assets. For example:  What is the asset, exactly?  Is it a stock or bond or real estate or precious metal or… what exactly is it?  How can it be profitable?  How can it lose money?  Why did you choose to invest in it to begin with?  What were you hoping to accomplish?
5. A target for your assets. If you have specific financial benchmarks you’re hoping to achieve with your assets, after which you want to liquidate or take other action, detail these targets and intentions.
6. List of resources & relationships needed to manage your assets. For example:  If you are leaving real estate behind, you should make sure that you’ve documented the names and contact information of your property managers, insurance companies, lenders and any other service providers.  Document the names of the law firms, accounting firms and other professional services used on the property.  The goal here is for truly simple, seamless transition.
7. List of responsibilities of the assets. Again using a real estate example:  Each year, property taxes must be paid.  Insurance must be purchased.  The property must be rented to generate cash flow.  These are all examples, and there are more.  The point is this:  Don’t assume that your beneficiaries know any of this.  In fact, assume that they know NONE of it.  And don’t fail to document EVERYTHING, even if those responsibilities are presently handled by a management company or other professionals, because at the end of the day, those responsibilities are still responsibilities of the owner.

Give yourself a report card on succession planning for your portfolio right now.  Forget about whether end-of-life issues are a top-of-mind consideration for you presently, since none of us are guaranteed another day.  This is a here-and-now kind of thing… if your beneficiaries are actually important to you, that is.  And OF COURSE they are.

This is important stuff, folks.  If you didn’t get all of those, check out the list, which I’ve left for you in the description area below.

Think seriously about this stuff my friends.  Just think of all of the STUPID mistakes you can make on your first real estate deal… and that’s when you’re excited about being a real estate investor.  Odds are, your beneficiaries may not have your level of enthusiasm about it, so they could be even more prone to make costly mistakes, so do them a favor:  Make it easy by leaving CLEAR documentation.  There’s no other way!

And folks, before I go, I want to mention something to you:  I’ve found a GREAT way to fund 100% of the cost of most deals – particularly those in the $50,000 to $250,000 range… and the cost to you is no more than the equivalent of a very few points up front and ZERO INTEREST on the loan.  That’s right… ZERO interest!  That funding method is to work with my friends Ari and Mike at Fund & Grow.  Those guys are THE EXPERTS at establishing zero-interest lines of credit for their clients.  They don’t tell you how… they do it for you!  This is great stuff and I’ve seen it work time and time and time again, so check them out right now over at SDIRadio.com/credit.  Again, SDIRadio.com/credit.  You’ll be VERY glad you did!

That’s all for now, my friends, but I do wonder what you think about something:  What are YOU doing to prepare the next generation to inherit your assets?  What things in addition to those I’ve outlined do you think should be done?  Tell me!  Tell me now!

You can do that by leaving a comment on today’s show notes page over at SDIRadio.com/227.  And be sure to check out the first comment on that page, which is from me.  There I give you one more tip that I’m using, which is NOT in today’s episode… and then tell me what you think!  And hey… if you’ve enjoyed this show and want more, be sure to tell your friends about Self Directed Investor Radio.  And if you haven’t yet given us a 5-star rating on iTunes, I’ll be SO GRATEFUL if you’d do so.  It costs you nothing and has a HUGE impact on this show.  If you don’t know how to do that, just go to SDIRadio.com/howto where you can get full instructions.

My friends… a lot of GREAT things are in the very near future for this show.  Hang with me, and we’ll blow your mind.  And remember:

Invest wisely today, and live well forever!

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