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Using a self directed ira to create hassle free cashflow


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Professional real estate investor David Campbell and Kaaren Hall president of uDirect IRA Services share the philosophy, strategies, and tactics behind using a self-directed IRA to create hassle-free cashflow.

In this webinar you are guaranteed to learn:

1) what is a self-directed IRA and why almost every American needs one

2) how easy it is to set up and manage a self-directed IRA

3) how to make sure your self-directed IRA stays tax deferred for as long as you want it to

4) how to use your self-directed IRA to retire younger than you thought possible.

5) the pros and cons of owning real estate in a self-directed IRA

6) how to get the best financing for your self-directed IRA

7) the difference between UDFI & UBIT and how to minimize your tax bill

8) which investments should you own personally and which investments are better suited for your IRA.

The answers to these questions might surprise you. You'll not only hear the perspective of self-directed IRA company president Kaaren Hall, but from professional investor David Campbell who has been using self-directed IRAs as a core part of his investing strategy since 2005.

This webinar is appropriate for both new and well seasoned investors. You can experience the video recording of this webinar by visiting

Published in: Economy & Finance, Business
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Using a self directed ira to create hassle free cashflow

  1. 1. Using a Self-directed IRA to Create Hassle-free Cashflow David Campbell Kaaren
  2. 2. 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
  3. 3. Kaaren Hall, PresidentuDirect IRA Services, LLC(866) uDirect IRA Services, LLC 2522 Chambers Road, Ste 100 Tustin, CA 92780
  4. 4. 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
  5. 5. 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
  6. 6. Compelling WHY Husband Father Musician Regular guy
  7. 7. 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
  8. 8. 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
  9. 9. 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
  10. 10. Essential Resources cash cashflow LIMITED credit equity time LIMITED and INFINITE talent strategic relationships INFINITE control of an opportunity
  11. 11. 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
  12. 12. 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.
  13. 13. 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
  14. 14. 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.
  15. 15. What About Losses?Losses• Cannot be written off taxes• Cannot be replaced in the retirement plan
  16. 16. 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
  17. 17. 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.
  18. 18. 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.
  19. 19. Disqualified Person• Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).
  20. 20. Qualified Persons• Aunts & Uncles• Cousins• Brothers & Sisters• Unrelated friends• Nieces & Nephews
  21. 21. 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
  22. 22. Self-Directed IRA - Structure• You• Your IRA• TPA• Custodian
  23. 23. 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
  24. 24. 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
  25. 25. 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.
  26. 26. 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)
  27. 27. 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
  28. 28. 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
  29. 29. 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
  30. 30. 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
  31. 31. 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.
  32. 32. 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
  33. 33. 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
  34. 34. ExampleFather & Son buy a houseFather: 50% CashSon: 50% Traditional IRATitle reads as:Custodian FBO Son’s IRA 50%, Father 50%, TIC
  35. 35. 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
  36. 36. 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.
  37. 37. 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
  38. 38. 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
  39. 39. 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
  40. 40. 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
  41. 41. 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
  42. 42. 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
  43. 43. 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
  44. 44. 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
  45. 45. 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.
  46. 46. 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:
  47. 47. must take house Paid $30,000 Rehab: $15,000 Appraised: $55,000 Rents: $550/month
  48. 48. Co-investing with your IRA + IRA $$$ =
  49. 49. 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
  50. 50. Personal Investment Philosophy FREE Consultation Passive investing Active syndicating Equity Exchanging New Houses In Dallas Hard Money Lending Creative solutionist Dallas Field Trip REG
  51. 51. “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.
  52. 52. Using a Self-directed IRA to Create Hassle-free Cashflow David Campbell Kaaren