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

Are YOU interested in investing in residential real estate?  If so, there’s one more threat to your property value that didn’t exist before a few years ago… but it’s a big one.  And you have companies like AirBNB, VRBO, HomeAway and CraigsList to thank for it.  I’m Bryan Ellis.  I’ll tell you all about it RIGHT NOW in Episode 146.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like YOU!

Imagine this:  You’ve bought a great house in Austin, Texas… or Tuscaloosa, Alabama… or San Diego, California… or Tallahassee, Florida… or Boise, Idaho… or Seattle, Washington… or any of hundreds of other cities ALL OVER America…

It’s a good house in a good neighborhood.  It’s certainly a Class A property… the type of place that would be entirely suitable for you and our own family to live in.  This isn’t a war zone.  This is a place with walkable streets and obvious local pride.

Your hopes are high.  You’re going to rent out that property, make a little cash flow, and build some equity.  You’re chasing financial freedom… and you’re doing it in a very responsible way.

Except, the phone isn’t ringing.  It seems that nobody wants to lease that house from you.  And you just can’t understand why.

That’s when you learn something interesting:  The house next door… and one several doors down… they’re listed on one of those services – like AirBNB, VRBO, HomeAway, and, of course, CraigsList – that allow home owners to rent out their houses on a short-term basis.  These services enable homeowners to begin running their own hotel service right in their own home…. The home that’s in the same neighborhood as your home.

No big deal, right?

That’s right… except for one thing:  Your property is located in a city that’s a common vacation destination… or home to a very popular college or pro football team… or it’s convenient to a huge venue where events are held on a regular basis like Madison Square Garden or the Georgia Dome or Staples Center…

And because of that proximity, those short-term rental properties that are in the same neighborhood as your property are very, VERY popular… and because of the nature of the reason why people come to town, there’s one common theme for those short-term visitor:  They’re coming to town to PARTY.

Hey, we all love a good party.  No doubt about it.  But there are limits… and when that party happens over and over… disturbing the peace in your neighborhood and making your property undesirable to renters or buyers, then that translates into a very real problem:  The potential for declining property values.

My friends, this is a real phenomenon.  The latest press coverage of it was this past Friday in the New York Times… and the coverage wasn’t kind to those renting their houses out in this way.

Clearly, AirBnB… maybe the biggest of the services who specialize in these short-term rentals… recognizes that there’s a problem. They’ve set up a neighbor hotline to call if there are problems.  But the reality is, there’s simply not much that AirBnB can do.

Austin, Texas – a very popular destination – tried to tackle the problem by stipulating that no more than 6 unrelated people could stay in any of these homes at any one time.  But that effort was thwarted by short-term renters of these properties, who had apparently been coached to tell local law enforcement that they weren’t actually “staying” in the property, just visiting… and some others claimed to be cousins or other distant relatives, thus technically satisfying the rule in a manner that couldn’t easily be disproven by police.

The net result in Austin:  Regulation has done little to stem the tide of disrespect of neighbors by users of short-term rentals.

To be certain, not every AirBnB or HomeAway client is a disrespectful partier.  Far from it.  But you know that it doesn’t take too many nights of disturbed sleep for one to lose patience with this type of behavior… and quite justifiably so.

What can we observe from this?

One thing is that you should certainly investigate the locale where you’re considering the purchase of property to see if there are any properties nearby that are offered as short-term rentals.  Particularly problematic are the properties that are represented as suitable for 8 or more people, as the larger the group of people occupying the property, the more probable it is that the group is a traveling party.  To my way of thinking, properties like these make other nearby properties less attractive than they’d otherwise be, and certainly demand additional caution.

Another thing we can conclude is that more regulation is coming to address these issues.  And reactionary regulation such as that spurred by issues like this short-term rental issue is usually poorly considered and has unintended side effects that are negative for the broader populace.  You can be sure that such regulation will ultimately restrict the rights of reasonable home owners as well, and not just those using their properties as short-term rental property.  And clearly, that’s a bad thing.

One solution that I can think of is this:  Home Owners Associations.  I’m not a huge fan of home owner’s associations, because they’re frequently controlled by people with less intellectual acuity, and even less integrity, than – well, I don’t want to insult criminals or those with mental challenges – so let’s just say they’re frequently not the most high-quality people in the world.

But this is a PERFECT place for a responsible Home Owner’s Association to take action.  Most HOA’s have quasi-governmental authority over the properties in their neighborhoods, usually including the right of foreclosure, as a response to rules violations.  And that is a very big stick to wield.  Why not use that authority – in a responsible way – to solve this problem on a neighborhood-by-neighborhood basis?

There… problem solved for a very large swath of residential properties in America.  No need for more regulations.

But bottom line, folks:  Don’t overlook this issue.  It’s an easy piece of due diligence to perform, and it could be a really big factor in the desirability, and thus the value, of that piece of property in which you’re considering investing.  Like good ole Ben Franklin told us… an ounce of prevention is worth a pound of cure!

Hey… I hope you enjoyed today’s show.  If you’d like a transcript of this show, text the word TRANSCRIPT to 33444 and I’ll be happy to send it to you, free of charge.

My friends, I’ve got some GREAT… really great… investment opportunities coming up that I’ll announce very soon – within 10 days, actually… and you’ll definitely want to know about these.  May I remind you that when I had 19 great investment properties available 2 weeks ago, they all disappeared within a few days?  And what I have to share with you within 10 days is just as spectacular as those opportunities – maybe even more so!

So be prepared.  Text the word TOPPICKS to 33444 to get on my early notification list.  The word there is TOPPICKS spelled TOPPICKS with no spaces.  Text TOPPPICKS to 33444 now!

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

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Want a way to buy very safe, very profitable real estate notes… and recoup ALL of your capital within 90 days while still receiving zero-risk profits for years to come?  I’m Bryan Ellis.  I’ll tell you how to do it RIGHT NOW in Episode 145.

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Hello SDI Nation!  Welcome to the podcast of record for savvy, self-directed investors like you!

Here’s a shout out to Julie Blackwell, who just yesterday and without any prompting, gave this show a 5-star rating on iTunes and left this review… she said:  “This is the best and most honest investment advice I’ve ever listened to.  Thanks so much!”

Julie… THANK YOU… I’m so grateful to you.  Please do me a favor, Julie… drop an email to me at [email protected].   I’ve got a special thank-you gift I’d like to give you for giving this show such a nice, unsolicited rating on iTunes.  I look forward to showing you my appreciation!

Oh… that goes for the rest of you, too…  if you’ve not already given this show a 5-star rating on iTunes, I’d be really grateful if you’d do that right away.  As soon as you’ve done so, just email me at [email protected] and I’ll send you a very nice thank-you gift too!

My friends, I’ve got a VERY powerful concept to share with you today.  You’re going to love it.  It’s a bit advanced, and I won’t mislead you:  It takes some effort.  But the payoff is astounding.  Basically, it’s a way to get high-value real estate cash flow assets at absolutely no cost.  It’s not a zero-down strategy, as you’ve got to have capital to get into the deal and hold it for a time – frequently under 3-6 months – but after that, you get most or all of your capital back, there’s no longer any risk to your capital, and you still get to enjoy a substantial flow stream for years to come.

Here’s how it works:

This strategy involves real estate NOTES, which are loans used to purchase real estate.  For example:  Imagine a guy named Bob Borrower, who buys a $100,000 house by putting up $20,000 in cash and borrowing $80,000.  The document Bob signs that specifies his repayment terms is called a “promissory note”, or “note” for short.

So here’s a really, really simplified version of this strategy.

Let’s imagine that Bob has paid his mortgage very reliably for 4 ½ years, but 6 months ago he lost his job, and in the time since, he’s only made a couple of payments.  Thus, he’s defaulting on his loan and on the path to foreclosure.

That’s a problem for his lender, because with every missed payment, the value of that loan declines, and the lender knows it.  Furthermore, foreclosures are to lenders like Kryptonite is to Superman:  Something to avoid at nearly any cost.

Thus, maybe some smart investors – say you and me, for example – we contact the lender and offer to buy that defaulted note.  If Bob had made all of his payments on time, the note would probably have a balance of around, say, $73,000.  But since the note is in arrears and headed towards foreclosure, you and I offer the lender $60,000 – and they take it.

But you and I chose to take the risk of buying that defaulting note for two really excellent reasons:

First, we analyzed the payment history and looked into Bob Borrower a bit.  We discovered he was always completely reliable prior to losing his job, and we have every reason to believe he’ll resume those payments when he finds a job again… which you and I believe to be likely.

And Secondly, even if Bob never gets another job, our money is still safe, because our $60,000 is secured by a house worth $100,000.  If nothing else, we can sell that house, get our money back, and probably even make a profit that way.  So to me and you, there’s really not a huge amount of risk.

So we buy that loan for $60,000 and we set out to work with Bob to get him back on track.  Sure enough, he gets another job, and you and I amend his loans to put the missed payments at the end and let Bob begin again with a “clean slate”.

And now, what you and I have is called a “reperforming” loan.  Before Bob missed payments, his loan was called “performing”.  When he wasn’t making payments, it was classified as “defaulted”.  Now that he’s paying on time again, it’s called “reperforming”.

But you and I are savvy investors, and we’re focused on one thing:  How quickly can we get our capital back?  So here’s how we’re going to do it:

We’re going to sell off a part of that loan – not all of it, just enough of it to collect our $60,000.  And however much of the loan is left will be the profit that you and I get to enjoy, without having a single penny of our own capital tied up in the deal!

I’ll not bore you with the calculations, but a very good estimate is that in this example, we’d have to sell off about 2/3 of the remaining payments on the loan.  In other words, somebody would give you and me $60,000 and in exchange, they’d get roughly the next 200 payments from Bob, after which you and I would receive the final 100 payments or so.

What have you and I accomplished?  Investment MAGIC is what we’ve accomplished!  Because you and I have purchased a defaulted note for $60,000… we then rehabilitated the note back into reperforming status… then we extracted ALL of our investment capital, so that we have exactly ZERO money remaining in the deal.  And 200 months into the future, we begin collecting monthly payments from Bob… for 100 whole months.  That’s right… 100 whole months of payments for which you and I have not a single penny invested or at risk.

Now if you’re thinking… that’s crazy… why would I do a deal where I don’t get a payoff for 200 months?  Then you’ve totally missed the point.

But if you get it… if the notion of doing deals where you’re able to get ALL of your capital out of the deal in a short period of time – usually 3-6 months – and in the process build yourself the equivalent of a very strong annuity that pays you for an extended period of time without effort on your part… well, if that’s what you got out of this brief description, then you understand why I LOVE this strategy so very much.

Like I said, it’s complicated.  It’s not the easiest thing in the world to find the right kind of notes for this strategy, but the payoff is worth the effort, because you can do one deal after another after another… ALL with the same capital!  What if you could take a piece of capital – say $100,000 – and do one of these deals every year for the next 15 years?  Remember – you could use the same $100,000 over and over, you’d never need to add more money to do the deal again.  But at the end of 15 years, you’ve got 15 separate “annuities” that are going to begin paying you very, very handsomely in the future… and for which you’ve got zero money invested and zero money at risk.

That, my friends, is investment BRILLIANCE, if I do say so myself.

Interested in doing some of these deals?  If you’ve got at least $50,000 of liquid capital and want to see if it’s right for you, set up a time for us to talk by going to SDIRadio.com/consultation.  I’d love to chat with you.

My friends:  Invest wisely today… and live well forever!

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What do you think when you hear the term “SECTION 8”?  For most of us, thoughts of this government assistance program that provides housing to low income people sends chills down our spines.  And that may be exactly the right response… but is it really?  Today we look at the Section 8 program from an objective point of view and learn 5 solid reasons rental property owners shouldn’t write off this program.  I’m Bryan Ellis.  This is Episode 144.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you!

I had the pleasure of spending yesterday with a brand new client named Mike from Delaware.  Mike is a brand new listener to this show, having discovered us just last week.  But he was bright enough to see the opportunity in the cash flow properties I’ve mentioned to you during the past week, and he came for a visit to make a purchase.  Mike, it was great to meet you, and I look forward to serving you well!

By the way, folks, for those of you who may be interested… all 19 of the properties I mentioned in last week’s podcast are now sold.  Every single one of them.  Thank you to those of you who responded so immediately… you folks are amazing and I’m so grateful to you.

The rest of you… don’t despair.  I’ll soon – very, very soon – have more great cash flow deals to share with you.  But the lesson here is this:  Don’t delay!  They never last long because one thing I can tell you for certain:  If you hear ME talking about a deal, you can bet on it that that deal is very, very attractive.  Thus, they go quickly.  So listen in for announcements about more in the future, or you can even get on my notification list right now by texting the word TOPPICKS to 33444.

So, Section 8.  Section 8 is a government assistance program for low-income earners.  The gist of the program is that the federal government pays some or all a low-income person’s rent for them, directly to the landlord.  In exchange, the tenant is required to respect the property.

Now, my friends, I’ve got to be honest with you:  I have a bias against giving things away for free.  People who expect things for free are generally people who expect EVERYTHING for free… the very essence of the entitlement mentality… and I can’t begin to express how thoroughly I despise people who believe their entitled to things they’ve not earned.

And I still feel that way.  No question about it.

That’s why this Section 8 thing has historically been a huge conflict for me.  On the one hand, as a landlord, you get something very, very valuable:  You essentially get a guarantee from the federal government that you will receive the rent you’re due on time, every time, each month.  And typically, the rents offered through Section 8 are very competitive, if not slightly above the market rate.  But on the other hand, my assumption has always been that if you give someone the right to live in your house for free, then what you’re asking for is serious property damage and endless property management headaches.

And you know, that definitely can happen.  It’s not difficult to find horror stories about Section 8 tenants who have damaged properties in a terrible way.  There’s no doubt about that.

But my friends, there’s more to the story, which I only recently learned.

A colleague of mine is a Section 8 guru of sorts.  He’s managed over 1,000 Section 8 properties.  He’s the kind of guy who knows the in’s and out’s of the business very well.  I was discussing my biases with him about the Section 8 program, and he looked at me a bit incredulously.  He actually said “I thought you were smarter than that”.  Hehehehehe!  And I’ll admit, he gave me a bit of a schooling.

He specified 5 big reasons he likes Section 8 properties… 5 big advantages that the section 8 property has over the non-section 8 property.

First:  Section 8 pays rental rates that are competitive, and frequently a bit above market rates.  Your gross income under Section 8 quite certainly won’t be less, and may be more, with Section 8.

Second:  That rent is absolutely guaranteed to arrive on time, every time, every month.  What this means is that payment is direct-deposited… there isn’t even any waiting for a check.  It happens automatically and totally reliably.

Third:  In my colleague’s market, the average duration of tenant he’s had is 3-4 years.  3-4 YEARS!  Think about that!  The single biggest issue for many landlords is turnover… and the 1-2 months it takes between each tenant to ready the property and remarket for the next tenant.  Imagine if you only had to replace tenants once every 3-4 years on average!  That’s huge!

Fourth:  He says that it’s downright easy to find tenants, because there’s such a massive backlog of people who have rental vouchers from Section 8, but who have nowhere to live.  That’s simply because there’s a pretty severe shortage of supply of these properties in most markets.

And the Fifth reason he likes Section 8:  Leverage over tenants.  My colleague explained it to me like this:  He said:  “Bryan, if you have a conventional tenant who doesn’t pay or who damages your property, what recourse do you have?”  Of course, I know that the answer is that I can take that tenant to court and probably get a judgment against them.  That’s when he smiled and said:  “Do you know what it’s actually worth to have a judgment?  Sure, it’s possible to collect against a bad tenant if you have a judgment, but it’s not automatic at all, and frankly it’s not worth the time it takes in many cases, after you factor in the need to hire someone to do the collection for you.  So sure, you can get a judgment, but it’s really not worth much.  But I’ve got a much bigger “STICK” to use with a Section 8 tenant… one with far more influence on them.”

Of course, he had my attention at this point.  He went on to explain that if a Section 8 tenant damages his property outside of normal wear and tear, that that tenant is required by the Section 8 program to pay for those damages.

And, of course, I immediately said there’s no way that they’ll ever pay… they have no money… that’s why they’re on Section 8 to begin with.

He laughed again and said:  “You’re right… most of them won’t pay.  But that’s because most of them won’t actually damage the property unreasonably for two reasons:  First, you have the full right to screen your tenants in Section 8 just like you do otherwise.  And Second, and far more importantly:  If a section 8 tenant damages your property and doesn’t pay, you can absolutely have them kicked out of the Section 8 program.  That means they lose their voucher and they no longer get free rent in the future.  And in my area, once they’re kicked out of the program, they can’t get back in.  It’s a big deal to lose a housing voucher.  In my area, there’s a 2-5 year WAITING LIST for people to get into this program, and once you have it, it’s like gold.  These people don’t want to lose their voucher.  And if they mistreat you or your property, losing their voucher is a very real risk.”

Well, my friends… I’ve got to admit… he changed my bias.  I still don’t think it’s smart to default to Section 8.  Here’s what I’ve concluded so far:  It probably only works well in areas where there’s a severe imbalance of supply and demand, meaning that there are far more Section 8 tenants than Section 8 properties.  That way, market dynamics work in your favor.

You shouldn’t consider this to be a full-throated endorsement of the Section 8 program.  It is not that.  But my friends, this I can say with confidence:  I had an absolute bias against Section 8, and I was wrong.  And being wrong probably cost me a whole lot of money over the years.  So I hope you can learn from my experience on this.

My friends:  Invest wisely today, and live well forever!

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You ever heard things like “only buy class A or class B rental property”?  Or what about… “stay away from Class C properties” or “never go into a war zone!” or “Section 8 tenants are a problem waiting to happen”?  Every one of these… a generalization.  But are they facts… or just marketing hype?  I’m Bryan Ellis.  As always, I’ll help you separate propaganda from truth RIGHT NOW in episode #143.

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Greetings, SDI Nation!  You people are the ABSOLUTE BEST and I’m so grateful for you!  Welcome to the podcast of record for savvy self-directed investors like you!

Folks, generalizations in real estate are almost never true.

May I give you an example?  Of course I can, it’s my show!  So here goes:

This, by the way, is a true story.  Totally true, no detail is embellished.

This past Friday, I had a meeting with a guy who was soliciting me for access to YOU, my dear friends.  You people are a very hot commodity!

Anyway, the man I was sitting with has done many hundreds of real estate deals.  He’s basically a high-volume rehabber and has built a good-sized portfolio of rental properties as well.  And what he told me was this:  “Nobody ever makes money from those Class C properties.  They’re trouble waiting to happen.”  The fact is this:  He told me that because his business is based around class B properties.  So, of course, anything that’s not class B doesn’t make sense to him.

And you know… this guy is credible.  Like I’ve said, he’s done hundreds of rehabs and has a rental portfolio that’s much larger than most people will ever have.  And if I was anybody else, I’d probably just take that advice to heart and go with it for reasons I’ll tell you in just a moment.

But that’s not the whole story.  The rest of the story is that this past Monday – 4 days before the meeting I just described to you – I had a meeting with another guy.  This guys is also a high-volume rehabber who has done a huge number of deals – over 1,000 in his case – and who has amassed an impressive portfolio of rentals.

He told me something interesting… without any prompting from me about the “classes” of properties, he said this:  “You know, I love these class C houses.  The cash flow is so much higher, and the tenants stay so much longer.  I wouldn’t do anything else.”

So what we have is ANOTHER investor with overwhelming credentials who wholly endorses class C properties and wants nothing to do with anything else.

So who’s right?

We’ll come back to that.  But first, let’s get clear about what these categories mean.  Generally speaking, properties fit into one of four categories:  Class A-C and then War Zones.

Class A is the part of town you’d be happy to live.  Nice, newer properties.  Very safe.  High credit quality.  High income.  But also generally speaking, high price and relatively low cash flow, usually in the mid single digits.  This is the domain of middle and upper-middle class folks.

Class B is a lot like Class A, only older.  These properties may have a bit of deferred maintenance and certainly don’t have all of the latest amenities.  This is where the lower-middle class tier lives.  These properties are a bit less expensive than Class A’s, and usually generate a cash return of somewhere in the mid to high single digits.

Class C is the older property that might need a fair amount of work to be habitable.  These areas are generally safe to be in, but you certainly would lock your doors at night driving through.  In these areas, the vast majority of the houses are livable but old, but there are a few houses that are abandoned and in a wholly uninhabitable state of repair.  This is where the lowest income-earners and some folks on government assistance live.  These properties are, relative to Class A, very inexpensive and the cash return on investment is pretty much always in the double digits.

And then there are the war zones.  These are the areas where it’s literally not safe to visit due to crime.  Most people don’t want to be here during the night or day.  Property is dirt cheap and returns on investment can be very, very high on a percentage basis… but unlike the other property classes, the risk you’re taking in war zones is risk to your physical safety as much as it is that you’ll experience financial loss.

And here’s what I know to be true:  Anyone who says that it’s impossible to do well in any one of these categories is someone whose opinion is either uninformed or tainted.  Particularly when you hear a turnkey rental property company suggest that it’s foolish to do deals in a class below the one where they’re selling.  What that really means is:  They can make more money selling you more expensive properties, so they want you to buy from them only.  Sad, but true.

Which one is right for you?  That’s probably the wrong question.  I suspect there’s room for a bit of all them – other than the war zone properties – in most portfolios.  Here are some good guidelines for you:

If your objective is capital preservation, Class A properties are the right place for you.  This is where foreign investors who just want a safe place for their capital tend to dump their money.

Class B is where many newer investors start because they think that the lower prices of Class B versus Class A means they’re getting a better deal.  That’s probably not true, but the returns on rents in Class B are certainly better than Class A, generally speaking.  Most Class B properties are occupied by tenants who are not on Section 8, which is a government assistance program to help low income people with rent.

Class C is where the rent to price ratio starts to go strongly in favor of the investor.  It’s easy to lose money in Class C properties if you’re new to investing in these areas, but there’s huge opportunity in Class C if you’re able to acquire very old properties for next to nothing, bring them up to Class B standards, and rent them out to the right kind of tenant.  A lot of Class C properties tend to have Section 8 – in other words, government assistance – types of tenants.  I’ll say more about that in just a moment.

And War Zones – well, I’m not going to make the mistake I just told you to watch out for by telling you that it’s impossible to make money in war zones, because it’s not.  But I don’t understand that business and prefer to avoid it.  I’ll tell you this much, though:  It’s amazing how much money can be made by the people who understand how to monetize those properties.  But that person isn’t me.

So, back to Section 8.  If you’re not familiar with it, Section 8 is a government assistance program for low income people that helps them pay their rent.  It is a national program, but it varies somewhat from market to market in terms of how it’s implemented and managed.  But the bottom line is this:  People on Section 8 are given a voucher, and that voucher is good for payment of either part or, very frequently, 100% of the rent due on a property.  The tenant gets a place to live for either nothing or very little, and the landlord gets a huge benefit, too – the rent gets paid, each and every month, without question, and it’s never, ever late.  That’s because it’s being paid directly by the local housing authority, and not by the tenant.

Now I had a HUGE, MASSIVE, OVERWHELMING bias where Section 8 was concerned.  I was absolutely convinced I was right, and I acted on this bias for many, many years.

I was dead, dead wrong.

I’ll tell you all about that bias in tomorrow’s episode of Self Directed Investor Radio, because I’ve got to tell you… it was enlightening for me to realize the error of my ways.  Had I understood some things a little better, I’d have made much better decisions.  If you think you know the truth about Section 8 – positive or negative – be sure to listen in tomorrow, because you’ll hear a perspective that’s unique and, fortunately, much more informed than in the past.

Folks, speaking of rental property… if you’d like to generate some JAW-DROPPING cash-on-cash returns from rental property investing, I can tell you HOW and WHERE to do exactly that.  Just stop by at SDIRadio.com/cashflow to learn all about it.  There’s a great webinar there that’s not going to waste your time with the THEORY of rental property investing.  Rather, I’ll tell you exactly where to buy into great cash-flowing properties, and I’ll even tell you about a few specific properties that have strong double-digit returns and that are – as of this particular moment – available for purchase!  So remember – visit SDIRadio.com/cashflow right now to check that out!

My friends, that’s all for now.  Remember:  Invest wisely today, and live well forever!

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Think Uncle Sam is protecting the money you’ve stashed away in 401k’s, IRA’s and mutual funds?  Think again, folks.  The feds are, time and time again, allowing convicted felons to handle your retirement money – even though that’s blatantly against the law.  And I’m about to tell you exactly which firms have the felons in their employ – and why Uncle Sam is so happy to break the law on behalf of Wall Street and to YOUR detriment.  That’s all RIGHT NOW  in Episode #142.

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Hello, SDI Nation – welcome to the podcast of record for savvy self-directed investors like you!

Today, I have a real doozy for you.  It’s going to disgust you… unless, of course, you like blatant collusion between Uncle Sam and Wall Street that represents REAL RISK to your money.

So, you ever heard of a QPAM?  Nah, most people haven’t.  It stands for “Qualified Professional Asset Manager”.  It’s a designation given by the feds to SOME companies that allows them to break the rules.

Yep, you heard that right.  You’ve certainly heard me discussing the notion of prohibited transactions on this show, that group of laws that limits how you can use the money in your retirement accounts… you know, things like your IRA can’t buy assets from or sell assets to most of your family members because… well because the opportunity for fraud among related-party transactions is just far too high.

And you know what?  That makes perfect sense.

What you may not know is that those rules also apply in large part to financial institutions if they’re managing retirement funds.  In other words, if, for example, you have funds placed at JP Morgan or Credit Suisse or Citigroup or Deutsche Bank or UBS or… well, you get the picture… then those institutions have to play by the rules too, and they can’t do deals with other institutions that are related to them… in other words, the companies that they own… or other companies with the same owner.  You get the idea.

Makes sense, right?  Remember:  Where YOU are concerned, the feds know that the opportunity for fraud is just far too high to allow transactions among related parties, so there are laws on the books for the exact same thing for the financial firms.

Enter the QPAM – Qualified Professional Asset Manager.  This is a convenient little designation that Uncle Sam offers to certain institutions that, fundamentally, allows them to totally ignore the related party rules.  Yes, you heard that correctly – if your financial institution wants to do business with other divisions of itself using your retirement funds… the QPAM status gives them the right to do that.

Sketchy, huh?

Oh, my friends, that’s not the half of it.

So, you’ll remember back in the 2005-2008 time frame, a little thing called the mortgage crisis happened.  Crazy things like no-doc loans and credit default swaps and mortgage backed securities were all the rage.  And there was so much money involved that the big Wall Street firms were willing to do anything – very nearly anything at all – to collect their huge pieces of the pie.  And so, many employees of those firms committed crimes… felonies, to be precise… and have since been convicted of those felonies.

And, of course, federal law prohibits financial institutions from being approved as a QPAM – that thing that lets them use your money to trade with themselves – if the firm employs convicted felons.

And that’s a big deal.  Literally billions of dollars in assets and income are at stake.

So you don’t have anything to worry about.  Uncle Sam has your back.

Yeah…. Right.

Last week, the Department of Labor – the part of the federal government that is in charge of regulations related to retirement funds – announced that it granted a bit of a reprieve to Credit Suisse.  You see, the problem Credit Suisse had is that they have felons working at their company, but they still want to have that special QPAM designation.

So what the Department of Labor say about this?  You might expect them to take the opportunity to stare down Credit Suisse firmly and say “your actions have consequences, and now you get to pay the price.”

But no, that’s not what good ole Uncle Sam did at all.  Rather, he said… “ya know, I think I’ll give you a pass, Credit Suisse.  You can keep your employees who are convicted criminals.  And you can continue to skim fees off the retirement assets of your customers by self-dealing those funds among your subsidiaries.  It’s all good, guys… business as usual!”

Of course, nobody from the Labor Department said it that clearly.  That would approach honesty, and that’s something we all know that we never get from the government.

But my friends, before you go and think that this is an exceptional case, and that the feds really do have your best interest at heart, just don’t even bother to think that.

That list of financial institutions that I read to you a bit ago – JP Morgan, Credit Suisse, Citigroup, Deutsche Bank, UBS – every single one of them have applied for waivers for their felonious activities in order to keep their QPAM status as well.

But good news – the Credit Suisse waiver grant was unusual.

Um….  Well… wait a minute.

I got that wrong.  Correction.

Apparently, the Department of Labor has granted that waiver EVERY SINGLE TIME it has ever been asked.  You heard that correctly:  The Department of Labor simply does not care if felons work for the firms managing your retirement funds.  In fact, every single time they’ve been given the explicit opportunity to turn away felons from working in proximity to your retirement funds, they’ve refused to do so.

So, let’s be clear:  Those financial firms, they’ve got some problems.  We know that.

But the bigger problem is with Uncle Sam… and the level of cronyism that’s developed between Washington DC and Wall Street in the past several years is nothing short of astounding… and disgusting.

What’s the answer?

Take control of your money yourself, people.  The time for blindly trusting Wall Street is behind us.  The time for trusting the government is behind us.  The only person you can trust to respect your capital is YOU.  You, and nobody else.

That is the essence of a Self-Directed Investor.

My friends, there’s a better way than by buying into conventional wisdom.  Heck, RIGHT NOW, I’ve got a connection with some great cash-flowing rental properties that are producing DOUBLE-DIGIT returns after ALL expenses… with reliability of income so high that nothing else compares.  If you could make double digits reliably, why would you ever risk your hard-earned capital on Wall Street?  Answer:  It simply doesn’t make any sense.  In fact, the only reason you do it now is because that’s what you’ve been conditioned to do.  How many of you have made a substantive study of investment alternatives outside of Wall Street?  A few of you have… and those of you for whom that’s true… almost none of you still invest substantially in Wall Street.

Folks, consider this clear revelation of collusion between Uncle Sam and Wall Street to be a wake-up call.  The stakes are nothing short of your retirement funds.  If you need help strategizing how to make your transition from Wall Street, I’d be delighted to help you.  Just stop by SDIRadio.com/consultation to set an appointment.

And my friends, if you’d like to learn more about some extraordinary cash-flow rental property investment opportunities… the time is now.  Stop by SDIRadio.com/cashflow and check it out.  Your jaw will drop when you see some of this stuff.

That’s all for now, my friends.  Tomorrow I’m going to share with you an important distinction I learned about evaluating cash flowing rental properties… I had a huge bias against a certain type of property, and you know what?  I was wrong… and it cost me a LOT of money.

I’ll tell you how, and why, in tomorrow’s episode of Self Directed Investor Radio.  And hey, would you do me a huge favor and tell one of your friends about this show?  I’d be so very grateful to you.

And hey… invest wisely today, and live well forever!

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The king is dead, long live the king!  The Self-Directed IRA used to be the king of the hill for self-directed investors planning for retirement, but now, it’s the Self-Directed 401k… and it’s so much better than the IRA version, it’s not even close.  But do YOU qualify to have one?  And if not, HOW CAN you qualify?  I’m Bryan Ellis.  I’ll tell you right now in Episode 141.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you!

For the longest time, the Self-Directed IRA was the king of the hill for those of you who want to invest your retirement funds in anything other than stocks, bonds, mutual funds or any other exchange-traded asset.  The Self-Directed IRA was like manna from heaven because suddenly, here was a tool that imposed very few limits on our investment choices, and we could finally buy real estate or private companies or precious metals or private placements or whatever we wanted with very few real limitations.

What’s more, there was a broad perception for a very long time that the IRA was basically a fortress.  Once money goes in, no creditor or government agency could ever take it out.  But it turns out, that’s just not true… there’s the specter of this thing called prohibited transactions which, when you commit one, your IRA ceases to be an IRA, subjects you to huge taxes, penalties and interest, and just as importantly, exposes everything in your IRA to creditors.

To make it worse, once your IRA is polluted by a prohibited transaction, there’s very little you can do to correct it.  In short, you’re screwed.

And so when this thing called the Self-Directed 401k came along, we were all excited about it because it was an improvement over the self-directed IRA in some useful ways, like… it could accept a whole lot more money, and you could borrow money from it, and you could absolutely and pretty easily directly manage your own capital without the involvement of an expensive custodian.  There are even some circumstances where the IRA would be subject to regular income tax and the 401k wouldn’t.  All good things… but maybe not game changers.

But there is ONE game changing difference that, even if everything else was the same, would make the Self-Directed 401k infinitely superior to the IRA, and it’s this:  The prohibited transaction rules are different, and far more favorable for 401k’s, than for IRA’s.  To be clear, you’re still subject to prohibited transaction limitations when using a 401k.  No doubt about it.  But unlike with IRA’s, there’s a very clear approach to CORRECTING problems you may have caused yourself by committing a prohibited transaction.  Yes, it will cost you a bit of time and money to make those corrections… but, unlike with IRA’s, correcting a prohibited transaction in a 401k is entirely possible.  And whereas the penalty for committing a PT in an IRA is absolutely draconian and disastrous, the cost for correcting PT’s in a 401k can be managed without costing you your entire retirement savings.

But here’s the thing… it’s those pesky regulatory issues Chad referred to a moment ago… there are some very specific requirements for qualifying for a Self-Directed 401k that are a bit more stringent even than for IRA’s, which are really restricted only as a function of your age and income.

What are those requirements to use a self-directed 401k?  Really, it all boils down to one thing:  You’ve got to be an owner or partner in a business that has no full-time employees other than yourself, your partners and spouses.

That’s it.  Well, technically you also have to have taxable income in the year you start the plan.  So there’s that.

So If you own or are partner in such a business, then you’re good.  And you should set up your self-directed 401k right away, with haste.  I’ll give you a suggestion in just a moment for where to go to set it up, because not all 401k providers are the same, and you may as well start out with the very best option.

But what if you don’t fit that requirement?  What if you don’t own a small business?  Or what if you DO own a small business, but you have full time employees?

Let’s deal with those separately.

If you don’t own a small business, but you’re serious about self-directed retirement investing through a self-directed 401k, then here’s what I suggest you consider:  Start a business.  It doesn’t have to be a huge business, and it doesn’t have to be a full-time business.  It just has to be a legitimate business.  Why don’t you go out on Craig’s List, buy a wave runner, and rent it out a few times a year?  That’s a small – but legitimate – business, and would reasonably be enough to let you create a self-directed 401k.

Of course, such a tiny business won’t put off enough cash to allow you to make huge contributions to the plan, but it will allow you to do something very important… it will allow you to create the plan so that you can TRANSFER your current IRA savings into your 401k!  And that, my friends, is a very wise thing to do.  Yes, there are some limitations to that, but particularly if you have retirement savings either in a traditional IRA or in an employer 401k, chances are very, very good that you could transfer all of that money into a self-directed 401k and start to enjoy all of the benefits that make the 401k wildly superior to the self-directed IRA.

And what if you DO own a small business, but you have employees?  You’ve got a couple of choices, one of which is to restructure your business into multiple entities such that one of those entities complies with the requirements of law, or you can set up a normal 401k for you and all of your employees, which just happens to be self-directed as well!  Yes, that’s possible.  Hang with me for a suggestion on who to handle this for you, because it’s got to be done right.

So my friends, two things I want you to know:  Having a self-directed 401k is worth its weight in gold, particularly for you real estate investors, or anyone buying non-exchange-traded assets.  That’s because the IRS is taking the position that EVERY self-directed IRA contains a prohibited transaction, and they believe it’s their job to find it.  They don’t even give the slightest presumption of compliance.  Thus, having a self-directed 401k in which it’s possible to correct those errors, do so affordably and with relatively little complication… that distinction alone is a massive, massive advantage.

And no matter which situation you’re in – you already qualify for a self-directed 401k but don’t have one, or maybe you don’t qualify but would like to, or maybe you’ve got too many employees – no matter which is true for you, here’s what I recommend:

Go over to SDIRadio.com/best401k to get my recommendation for who to guide you to set up your plan.  There’s one guy who is the best of the best at this, and his info is there at SDIRadio.com/best401k…

We’re out of time today folks, but remember:  I’ve got a very, very special webinar coming up TOMORROW that will tell you how you can get involved in some incredibly attractive cash-flowing properties that… well I’m just blown away.  It’s the result of a distress situation where I was in the right place at the right time, and let’s just say, if you’re looking for cashflow properties, you’ve GOT to hear this right away.  To join that webinar, just text the word TOPPICKS to 33444 or if you’re outside of the United States or otherwise can’t text, just visit SDIRadio.com/cashflow.  You’ll be very, very glad you did.

My friends… Invest wisely today, and live well forever!

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Self Directed IRA’s are powerful.  Self-directed IRA’s are flexible.  Self-Directed IRA’s can help to make you very, very rich.  And today, I’ll give you the sobering reason to consider abandoning your self-directed IRA, and to never, ever use it again.  I’m Bryan Ellis.  I’ll give you the reasons, and the solution, RIGHT NOW in episode #140.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you.

My friends… I’m going to do it again today… I’ll bang the drum on the risk of prohibited transactions, and why those of you who are doing real estate transactions – or investing in nearly any non-exchange-traded assets – are taking a huge, unnecessary risk by sticking blindly to the use of your self-directed IRA.

But first… HOLY COW, people!  Clearly, a whole lot of you are interested in owning some cash-flowing rentals!  Registrations for this week’s webinar about that topic have absolutely blown up.  Here’s the deal:  I’ve found one of those gold-mind types of opportunities.  A very successful real estate investor owns a portfolio of over 50 properties, but he’s in a serious legal dispute with his business partner, and their mediation requires them to liquidate these properties quickly.  That’s created a huge, wonderful opportunity because, folks… these are some incredibly solid cash-flowing deals.  I’m talking about properties that can be bought in the mid-$50,000 range that are collecting rents of $750-$800… and for reasons I’ll explain to you on the webinar this week, tenants tend to stay in these properties for 3-5 years and never, ever miss payments.  It’s a beautiful situation.  Anyway, bottom line is that even after expenses and reserves, most of the 19 or so properties I picked out of that portfolio are still yielding 12% cash-on-cash… and sometimes, quite a bit more.  Several of those properties are ALREADY gone, as some other smart investors like you have already jumped on it, so we’re down to somewhere around 13 remaining as of now.  Bottom line:  You’ll need to act quickly if highly cash-flowing property, fully managed, with very long-term, low-maintenance tenancies is something that appeals to you.  The webinar where I’ll tell all of you about it as a group is THIS week, and you can get the FREE registration link by texting the word TOPPICKS to 33444 right now.  I’ll give that to you again in just a minute, but also if you’re an existing client of mine and you’d like to chat with me personally about this BEFORE the webinar, you know I’m happy to talk with you, as existing clients get first shot at everything.  If that’s you, just go to SDIRadio.com/consultation and set up an appointment time, and I’ll be glad to talk with you.  And if you’re not an existing client, please be sure to join me on the webinar… register by texting the word TOPPICKS – spelled toppicks with no spaces – to 33444.  Text TOPPICKS to 33444.

So, my friends, the importance of prohibited transactions can’t be overstated, and since most IRA custodians won’t do you the good service of making it clear to you just how risky it is to use a Self-Directed IRA to buy any non-exchange-traded assets, clearly that responsibility falls to me, and I gladly bear it for you, my dear listeners.

Very quickly… a prohibited transaction is when you break a certain set of rules that the IRS has put in place that limits, to a small degree, what you can do with your account, and with whom you can do such things.  Bottom line:  If you break any one of those rules when using your IRA, your account is BLOWN UP, and the financial ramifications will be truly, deeply severe.  Ever seen those pictures of Nagasaki, Japan, when the atom bomb was dropped on it, forming a huge mushroom cloud?  It’s the financial equivalent of that… it’s a disaster if you commit one of these things within a self-directed IRA.  It’s entirely plausible to lose 50% or more… up to the whole thing… due to taxes, penalties and interest.  It’s an absolute disaster… and there’s simply no easy way to get any grace from the IRS to fix your mistake.  With few exceptions, once you’ve screwed up and Uncle Sam finds out about it, then it’s as if your house is already on fire and you can no longer buy insurance.  You’re screwed.

Here’s an example.

There’s a pending bankruptcy case involving a person named Donald Rogers.  Rogers filed for bankruptcy, and given that he had a self-directed retirement account, the bankruptcy trustee – the person who is trying to take away Roger’s assets for the benefit of creditors – promptly inspected the account for a prohibited transaction because if Rogers had committed one of them, then his account would no longer have any protection from creditors.  That’s one of the downsides of committing a prohibited transaction… suddenly, your IRA can be taken by creditors.

And, as it turned out, Rogers really, really appears to have committed prohibited transactions.  Some really, really, really obvious ones.  Things like… he lived in property owned by his account… he bought a boat using the funds in the account, and used the boat himself… he did business with relatives, took loans, and basically did absolutely everything wrong that he possibly could have.  Looks like an open and shut case.  No question about it.

That’s why the Bankruptcy Trustee asked the judge to rule that Roger’s account had been involved in a prohibited transaction… it was obvious.  Slam dunk.

And folks… the ramifications are huge.  Rogers’ 401k is worth about $300,000, and frankly, he’s going to be ruined by this.  When you factor in his creditors along with the taxes, penalties and interest he’s going to owe as a result of this, his retirement account will end up being a huge liability rather than an asset.  It’s amazing… he could lose the whole thing, and then some.  We don’t know for sure yet, because the part of the case I’m telling you about was a request by the Trustee for summary judgment concerning prohibited transactions and not the conclusion of the full case.

Oh, but wait a minute.  There’s an important detail I got wrong in my description to you.  Hmmm….

It turns out that Rogers has a self-directed 401k, not a self-directed IRA.  And largely because of and related to that, the judge REFUSED the request of the trustee to grant summary judgment, which would have cleared the way for the trustee to take away Roger’s 401k.  But the judge didn’t do that… the Trustee just couldn’t yet show that the 401k was disqualified.

And here’s the rest of the story… this particular case is still pending, so we don’t know what will happen.  But if Roger’s attorney knows anything about this stuff – which is, frankly, doubtful – he’ll reach out to the Department of Labor – the government entity that regulates 401ks – and will take a few simple steps to adjust the plan and bring it back into full compliance.  It will likely cost very, very little to do that, and what will be the result?

At the end of the day, if Rogers’ attorney knows what he’s doing, Rogers will be able to keep his 401k… the bankruptcy trustee won’t get his hands on that money… it just won’t happen.  All for one simple reason:  The rules for 401k’s are FAR MORE forgiving than for IRA’s where prohibited transactions are concerned… the difference isn’t even close.

In this case… the difference is worth $300,000.  For Rogers, it’s worth literally everything he owns… because his 401k may well end up being the only thing he has left after bankruptcy.

And remember:  You don’t have to file bankruptcy for this to be relevant.  Just by committing a prohibited transaction in your IRA, you’ll be subject to the same taxes, penalties and interest… and the financial pain that can cause is absolutely, positively brutal.

And don’t kid yourself, my friends.  Don’t just tell yourself that you’re smarter and more careful than Rogers.  Honestly, it’s hard for me to imagine a circumstance in which a person does any substantive real estate investing through a self-directed retirement account WITHOUT committing a prohibited transaction.  It’s just very, very easy to do.

Want to get a self-directed 401k set up the RIGHT WAY?  I’ve got a great recommendation for you.  Go over to SDIRadio.com/best401k for my suggestion.

So the moral of the story?  My friends, if you qualify, you absolutely should use a self-directed 401k rather than a self-directed IRA.  There’s just no counter argument.  And if you don’t qualify to use a self-directed 401k, you should make some changes so that you DO qualify.

And THAT will be the topic of tomorrow’s show… Do YOU qualify for a self-directed 401k… and if not, HOW CAN you qualify?  It’s so important, my friends…. So important.  So be sure you’re subscribed to this show on iTunes or Stitcher so that you don’t miss it.  This is a huge, huge deal.

That’s all for now.  One final reminder – text TOPPICKS to 33444 for the registration link for this week’s webinar on acquiring high cash-flowing rental properties.

And remember:  Invest wisely today, and live well forever!

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Hedge funds, venture capital and private placements.  Ah yes… it’s the world of investing that’s open only to the wealthiest of investors… until now.  I’m Bryan Ellis.  I’ll tell you why the most hush-hush of investment opportunities are taking to the streets for everyone to see RIGHT NOW in Episode 139.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy, self-directed investors like you!

You know, as I sit here behind the SDI microphone, I’m struck by the sheer enormity of the opportunity that’s available to smart, well-connected investors.  Case in point:  Just yesterday, I met with a guy who owns a company who has built a portfolio of over 50 single-family rental properties, nearly all of which are yielding 12%+ per year from cash flow… sometimes MUCH more… and that’s assuming full purchase with cash, not one of those hocus-pocus deals where the high return is only because of taking on mortgage debt.  These properties are just WINNERS… high yielders… and very, very attractive.

But you know what?  This guy has a problem.  He and his business partner are fighting in a really big way… and he’s got to unload his portfolio.  As in… he MUST do it… those are the terms of the mediation  between the partners… and he’s got to do so under terms that are, shall I say, rather UNFAVORABLE to him, but rather favorable to the buyer.  And that buyer will be me… and small number of my most decisive clients who are willing and able to act quickly.

So here’s the deal… I’ve got exactly 19 properties available with these characteristics:

Characteristic #1:  VERY high cash flow… like rents of $750-800 versus purchase prices in the $50’s!

Characteristic #2:  Totally new renovation, with brand new city inspections and certifications plus a one-year maintenance warranty!

Characteristic #3:  Tenant already in place, with 100% reliable third-party rental payment guarantees…

Characteristic #4:  Experienced, competent and reliable property management ALREADY in place!

Characteristic #5:  Purchase BELOW retail value!

My friends, if you’re looking to build some incredibly reliable and very low-stress cash flow… with EXTREMELY attractive cash-on-cash ROI, then here’s what you do:

If you’re on my top picks notification list, then I’ve already sent you an invitation to learn more about this opportunity on a webinar I’m giving THIS WEEK.  You’ll want to see that webinar, right away, because I have a very limited number of properties – 19, to be precise – that will go very quickly given the attractiveness of this opportunity.

If you’re NOT on my top picks list, then, RIGHT NOW, text the word TOP PICKS with no spaces to 33444.  Again, just text the word TOPPICKS – spelled TOPPICKS with no spaces – to 33444 and I’ll immediately send you the information you need to get on that webinar.  And when you get it, register immediately.

This is a beautiful opportunity and I hope you don’t miss it!

So… we’ve all heard of these fancy hedge funds and private equity firms that are the exclusive domain of the uber-wealthy.  And many investors who are certainly affluent, but maybe not ultra-wealthy, certainly have longed for greater access to some of these elusive opportunities.

Well, the wait may be over… to an extent.  In the last couple of years, the law has changed such that one opportunity has become available to some of these investment funds that was never before available:  General Solicitation.

That’s the fancy term for “advertising”.  Previously, it was illegal for non-publicly-traded investment funds to advertise themselves to the public.  That’s because, with just a few minor exceptions, investing in those funds was limited to one group of people:  Accredited investors.  Many of you, my dear listeners, are yourselves accredited investors.  It basically means that, as an individual, you have a net worth of over a million dollars, excluding your home.

Truth is, I don’t think that will really make much of a difference in the long run.  Unaccredited investors simply can’t afford the minimum investment in many of these funds, which is usually $100,000 to $250,000 on the lower end.

But here’s where there could be an interesting impact for the thousands of you in this audience who do meet the standards of accreditation but who are not currently privy to any of those types of opportunities.

I suspect that you will see a growing number of private investment funds begin to advertise their services per the new rules.  This is a good thing… more choice is always a good thing for consumers, including consumers of investment opportunities like you and me.  And while advertising in and of itself is certainly NOT a standard for evaluating the quality of such opportunities, there’s no doubt that increasing competition in that world is a good thing… and I’m equally certain that increasing the opportunities available to you OUTSIDE of Wall Street is a good thing.

But always remember the standard of a wise self-directed investor:  Simple, Safe and Strong.  Any investment that isn’t simple enough to explain coherently to your grandmother in a sentence or two is too complicated.  Any investment that doesn’t have a clear, concrete way to protect and return your capital as it’s chief concern is not safe enough for your capital.  And any investment that can’t reliably generate the financial results you need… both at the conclusion of the investment and during the entire holding period… that investment isn’t strong enough to justify use of your capital.

Remember:  Your capital must be respected.  That’s job #1.  That capital didn’t come to you freely, nor must it be given away carelessly.  Simple, Safe and Strong… that’s guide, that’s the rule.

My friends, if you’re looking for some EXTRAORDINARY cash-flowing real estate ownership opportunities, the time is NOW to text the word TOPPICKS to 33444 so I can send you information about the package of 19 properties I mentioned to you before.  Curiously, I got an email about that while I was writing this episode for you, so we may not even have that many remaining any longer.  So go ahead and text TOPPICKS to 33444 right now to get the info.

Tomorrow I’m going to give you a powerful and maybe shocking example of how much safer your money will be if you choose to use a self-directed 401k over a self-directed IRA.  The difference is stark, disturbing and… well, you can’t ignore this.  So be sure to SUBSCRIBE to this show on either iTunes or Stitcher RIGHT NOW so you don’t miss an episode.

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

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Hello, SDI Nation!  I’m Bryan Ellis, your host for Self Directed Investor Radio.  Today is unusual… There will not be a normal episode of SDI Radio.  Why is that, you may ask?

Here’s why, my friends:  At the end of the day, I’m not just the host of a booming podcast, nor am I just the publisher of a very successful real estate newsletter.  I’m a self-directed investor investor, too… I actually DO the things I speak to you about each day.

And I’ve got to take a sudden, rather unexpected trip to do some serious due diligence on what appears to be a very attractive porfolio of over 50 cash-flowing rental properties that can be acquired at very, very attractive pricing.  It’s a classic distress situation – a guy who is a very seasoned real estate investor is having serious trouble with his business partner, and they’ve got a legal dispute brewing between them.  They’re trying to unload their property portfolio as quickly as possible because that’s the advice they’ve been given by their attorneys and mediators.

Bad for them, because there’s a LOT of equity in these properties, most of which already have paying tenants in them.  Good for me, because I’d be delighted to buy every single one of those properties if they fit my model.

This is, of course, relevant for you, because I’ll share this opportunity with you.  I know, because so many of you have told me clearly, that you REALLY want to acquire cash-flowing rental properties.  And I don’t blame you!  Acquiring the right portfolio of cash flow-producing properties is a reliable, predictable path to long-term wealth, if your properties meet the right criteria.

But what is that criteria?  The answer is the S3 Criteria:  Simple, Safe and Strong.  And that’s what I’m going to do today is to determine whether the portfolio I’m reviewing meets my standard.

I’ve got a lot of digging to confirm.  I’ve got to talk to the property owners – the partners who are feuding – along with their attorneys and the lenders who are funding these deals.  I’ve got to talk with some of the current renters of the property.  I’ve got to do some serious digging into the specifics of the local area where these properties are located.

My gut feeling is positive… I think there’s a real opportunity here.  That’s why I’m taking an unscheduled day away from the office today because, God knows I don’t have time to do that since, as my regular listeners know, I was ill for so long and missed quite a lot of work time.  But my friends, I have a sense this one might be worthwhile, and might really pay off.

And if it DOES, the VERY FIRST people I’ll tell about it is those of you on my TOP PICKS notification list.  In fact, the very moment that I know I’ve got something that’s worth sharing, I’ll immediately fire out a notice to my top picks list with the details.  And here’s one thing of which you can be sure:  If you hear about an opportunity on my top picks list, then it’s an opportunity worth taking seriously, and worth investigating immediately.

So here’s my respectful suggestion to you:  MAKE SURE you’re on the top picks early notice list by texting the word TOPPICKS to 33444.  Again, text the word TOPPICKS – spelled toppicks with no spaces or periods – to 33444.  That will put you on our Top Picks list at absolutely no cost.

One more thing… Soon, it won’t be free to get on the top picks list.  Right now it is.  Get in while the getting’ is free! 

That’s all for now, folks.  Have a spectacular day, and remember:

Invest wisely today, and live well forever!

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Contempt, Whistleblowers and Wall Street.  Today you learn just how far the scumbags on Wall Street will go to line their own pockets at your expense, and it's DISGUSTING.  Get ready for more evidence that the men and women of "BIG FINANCE" absolutely loathe you.  I'm Bryan Ellis.  This is Episode 138.

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Hello, SDI Nation.  Welcome to the podcast of record for savvy, self-directed investors like you!

Today, you hear a story that's disgusting, but very illustrative.  I hope you'll not just take this story as an anecdote, but as a motivator to action.  Because my friends, though this story is about the contempt that drives one single person, if he gets what he wants, it will have a very direct and very negatve impact on millions of people-quite certainly including many, many listeners to this show.

Today's story is one of contempt and greed.  Allow me to set the stage.

Back in 2006, Congress authorized the creation of a Whistleblower Office within the IRS.  The idea was simple - to motivate people to identify others thought to be engaged in tax fraud, with the motivation of receiving a percentage of the taxes collected as a result.  Yep, a formal "snitching" program.  Classy, huh?  But the IRS was really only after the "big fish", because the reward only applies if there's potential for collecting more than $2,000,000.

And, like everything else the government does, this program is wildly inefficient.  For example, in 2012, 8,634 people snitched on their employers, their competitors, their neighbors and their friends.  How many of those cases resulted in collecting $2,000,000 or more?  12.  Yep, 12.  Not even 1% of the cases reported by snitches resulted in achieving the ojective of the program.  Barely 1% of 1%, actually.

Yes, the IRS Whistleblower program connects to Wall Street's loathing for you.  Hang with me.

Another piece of this tale is the mutual fund company Vanguard.  This is where the story will connect to many of you, my dear listeners.

Vanguard is a very highly reputable mutual fund company that has achieved some impressive operational efficiencies.  As a result, the fees they charge clients of their mutual funds are far less than their competitors.  In fact, their average expense ratio is, depending on whose stats you're looking at, somewhere between 60 and 85% less than the industry average.  And despite this, their mutual funds are competitive in terms of returns.

As a result, Vanguard has become a very large company and is a favorite of individual investors who want to keep their expenses low.

So what's the problem?

A guy named David Danon used to work for Vanguard.  Danon is a lawyer.  And Danon chose to use the information to which he had access while acting as a lawyer for Vanguard to report them to the IRS for underpayment of taxes.

I want that to sink in for just a moment.  Let's set aside, for a moment, whether Vanguard actually underpaid taxes.  I want you to focus on the fact that Danon, an attorney for Vanguard who continued to work for them while he was preparing this Whistelblower claim, an attorney who is bound by attorney-client confidentiality, nevertheless reported his client to the IRS... not out of the goodness of his heart, but because he expects to be paid a percentage of the revenue the IRS may attempt to collect.

That, my friends, is disgusting.

But why does Danon allege an underpayment of taxes?  This gets to the point of contempt for YOU.  As in all lawsuits, the devil is in the details, but in this one specifically, the general idea is this:  Danon alleges that because Vanguard charges lower fees to it's clients than it's competitors, that it therefore made less profit than it should.  And therefore, Danon suggests, Vanguard should be taxed on the fees it SHOULD HAVE charged.

That's right, folks, Vanguard is being accused of being a tax cheat essentially because they could have made more profit than they actually did.  They didn't rip you off like all of their competitors, and this guy Danon - a Wall Street guy - wants them to pay for it.

And, if he wins in this effort, Vanguard will pay... but more importantly, YOU will pay.

The bottom line:  This guy Danon, a Wall Street insider to be sure, is doing just the same as his industry does:  Putting his own interests far ahead of that of clients like YOU.

This isn't a small deal.  My reading of this situation suggests that there's a tax bill of nearly $35 BILLION at stake for Vanguard, should they lose.  And who will pay that?  You.  Not just You if you're a Vanguard customer.  You if you're invested in Wall Street at all.  Because after Vanguard's low pricing model goes, there will be no real competitive restraint to even higher fees.

At the end of the day, the real issue is confiscatory taxation that’s weaponized against taxpayers in the form of a Whistleblower program that is proven to be astoundingly inefficient.  But you can’t do much about that, other than by voting for politicians who believe, correctly, that taxes are far too high.

But what you CAN do – what you SHOULD do – is to stop merely CONSIDERING shifting your assets out of the stock market and into an asset class that actually MAKES SENSE.  You need to actually TAKE ACTION!

To that end, I’ve got some great news.  In the coming week, I’ll have a lot more to share with you about some TRULY worthwhile assets… some very attractive cash flowing rental properties that you can purchase in strong markets, with guaranteed rental income, built-in property management and at below-retail pricing!  We’re at an advanced stage in working to acquire a great portfolio of cash-flow producing rental property, and I’ve got to tell you… this one is exciting.  If you’re considering the purchase of rental property in the near future – or particularly if you’re seriously considering another property right this moment – I respectfully suggest you consider waiting until next week when you hear what I have to share with you.  You’ll be very, very glad you did.

I’ll announce more about that on this show when the details are confirmed, but as always, the best way to make sure you get the most timely notice of great opportunities is to be on my TOP PICKS notification list.  To get on that list, at no cost, just text the word TOPPICKS with no spaces to 33444.  Again, text the word TOPPICKS to 33444.  It’s spelled TOPPICKS with no spaces.

Well, my friends, I’m off to spend a day with daughter at a college interview she’s been invited to attend.  I hope you have a great weekend, and be sure to join me on Monday because on that day, I’m going to tell you about that magical world of hedge funds and private placements that have always been the exclusive domain of the very wealthy… and I’ll show you how YOU can get access to that world, as well… even if you’re not exactly Bill Gates.  But the only way to get it for sure is to SUBSCRIBE to this show on iTunes or Stitcher, so be sure to do that right now!

In the mean time, folks:  Invest wisely today, and live well forever!

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