Using a self directed ira to create hassle free cashflow

Using a Self-directed IRA to Create Hassle-free Cashflow David Campbell Kaaren Hallwww.HasslefreeCashflowInvesting.com www.uDirectIRA.com

David Campbell Former high school & college band director Professional investor Self-made multi-millionaire Real estate developer Real estate broker Real estate & business advisor Financial mentor Over $800 million of real estate experienceHouses, condo-conversion, multi-family, winery, resort, office,retail, medical office, commercial development, home building California, Texas, North Carolina, Mexico, and Belize

Kaaren Hall, PresidentuDirect IRA Services, LLC(866) 538-3539KHall@uDirectIRA.com uDirect IRA Services, LLC 2522 Chambers Road, Ste 100 Tustin, CA 92780

Begin with end in mindMy Philanthropy: helping other people live moreabundant lives through hassle-free investments bygiving the knowledge and support for our others to invest with mental tranquility.  NOT a sales pitch  NOT investment, legal, or tax advice  NOT a securities offering

WHAT THIS IS ! This IS a service to our existing clients This IS an opportunity to introduce other people to the possibility of living more abundant lives through hassle-free investments by giving the knowledge and support for our others to invest with mental tranquility. This IS a job interview

Compelling WHY Husband Father Musician Regular guy

Deployment Phase If your desired monthly expenses are less than 1% of your “liquid” NET worth$500,000 cash x 1% ROI per month = $5,000

Aggregation Phase If your desired monthly expenses are greater than 1% of your “liquid” NET worth$100,000 cash x 1% ROI per month = $1,000

Aggregation Phase If your desired monthly expenses are greater than 1% of your “liquid” NET worth$100,000 cash x 1% ROI per month = $1,000 cash rate of return expectation

Essential Resources cash cashflow LIMITED credit equity time LIMITED and INFINITE talent strategic relationships INFINITE control of an opportunity

How To Use SD IRA to Retire Younger Than You Thought Possible  cash Traditional IRA  cashflow Self-Directed IRA  credit (other people’s)  equity  time  talent  strategic relationships  control of an opportunity

How to Self-Direct Your Retirement Savings uDirect IRA Services, LLC is not a fiduciary and does not render tax, legal, accounting, investment, or other professional advice. If tax, legal, accounting, investment, or other similar expert assistance is required, the services of a competent professional should be sought.

Self-DirectionWhy Haven’t I Heard About This?• Few attorneys are knowledgeable – About self-directed plans• Few CPAs are knowledgeable – About self-directed plans• IRS rules have allowed self-direction since IRAs were created in mid-1970s

What’s the Difference? Typical IRA Self-Directed IRA• Stocks • Rental Property• Bonds • Notes• Mutual Funds • Private Stock• CD’s • LLC’s • Tax Liens • Foreign Property • Raw Land • Etc.

What About Losses?Losses• Cannot be written off taxes• Cannot be replaced in the retirement plan

What Are The Limits?A Self-Directed IRA can invest in anything EXCEPT1. Life Insurance Policies2. Collectibles 1. Artworks 2. Coins 3. Collectible Cars 4. Antiques 5. Gems 6. Stamps 7. Rugs

What if your funds are with your current employer?Your plan will probably NOT allow you to self-direct Must wait until you leave the company To rollover retirement plan You can request an “in-service” transfer from your current plan administrator.

Prohibited Transactions(IRS Publication 590)• Borrowing money from the IRA• Selling property to it.• Using it as security for a loan.• Buying property for personal use (present or future) with IRA funds.

Disqualified Person• Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).

Qualified Persons• Aunts & Uncles• Cousins• Brothers & Sisters• Unrelated friends• Nieces & Nephews

Prohibited Transactions• Neither you nor any disqualified people may benefit from IRA• Cannot buy, sell or exchange property between plan and – Self or – Disqualified people• Cannot provide goods, services or facilities

Self-Directed IRA - Structure• You• Your IRA• TPA• Custodian

Buying Real Estate With Your IRAPros1. Capital gains are tax free2. Positive cash flow is tax free3. No time limit for holding property4. IRA can borrow money – Leverage your investment5. Potential to earn a larger rate of return on invested capital

Buying Real Estate With Your IRACons1. No tax advantages of owning real estate2. No deduction for capital losses3. You are solely responsible for all gains or losses4. You cannot replace losses

Rule #1There is no such thing as a good property or bad property. There is no such thing as a good investment or bad investment.There is only appropriate and inappropriate ownership and timing.

Inside IRA Outside IRA Ordinary income Long term capital gains with ability to 1031Short term capital gains unable to 1031 Real estate with depreciation that creates an immediately Promissory notes USABLE passive loss Flips Get as much low rate high LTV financing as you can Syndications that are FIRST active Positive cash flowing assets Debt relief faster than w/ no tax bill amortization No equity properties High equity properties(form of asset protection)

Your IRA Can Take A Loan!• Loan must be non-recourse – Upon default, lender can seize subject property only• Upon default, lender cannot – Seize other IRA plan assets – Seize your personal assets

Non-Recourse Loans• Few lenders to choose from – Must be a portfolio loan – Cannot be sold on the secondary market• Larger down payment required – 40% to 45%• Cannot personally guarantee the loan

Personal Guarantees• Personal guarantees by the IRA owner not permitted• Can be personally guaranteed by a third party – Must not be a “disqualified” person – Disqualified people are • Ascendants • Descendants • Spouse and self • And others

Getting the Best IRA Financing PossibleRecourse to your allowed partner and non-recourse TO YOU Group investments Seller financing Swap debt with an non-disqualified investor Blended interest rate

UDFI• Unrelated Debt Financed Income tax• Any property held to produce income is debt-financed property if at any time during the tax year there was acquisition indebtedness outstanding for the property.

UBIT• Unrelated Business Income Tax• If a tax exempt entity engages in a business that is unrelated to its primary purpose, any income derived from such business will be subject to UBIT• IRS Pub 598• UDFI & UBIT are reported on form 990-T

Buying Real Estate - The Process• Open a self-directed account• Shop for a property• Remember, it’s the IRA that is the buyer• Custodian to sign “Offer to Purchase”• Submit a Buy Direction Letter for earnest money deposit• Funds wired to closing from your IRA• Fund & Record• Rents are made payable to your IRA

ExampleFather & Son buy a houseFather: 50% CashSon: 50% Traditional IRATitle reads as:Custodian FBO Son’s IRA 50%, Father 50%, TIC

Disqualified?• Before the deal – Father has no ownership – Son’s Traditional IRA has no ownership• Because this is a new deal – Father and son do not have to worry about the “disqualified person” rule

Disqualified?• After the deal – The “disqualified person” rule comes into effect• Neither Father nor Son can live in the condo – No one who is disqualified to either of them can live in the house • Ascendants, descendants, etc.

After the deal….• After the deal• Neither Father nor Son can ever buy out each other’s ownership – They are disqualified to each other• Expenses and profits are split – 50% to Father • Taxable – 50% to Son’s Traditional IRA • Tax-deferred

What if the IRA depletes itsreserves?1. Make your yearly contribution2. Liquidate other assets in the IRA3. Transfer money from other retirement accounts4. Bring on a partner – Not a disqualified person5. IRA can get a loan6. Sell the asset

IRA-Owned LLC “Checkbook IRA”• IRA purchases shares of a newly-formed LLC formed for this purpose• LLC receives funds in it’s checking account• LLC follows same rules as IRA for investing

3 Types of Plans• IRAs – Individual Retirement Accounts – What you are doing for your own retirement• Qualified Plans – ERISA controlled – Typically, what an employer provides you• Other Plans – Education – Health

Types Of Self-Directed Plans IRAs Qualified Plans Other Plans Traditional 401K/ 457/ 403b Coverdell Health Savings Roth Defined Benefit Account SEP Profit Sharing Simple Individual K Spousal

How Do I Self-Direct?1. Complete an application 1. Provide copy of driver’s license 2. Copy of statement2. Fund your account 1. Annual Contribution 2. Transfer 3. Rollover3. Tell us what you want to invest in

Retiring Earlier Than You Thought Possible Higher Yields Distributions without depletion of principalLaddered strategies: liquid and non-liquid real estate Avoiding the early withdrawal penalty before 59 1/2

Early withdrawal penalty EXEMPTION “IRS 72 t” Retirement Distributions at Any Age NO early withdrawal penalty Substantially equal payments for 5 years or until 59 ½ years old $500,000 principal x 20% ROI = $100,000 annual profit$50,000 profit distributed and TAXED as ordinary income $50,000 income remains in IRA and is TAX DEFERRED

Rule #1There is no such thing as a good property or bad property. There is no such thing as a good investment or bad investment.There is only appropriate and inappropriate ownership and timing.

9 CAP rate based on actual performance 15% cash on cash return from leveraged return Compare this to stock market risk / reward CAP RATE 9% 9%Cash on Cash Return 9% 15% Purchase Price $1,000,000 $1,000,000 Debt $0 $700,000 Equity $1,000,000 $300,000Net Operating Income $90,000 $90,000 Debt Service $0 $45,000 Cash Flow $90,000 $45,000 FREE video training: www.HasslefreeCashflowInvesting.com

must take house Paid $30,000 Rehab: $15,000 Appraised: $55,000 Rents: $550/month

Co-investing with your IRA + IRA $$$ =

Real estate equity as a down party 1 party 2 property House Rite Aid value $500,000 $4,000,000 debt $100,000 $2,500,000 real estate equity $400,000 $1,500,000 cash to balance $1,100,000 $0TOTAL EQUITIES $1,500,000 $1,500,000

Personal Investment Philosophy FREE Consultation Passive investing Active syndicating Equity Exchanging New Houses In Dallas Hard Money Lending Creative solutionist Dallas Field Trip REG CruiseDavid@HasslefreeCashflowInvesting.com

“There are no risky investments, only risky investors.” - Robert Kiyosaki Real Estate Guys10th Annual Investor Summit at SeaMarch 30th – April 7th, 2012 FACULTY: Robert and Kim Kiyosaki, David Campbell, Rich Dad Advisors - Ken McElroy, Wayne Palmer, Tom Wheelwright, Wayne Kirk, Robert Helms and Russell Gray - Hosts of the Real Estate Guys Radio Program.

Using a Self-directed IRA to Create Hassle-free Cashflow David Campbell Kaaren Hallwww.HasslefreeCashflowInvesting.com www.uDirectIRA.com

Using a self directed ira to create hassle free cashflow

by David Campbell

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