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

When is the profit in your self-directed IRA or 401(k) NOT shielded from taxes? It may happen       far more frequently than you think. I’m Bryan Ellis. This is episode #306 of America’s largest, fastest-growing podcast for self-directed investors.

----

Hello, Self-Directed Investors all across the fruited plane! Welcome to Self-Directed Investor Talk, the show of record for savvy, self-directed investors like you, where in each episode, I help you to find, understand and profit from exceptional alternative investment opportunities and strategies.

Lately there’s been a lot of news about Apple computer, as it’s stock has gone high enough to make the company worth more than a Trillion dollars, the first company to have achieved that lofty level. And there’s constantly news about AMAZON, as that stock has continued to zoom upwards in a meteoric fashion. But did you know that REAL ESTATE beats STOCKS… pretty easily… as a retirement investment… and I can prove that to you conclusively? In fact, I invite you to allow me to present the hard evidence to you that the core retirement investment strategy that Wall Street has taught all of us is fundamentally unwise and unsafe. And I’ll show you how to use real estate to get MUCH BETTER RESULTS. I’ll do that by way of a special FREE webinar for which there are still a few openings available. It’s called Real Estate Beats Stocks… EASILY, and you can register for it at no charge by visiting today’s show page… SDITalk.com/306… SDITalk.com/306 and click the link that says “Register For The Free Webinar Here”. But don’t delay… it’s coming up very soon and seats are filling up fast, so to get FREE access, go to SDITalk.com/306 now.

Hey… did you know that not all of the income you make in your self-directed IRA or 401(k) is inherently protected from taxes? That’s right. The distinction lies in the fact that, from the IRS’ point of view, there are two TYPES of income: EARNED income and UNEARNED income. We’ll call them ACTIVE and PASSIVE income, as I think those are more descriptive.

Oh yes… one more thing before we look at the distinctions…

I’d like to offer a sincere THANK YOU to an iTunes listeners who uses the handle Jaywk007. He gave this show a 5-star rating and a really nice review that says “I just started listening to Bryan’s podcast and so far I think it’s awesome… I wish I had found it a long time ago!” Thank you, Jay… I really appreciate that!

And for your entertainment, folks… in tomorrow’s exciting episode, I’ll read to you a recent 0-star review I received. This show has 471 ratings on iTunes right now, which is HUGE… and of those, 450 of them are 5-star. But hey… some people can’t take the heat, and I’ll share one of them with you tomorrow to give you a nice chuckle.

Ok… active income and passive income. That’s a massive, crucial distinction, and here’s the reason why:

When your retirement account generates what’s called PASSIVE income… things like profits from the sale of stock or income from rental properties or interest from a CD… that kind of income is exactly what your retirement accounts was designed for, and consequently, that kind of income – passive income – is where the tax benefits come into play which you BELIEVE to be fundamentally associated with your IRA or 401(k).

But as it turns out, there’s nothing fundamental about those tax benefits. Because if another type of income – called ACTIVE income – is generated in your IRA or 401(k), then look out, because you’ve got a rude awakening headed your way, that rude awakening being, of course, that IRA’s and 401(k)’s do nothing to help your tax situation when the money in question is EARNED or ACTIVE income.

What is active income? According to a definition offered by our pals over at the IRS, It can be one of two different things, and both are pretty simple. First is active income happens whenever you work for someone and they pay you. Easy-peasy. Second is when you own a business or a farm which pays you.

So how does this relate to your IRA or 401(k)?

One very common example of unexpected EARNED income in an IRA or 401(k) is through flipping real estate. Whether you think of real estate flipping as a business or not… it is. And as such, the IRS tends to see the income generated from real estate flipping as ACTIVE or EARNED income if you do more than 2 or 3 of them per year in a retirement account.

That’s not specific to real estate. If you’re actively buying and reselling just about any type of asset… apparently with the exclusion of publicly traded stocks… that will be considered a business that you’re operating through your retirement account, and will, as such, be taxable.

There’s at least one other way to generate income in an IRA that has to do with taking on debt in an IRA, but we’ll look at that another day.

Now a quick note of distinction: You hear me regularly address the issue of “prohibited transactions”… a class of compliance errors that, when committed within your self-directed IRA, renders the thing totally destroyed and, quite probably, slashed in value by 40-60% or more. Those are things like allowing your IRA to buy assets from you personally, etc.

But I want to make it clear to you that performing activities in your IRA that generate ACTIVE income is NOT the same as a prohibited transaction. ACTIVE, or EARNED, income is TAXABLE in your IRA or 401(k)… but it’s not a compliance problem… it’s NOT prohibited.

In fact, it can sometimes be a useful thing to take the hit on those taxes just so you can blow up the size of your retirement account more quickly. But we’ll look at that another day, too.

Folks, thanks for listening. If you’re learning something, please stop by iTunes and give us a nice rating and review. And if you have a suggestion for a topic you’d like me to address, drop a note to me at [email protected].

My friends, invest wisely today and live well forever!

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

You’ve found a great multi-family deal, but it’s going to take some cash. You have some cash in your 401(k). How do you put them together for a glorious result? I’ll tell you right now. I’m Bryan Ellis. This is episode #305 of America’s Largest, Fastest-growing podcast for self-directed investors…

-----

Hello, Self-Directed Investors coast to coast and all across the fruited plane! Welcome to Self-Directed Investor Talk, the show of record for savvy self-directed investors like YOU, where each weekday, I help you to FIND, UNDERSTAND and PROFIT from exceptional alternative investment opportunities and strategies.

Happy Q&A day, my friends! I always enjoy Q&A day here on SDI Talk – which happens every 5th episode. If you’d like to submit a question for Q&A day, the best way to do that is to email me directly at [email protected] with your question… I look forward to hearing from you!

Today’s question comes from Riley Lange from Colorado Spring, Colorado. He asks: “What’s the process for rolling your corporate 401(k) over into a multifamily property as a passive investor?” Riley, that’s a great question, and in answering it, I’ve got to encourage you to visit today’s show page at SDITalk.com/305 to refer to the additional resources I’ll reference.

So Riley, if you’re using an existing 401(k) to fund this investment, the process you’re going to want to take will look something like this:

First, select the right type of self-directed account. Even if you already have a self-directed IRA or other account, take the time to reconfirm this, because in many cases – and the type of investment you’re proposing is DEFINITELY one of them – the distinction among the different types of accounts can have HUGE… I mean truly HUGE ramifications on the complexity and profitability of the investment. Yes… the ACCOUNT TYPE you select – like Traditional IRA vs Roth IRA vs SEP IRA vs Solo 401(k), etc. – can mean you actually make substantially MORE or LESS money, so take this seriously. Fortunately for you, SDI Society offers a very powerful and very concise training on this topic, which, while it is not a free training, I have taken the liberty of providing a way for you SDI Talk listeners to access it for free for a VERY limited time if you go over to SDITalk.com/bestaccount.

So after you pick the right account type, the second step is to pick a great custodian or account provider. This too is a big topic. Speak with friends and colleagues about who they use. Get some first-hand referrals if possible. That’s always the best way. If you need a great starting point, over on today’s show page at SDITalk.com/305, I’ve provided the official SDI Society list of self-directed IRA custodians and other account providers… that’s a GREAT place to start.

Third, transfer your money directly from your existing 401(k) to your new account. The IRA company or account provider can guide you on how to do this.

Fourth, assuming you have done proper due diligence on this investment – which is a huge, massive topic unto itself – then you’re ready to direct your custodian to make the investment. Now most of the time, larger multifamily projects will actually not technically be a real estate purchase. Instead, larger properties are usually held within a partnership or other business entity, and you – or your self-directed account, in this case – will instead be purchasing a portion of the partnership which owns the real estate. The broader point here is to make sure that you fully understand how the transaction is structured before you jump in, because there’s a wide array of options here and some are more advantageous to you than others.

So however the transaction is structured, you’ll see to it that the necessary money is transferred from your account to either the investment operator or – more ideally – to a third-party escrow service, and that you receive the proper documents to serve as your account’s indicia of ownership.

At that point, your self-directed retirement account actually owns the investment. Any income that’s generated will be paid to and necessarily owned by your retirement account. And when the time comes for you to sell that investment, all of the proceeds of sale will go back into your retirement account… and that’s REALLY when you get to experience the utter beauty of tax-free investing.

But I do have a word of warning for you: Remember that with pass-through entities, like partnerships and most LLC’s – which is the likely way that your investment will be structured by the investment provider – with entities like that where the tax liability passes directly through to the owners rather than being paid at the entity level, that means that to the extent that the entity generates EARNED income or uses debt financing, your self-directed IRA or solo 401(k) may be liable for payment of current-year income taxes! Yes, I know that those are tax-free entities… but that doesn’t mean that every type of transaction is tax-free. For example, if the investment fund uses leverage – also known as debt – to finance a portion of the transaction, then there’s very likely to be a current-year tax liability for self-directed IRA’s. Similarly, if any of the income generated is “active” income rather than “passive” income – more technically, if any of it is considered to be “unrelated business taxable income” – then your account will owe a current-year tax liability on any income generated from that as well.

Again, Riley, and all of SDI Nation, the one thing that could affect that issue the most is the TYPE of account you select on the front end. It’s really that critical. Be sure to check out SDITalk.com/bestaccount for more about that so you don’t find yourself with a tax bill you weren’t expecting.

And that, my friends, is how one rolls over their corporate 401(k) to invest into a multi-family property.

If you have any further questions or comments, be sure to drop me a line to [email protected] – I’ll be happy to help you out.

In parting, my friends, I have a favor to ask of you: If you’re learning from SDITalk, I ask you to become a subscriber to the show now. Just stop by SDITalk.com to enter your name & email… and that’s all it takes!

My friends… invest wisely today and live well forever!

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

High income earners, rejoice! The IRS announces that I was right... I'll tell you more right now in episode #303 of America's largest, fastest-growing show for self-directed investors...

-----

Hello, Self-Directed Investor Nation! This is Self-Directed Investor Talk, the SHOW OF RECORD for savvy, self-directed investors like you, where each day, I help you to find, understand and profit from exceptional investment opportunities and strategies.

Today, we focus on the STRATEGY side of the equation, but first...

I'd like to extend a huge thank-you again to you folks for continuing to totally BLOW UP our download numbers for this show in the last couple of days since we've gone back on the air... you people are amazing and I'm so grateful! In particular, I'd like to thank all of you who were so kind as to leave me some wonderful 5-star reviews over on iTunes even since we took our hiatus from broadcasting last year. One such kind 5-star review on iTunes came from NateKG who said "I am a full-time day trader getting into the markets after a long career of driving trucks. After searching for some advice on self-directed 401k's, I came across SDI. "WOW", I thought after the first two episodes. This guy's got some valuable information. Everything I was looking for! I highly recommend you listen to Bryan's show all the way from the start. You will be glad (and wealthier) you did!"

Thank you, NateKG... I appreciate that so very much! And if you, my dear listener, feel so inclined, I'd be ever so grateful if you'd consider following in the wise ways of NateKG and stopping by iTunes to give us a rating and review... I'd really really appreciate it!

Ok, onward...

So, my friends... chances are good you're familiar with this thing known as the Roth IRA. It's the newer version of the IRA that allows you to make deposits on an after-tax basis, but all withdrawals of profit you make during retirement are totally TAX-FREE! It's really amazing, to be frank... it really does totally eliminate taxes on your profits.

BUT... there's a downside to it, and that is that there are income limits for making a contribution. Once your income goes above a certain level... not terribly high, starting around $120,000, then your ability to contribute to a Roth is limited and is soon wholly eliminated based on your income.

Well... that's a problem, because the tax advantages of the Roth IRA are just astounding. So somewhere along the way, somebody hatched an idea called the "Backdoor Roth IRA" which would give high-income earners an indirect, back-door kind of way to put money in a Roth IRA. The idea is actually pretty simple:

Instead of contributing to a Roth IRA, what you could do instead was to contribute to a Traditional IRA – which does NOT prevent high income earners from making contributions, as long as they don't take a tax deduction for it... and then just convert that Traditional IRA to a Roth IRA!

The net effect is that you end up with exactly the same thing: A Roth IRA with the amount of money that you would have otherwise contributed... all the same tax benefits and all the same everything applies thereafter, just as if you'd contributed the money directly to a Roth IRA in the first place.

Pretty cool, right? 

Yeah, definitely... now this strategy isn't new. In fact, I told you about it on this very show in January of 2017. You can find that episode linked on today's show page, which is SDITalk.com/303. But the sticking point, which I mentioned in that episode, is that a lot of people have been concerned that the IRS would see this as some sort of a skirting of the rules, and take action against anybody using this strategy.

But there's a problem. That problem is called the "Step Transaction Doctrine", which is a fancy way of saying that if you use a combination of rules as a series of steps to circumvent some other rule, then you're breaking the original rule. The point here being, of course, that a lot of folks out there in the tax and legal community were pulling out their hair over fears that the IRS would drop the hammer and say that using the Backdoor Roth IRA was a violation of the Step Transaction Doctrine and would cause tax problems for anyone who used it.

I never believed that. Here's what I told you about that back in January of last year about that very thing:

So I'm on record telling you that that particular hubub was probably more of a hysteria than a legitimate issue, and well folks, time has proven me right, yet again, as the feds have issued a clarification in the form of a footnote in a congressional conference committee report says, “Although an individual with AGI exceeding certain limits is not permitted to contribute directly to a Roth IRA, the individual can make a contribution to a traditional IRA and convert the traditional IRA to a Roth IRA.”

Well, folks... it doesn't get a lot more clear than that. Very black and white. But then they went a step further, when Donald Kieffer Jr., a tax law specialist with the IRS’s Tax-Exempt and Government Entities Division made this comment on July 10th Tax Talk Today webcast. He said: “I think the IRS’s only caution would be whenever we see words like ‘back door’ or ‘workaround’ or other step transactions that are putatively enabling a way to get around limits - especially statutory contribution limits - you generally find the IRS is not happy and prepared to challenge those,” Kieffer said. “But in this one that we’re talking about, it’s allowed under the law.”

That's pretty blatant, I think you'll agree... and it's great news. So all you high income earners... rejoice! It looks like you can use the backdoor Roth IRA to your heart's content.

Ok folks, that's all I've got for you today. Remember to check out our sponsor, the SDI Academy, if you'd like to learn the ACTUAL TRUTH of what your self-directed IRA and 401(k) are really all about... and how to use them without causing yourself real heartache. You can learn more over at SDITalk.com/academy.

My friends... I'll be back with you tomorrow, same bat-time, same bat-channel... and in the mean time, invest wisely today and live well forever!

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

The last decade’s hottest investment strategy among individual real estate investors is dying a very rapid death. Find out what it is… and why it’s dying right now. I’m Bryan Ellis.  You’re listening to Episode #302 of the largest, fastest-growing self-directed investor podcast in America…

-----

Hello, Self-Directed Investor Nation! Welcome to Self-Directed Investor Talk, the SHOW OF RECORD for savvy self-directed investors like YOU! 

Before we get into the thick of things today, I’ve got to ask you: do you THINK you really know the fundamentals of self-directed IRA’s? Do you really? Well if you DON’T know those fundamentals, you’re in luck. And if you think you DO know them… you may be having even BETTER luck. That’s because for a very brief time, you can receive FREE access to a very highly regarded $297 training program called the SDI Wealth Guide to Self-Directed IRA Fundamentals, available now at SDITalk.com/fundamentals. That video-based training is available to you right now… and in it, you’ll receive the unexpected… but TOTALLY accurate… answers to questions like: What is a self-directed IRA? What kind of self-directed IRA’s are available? What’s the best type for YOU? And are there any self-directed investing alternatives that are SUPERIOR to the IRA? So check it out now, because your status as a listener to SDI Talk gets you something very special: FREE access to this training – normally priced at $297 – just by visiting SDITalk.com/fundamentals.

Ok, my friends, this is episode #302, so all of the links and resources I mention in today’s show can be found, very conveniently, by visiting SDITalk.com/302. But I’d like to take about 20 seconds to express to you something kind of personal but very important, and that is that…

I have a sincere thank you for you people. As you know, I’ve been on hiatus from doing this show for some time. To be honest, I’ve been struggling with some pretty severe personal challenges, and my mind wasn’t where it needed to be to give you folks what you deserve in this show. But yesterday, the time had come to begin this show anew, and that’s why I want to thank you:  Yesterday, this show got HUGE download numbers, even though it was the first episode I’ve published in 6 months, and even though I did nothing to promote it. Still, you people downloaded this show en masse… and I’m so very sincerely, sincerely grateful to you. Thank you from the bottom of my heart.

Ok, let’s do this.

In the last decade, there’s been a dramatic rise in something known as “turnkey rental property investments”. This is a type of rental property investing made for people who want the money, but not the time commitments, of rental ownership.

The way it works is simple: If you buy a turnkey rental property, you’re buying more than just a rental property.  You’re buying the property itself, sure… but that property has already been renovated to rent-readiness. But there’s also been a tenant identified, qualified and moved into the property. And to top it all off, there’s a property manager already in place who is handling the entire tenant relationship so that you, as the investor, can just collect the checks rather than be a landlord… and it also gives you the ability to invest your capital into markets where it really makes sense to do so, rather than being limited only to investing in your own back yard.

So, a pretty cool concept… right? Sure is. With turnkey rental properties, you’re not buying a house, you’re buying an asset that’s presently producing cash flow.

As a side note, this is one of those places where I think the very famous book Rich Dad, Poor Dad by Robert Kiyosaki really painted too rosy of a picture. The message of that book is great: Invest in assets that produce cash flow. The secondary message is that real estate property is the best way to generate such cash flow. But the story seems to suggest that merely by owning these rental properties, you’re going to experience the theoretically possible cash flow.

It’s just not that way. I was having a conversation last night with one of my subscribers named David who has a vast array of experience as a landlord in multiple markets, and we were looking critically at how one might successfully manage a portfolio of properties from a distance. The conclusion is that it’s not easy to do, and merely owning properties – even good ones – is a long way from guaranteeing your success.

And that’s where the whole turnkey thing comes into focus. When you buy a turnkey property, assuming you’re buying a good property with a good property manager, then what you’re doing is acquiring a real cash-flowing assets… the kind that Kiyosaki praised so heavily in Rich Dad, Poor Dad.

And it’s that level of convenience and automated realization of profits that’s made the business of turnkey rental properties boom so heavily in recent years.

But there’s a dirty little secret in that business that the turnkey providers are really hoping you don’t find out: There’s a serious inventory shortage. That’s right… the turnkey people are having a really hard time keeping up with the demand for these properties because… after all… a key consideration is the ability to generate CASH FLOW from these properties. But as the PRICE of real estate has grown at a much faster pace than the attractiveness of turnkey deals is turning downward.

You need not trust me. Check out today’s page over at SDITalk.com/302 and you’ll see two very interesting links: One with the National Rent Index from Apartment list, showing national rents increasing at only 1.4% per year…

And then you’ll see the National real estate composite index from Case Schiller, which shows a national appreciation rate for actual REAL ESTATE VALUES of more than 3 times that… about 4.7% from July of last year to now.

So as real estate values increase at a dramatically faster rate than rental rates, what we have is a situation where it’s much harder for the turnkey rental property companies to mass-produce turnkey rental properties that offer an acceptable yield.

Now before you conclude that I’m suggesting that this isn’t a good time to buy rental properties, I’ll recommend you hang with me for a minute, because that’s not what I’m saying at all.

What I AM saying is that things are becoming much harder for the turnkey property companies, and so many of them are diversifying AWAY from turnkey properties – which is something that some of them know a lot about – and they’re jumping into offering other types of investments. Usually real estate-related, but certainly not similar to turnkey rental properties. Frequently it’s investments in international real estate in tropical locations… or maybe it’s opportunities to syndicate your money into the building of new entire neighborhoods or developments which will then be sold to other investors or home owners… or maybe it’s something wholly unrelated to real estate.

This stuff gives me pause. It’s not that there’s anything fundamentally wrong with any of that… it’s just that this almost inherently means that the turnkey company you’re working with is stepping out of their area of expertise and into a realm where they’re new to the game. And so that is something important and worthy of consideration where the safety of your money is concerned.

But far be it from me to say that it’s no longer a wise thing to buy rental properties today. It’s pretty much always a smart thing to buy strong cash flow. But there are a couple of distinctions now:

The first is that you’re going to find lower and lower inventories being offered by these turnkey providers. This is evidenced by your needing to be placed on a “waiting list” for properties… and by that wait being multiple months in duration. As such, you’ll find that when properties ARE available for investment, you’ll need to jump on them rather quickly.

Incidentally, we do have a few really great turnkey deals available right now, which you can see by visiting SDITalk.com/turnkey, SDITalk.com/turnkey.

And the other distinction is this: There’s a huge difference between YOU finding rental property investments that make sense, and a turnkey rental property company finding a situation that makes sense. For you, you’ve only got to find deals one by one, or even if you’re deploying a lot of capital, still you only need a relatively small number of deals. But these turnkey people… a lot of them move 50-100+ properties per month… they’ve got to find entire swaths of geographic areas where they can get a large volume of deals on a recurring basis. The advantage is inherently with you, because you’re small, you’re nimble, and when an INDIVIDUAL great opportunity arises, it will make sense for you to pursue it, but not them.

So again, far be it from me to suggest that now is no longer a good time to acquire real estate cash flow. A good time for that is, approximately, ALWAYS.

Ok folks, that’s it for today. Hey… do me a favor, will ya? When you have a question about self-directed IRA’s, 401k’s, custodians or investment strategies, shoot them over to me at [email protected]... I’ll do my best to answer them here on the show for you.

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

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

The housing market is showing signs of multiple personality disorder... the two things that could bring real estate to it’s knees near-term… and Facebook lays an egg and gets scrambled on Wall Street. I’m Bryan Ellis… this is Episode #301 of Self-Directed Investor Talk.

----

Hello, Self-Directed Investor Nation… a lot to get to today, after a bit of a hiatus. Today’s show page is SDITalk.com/301, so let’s jump right in, after a quick word from our sponsor, the Self-Directed Investor Academy.

Have you ever noticed that there’s just not much in the way of really great training material out there where self-directed IRA’s and solo 401(k)’s are concerned? Oh sure… all of the IRA companies provide “education”… but their end is clearly so you’ll give them your business. And there are a few books written by attorneys using the native language of attorneys which is a strange dialect of Latin known as “YesButProbablyNo”… but if you’re an intelligent person who just wants the hard truth about how to use self-directed retirement accounts while squeezing every penny of value out of them you can… even when that may not be in the best interest of your IRA company… well, SDI Academy is for you. SDI Academy is a private membership group that produces video-based Wealth Guides about the exact topics that self-directed IRA and 401(k) owners need to understand… totally free of the murky babble you see on the internet. I think you’ll particularly enjoy their trainings on how to pick the right self-directed retirement account for you and how to pick the best self-directed IRA company for you… because the results you’ll end up with are probably VERY DIFFERENT than what you’d expect… and so, you’ll really get TREMENDOUS VALUE. For a limited time, listeners to SDI Talk can get a FREE 3-day membership to the already-inexpensive but inordinately valuable SDI Academy by visiting SDITalk.com/academy. That’s SDITalk.com/academy.

Ok people… we all know that the overwhelming top asset class choice among self-directed retirement account owners is real estate, so what I’ve got to share with you will be quite directly relevant for a very large swath of you… say, 100% of you! Hehehehe.

This past week, some new economic numbers came out that suggest the housing market is slowing down… the evidence cited by sources like the very entertaining but not always accurate CNBC informs us the reason for this is a slowdown in boiling-hot markets like L.A. and Denver.  For some reason I’m not entirely sure of, I’ve linked to the cutesy video CNBC made about this over at SDITalk.com/301.

https://www.cnbc.com/video/2018/07/26/housing-market-slows-down-real-estate-housing.html

But this very morning, July 30, 2018, the National Association of Realtors reported that pending home sales rose more than expected after a relatively soft selling season so far this year. Conflicting news, it would seem.

Not really. There’s more to it below the surface. And I, your humble host, will pull back the curtains for you now.

What we have right now, folks, is a situation where real in many of those hot markets, real estate prices are still increasing, but two other statistics have changed: The rate of increase is less than it has been in years – like in Dallas, Texas – and the number of home actually being sold is falling off too, like in Southern California, where CoreLogic tells us that there were SUBSTANTIALLY fewer home sales of all types have sold this year versus last… as in, a whopping 11.8% fewer home sales this year versus last.

So it’s strange… you’ve got rising prices, but decreased activity.

Now I could totally go into geek mode on you with this stuff, but I’ll tell you what I think is happening from a very practical perspective:

What we have is a real estate market that has boomed and boomed and boomed such that it looks like the mortgage meltdown of 2008 never happened at all. That’s only 10 years ago now… and practically NOBODY is sitting on a real estate loss anymore, if they just held on.

Do you know what you’re NOT hearing much about these days, that was a super popular topic back then? Foreclosure filing statistics. I’ll tell you why: There’s almost no bad news there. Foreclosures have tanked practically nationwide. That’s a very good thing.

So what’s going on here with this strange mix of positive and negative data? Everyone has a theory, including me, but let’s look at what we actually KNOW to be true:

The U.S. economy is BOOMING. By any and every reasonable standard, the U.S. economy is in better condition now than at any time in the last 10 years… and maybe longer. It’s eerily… well, quite positively, actually, reminiscent of the 1980’s from about 83 onward… the economy was just clicking on all cylinders… and the same is happening now. Unemployment is lower than it’s been since 2000… GDP is booming… wage growth was higher last month than it’s been all year so far… the fact is, it’s just hard to find any objectively negative indicators about the economy right now.

So what’s going to happen next with housing prices? You people who’ve listened to me for a long time know that I don’t claim to be a prognosticator, and that has not changed. But just from a simple logical point of view, here’s what I expect:

I expect that there will be continued slowing in the rate of appreciation in the super-hot markets, but I don’t believe we’re facing any sort of impending real estate collapse. The fundamentals of the economy are simply too strong for that right now, and there are a number of leading indicators suggesting that it will boom still more.

That said, there are two big potential headwinds to keep an eye on for those of you who may be in the market to unload some of your property to finance retirement or other expenses.

The first headwind is rising interest rates. Interest rates are already on the rise and will likely continue to do so, as is to be expected in a rapidly expanding economy. The thing to watch is whether the Fed goes nuts with this. In recent decades, the Fed has been as much a political entity as an economic one… and that’s NEVER good for the economy. Right now, that tendency appears to be still reasonably in check.

The second potential headwind is the midterm Congressional elections of 2018. Set aside your political biases and beliefs for just a moment, and let’s make some rational predictions here.

What we know, without a doubt, is that the stock market tends to be a leading indicator of the broader economy. We also know that when President Trump was elected in 2016, from the very next day onward for a very long time, the market boomed upwards with a ferocity and consistency that was absolutely breathtaking, which means that the market believed… even though nobody seemed to want to admit it… that they WANTED Trump policies for the good of the economy.

So fast forward to the election to happen in November of this year. Should the Democrats retake the House of Representatives, you can be certain that Congress will instantly slam the door shut on Trump’s economic objectives. There will be a number of things he can continue to do independently, but to effect real change, he needs Congress. So if the Democrats retake Congress, the Trump boom in the economy will likely stagnate… and I bet the stock market will start to bleed consistently.

What I expect, overall, is more of a plateau in real estate values rather than a hard decline.  In a weaker economy, sure… you might predict a bit of a collapse. But a weak economy is not what we have right now. It’s strong, and arguably getting much stronger.

What’s the prescription? Same as always: With your real estate investments, focus on cash flow. Cash flow, cash flow, cash flow. Strong cash flow makes it wholly unnecessary for you to focus much on flighty valuations in real estate or stocks or anything else. Enough cash flow from your investments, and simply nothing else matters. Cash flow is king.

And I can’t wrap up today without mentioning the absolute slaughter of Facebook stock last week… a meltdown that slashed $100 BILLION of value from Facebook. That’s never happened before in the history of the stock market that a company has taking such a quick market cap slashing of that degree.

I bring this up for two reasons:

First, for any of you who remain focused on investing your money in Wall Street, you should take the time to learn about stock options as a way to hedge your risk. You buy insurance for your real estate… I think it’s a bit foolish not to do the same for your investments if it’s simple and economical to do that… and that’s what stock options can do for you.

Second… the Facebook debacle reminds me of one of the reasons it’s so wonderful to invest in non-Wall Street assets… and that is that with a bit of effort, you can actually buy assets at a discount versus their current value… and thereby build in a strong cushion against loss. You can’t do that with Facebook. As I look right now, Facebook is trading at about $170 per share. That being true, there’s no way you’re going to be able to buy those shares at a huge discount versus their current price. But in real estate, for example, it happens ALL THE TIME that you can buy real estate far below it’s market value. That’s a huge difference… a huge reason to seriously look at pushing more and more of your assets AWAY from Wall Street and into assets you actually control and understand yourself.

That is all for today, my friends… I’ll be back with you tomorrow and will tell you something I’m observing in that industry known as “turnkey rental properties”… this is a big deal… and NOBODY is talking about it… except for me, tomorrow, on this very show

I am, of course, Bryan Ellis. This is Self-Directed Investor Talk, the biggest, fastest-growing self-directed investor podcast in America.

------

Self-Directed Investor Talk is a production of the Self-Directed Investor Society. This content is not intended to be advisory in nature and is not offered with the intention of providing legal, tax or other licensed professional guidance to any listener… be sure to see your own licensed advisors for that type of advice. This broadcast is copyright 2018 and is used under license from the Self-Directed Investor Society.

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

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

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

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

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

https://SDITalk.com/296 -- What is the real purpose of your IRA custodian? It’s probably not what you think, but I’ll tell you the real answer. I’m Bryan Ellis. This is episode #296 of Self-Directed Investor Talk.

-----

https://SelfDirected.org

https://SelfDirected.org/ira

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