Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Investing In Real Estate And Other Alternative To Grow Your Retirement

978 views

Published on

This is an introduction to self-directed IRAs and how they can be used to invest in alternative assets like Real Estate, Notes, Precious Metals, Oil & Gas, Entities, and a whole lot more.

  • Be the first to comment

Investing In Real Estate And Other Alternative To Grow Your Retirement

  1. 1. Investing in Real Estate and Other Alternative Assets to Grow Your Retirement
  2. 2. Disclaimer <ul><ul><ul><li>The Entrust Group, Inc. and its franchisees (&quot;Entrust&quot;) do not provide investment advice or endorse any products. </li></ul></ul></ul><ul><ul><ul><li>All information and materials are for educational purposes only. All parties are encouraged to consult with their attorneys, accountants and financial advisors before entering into any type of investment. </li></ul></ul></ul>
  3. 3. Who is Entrust? <ul><li>LARGEST NETWORK of Self-Directed TPAs. </li></ul><ul><li>NO CONFLICTS OF INTEREST with how you want to invest. </li></ul><ul><li>WITHOUT LIMITS imposed by other custodians. </li></ul><ul><li>OVER 25 YEARS managing self-directed accounts! </li></ul>
  4. 4. Traditional Custodians What Wall Street Doesn’t Want You To Know
  5. 5. Traditional Custodians Never, ever think outside the box!
  6. 6. Entrust’s Philosophy <ul><li>You don’t have to think outside the box, because the box is bigger than you think! </li></ul>
  7. 7. What is a “Self-Directed” IRA? An IRA in which the IRA owner directs all investments in the account. There is no legal distinction between a “self-directed IRA” and any other IRA except with a truly self-directed IRA the account agreement allows the broadest possible spectrum of investments.
  8. 8. Take control of your retirement! What are the benefits of self-direction?
  9. 9. Diversification What are the benefits of self-direction?
  10. 10. <ul><ul><li>Tax Savings </li></ul></ul>IRS IRA Investor What are the benefits of self-direction?
  11. 11. Social investing! It’s midnight. Do you know where your IRA dollars are? What are the benefits of self-direction?
  12. 12. <ul><ul><li>Invest in what you know best! </li></ul></ul>What are the benefits of self-direction?
  13. 13. Why save for retirement? <ul><li>Realtor Rose is 51 years old. </li></ul><ul><li>Rose has saved $200,000 for retirement. </li></ul><ul><li>Rose earns $80,000 net per year on her Schedule C. </li></ul><ul><li>Rose would like to have retirement income of $60,000 (75% of her working income) so she can retire in style and enjoy life. </li></ul>
  14. 14. <ul><li>Assuming 6% income from her retirement assets, and ignoring the effects of inflation, Rose needs to have $1,000,000 in retirement assets when she retires in 15 years. </li></ul><ul><li>This means Rose’s retirement savings must grow at a rate of more than $53,000 a year, including gains from her investments and contributions. </li></ul>Why save for retirement?
  15. 15. Why save for retirement? <ul><li>Rose’s choices include: </li></ul><ul><li>Dying sooner </li></ul><ul><li>Working longer </li></ul><ul><li>Relying on Social Security </li></ul><ul><li>Increasing savings </li></ul><ul><li>Increasing yield from assets </li></ul>
  16. 16. What types of plans can be self-directed? <ul><ul><li>Traditional IRA </li></ul></ul><ul><ul><ul><li>(including rollovers) </li></ul></ul></ul><ul><ul><li>Roth IRA </li></ul></ul>
  17. 17. <ul><ul><li>Employer plans: </li></ul></ul><ul><ul><li>SEP IRA </li></ul></ul><ul><ul><li>SIMPLE IRA </li></ul></ul><ul><ul><li>Individual 401(k) </li></ul></ul><ul><ul><li>Roth 401(k) </li></ul></ul>What types of plans can be self-directed?
  18. 18. <ul><ul><li>Special plans: </li></ul></ul><ul><ul><li>Coverdell Education Savings Account (ESA) </li></ul></ul><ul><ul><li>Health Savings Accounts (HSA) </li></ul></ul>What types of plans can be self-directed?
  19. 19. <ul><ul><li>ALL of the above accounts can be self-directed! </li></ul></ul>What types of plans can be self-directed?
  20. 20. Which account is right for Rose ?
  21. 21. Roth IRA There are worse problems to have! But wait…there’s hope!
  22. 22. Roth IRA Fun Fact #1 <ul><li>You can take a tax and penalty free distribution to help purchase a home if you are a “First-time Homebuyer.” </li></ul><ul><li>“ First-time homebuyer” means that you and your spouse have not had a present interest in a main home during the prior 2 year period. </li></ul><ul><li>First-time homebuyer can be you or other family members, including children or parents. </li></ul><ul><li>$10,000 lifetime limit per person. </li></ul>
  23. 23. Roth IRA Fun Fact #2 <ul><li>Distributions from a Roth IRA of any amount up to your total contributions at any time are PENALTY FREE and TAX FREE ! </li></ul><ul><li>Great for those who may need access to these funds prior to age 59 ½. </li></ul><ul><li>Make your child a millionaire by encouraging savings in a Roth IRA risk free while young. </li></ul>
  24. 24. Traditional IRA <ul><li>Can be converted to a Roth IRA if modified AGI is $100,000 or less. </li></ul><ul><li>IMPORTANT NEWS FLASH : In 2010, the $100,000 limit for converting to a Roth IRA is removed! </li></ul><ul><li>For conversions in 2010, you may pay the taxes 50% in 2011 and 50% in 2012! </li></ul>
  25. 25. Rose ’ s Work Plan Options <ul><li>In addition to her Roth IRA or Traditional IRA, Rose may have one of several types of retirement plans related to her working income. </li></ul><ul><li>Rose’s options include: </li></ul><ul><li>- SEP IRA </li></ul><ul><li>- SIMPLE IRA </li></ul><ul><li>- Profit Sharing/401(k) Plan </li></ul>
  26. 26. Rose’s Work Plan Comparison <ul><li>For 2009 tax year, Rose can put: </li></ul><ul><li>- $16,216 into a SIMPLE IRA or </li></ul><ul><li>- $14,870 into a SEP IRA or </li></ul><ul><li>- $36,870 into a Profit Sharing/401(k) </li></ul><ul><li>Which is best? </li></ul>
  27. 27. But wait, there’s more…. <ul><li>Rose may qualify for 2 additional types of Entrust self-directed accounts: </li></ul><ul><li>- Health Savings Account (HSA) </li></ul><ul><li>- Coverdell Education Savings </li></ul><ul><li>Account (ESA) </li></ul>
  28. 28. Health Savings Account (HSA) <ul><li>Used to pay qualified medical expenses, which are broadly defined. </li></ul><ul><li>Contributions to HSAs are TAX DEDUCTIBLE . </li></ul><ul><li>Distributions for qualified medical expenses are TAX FREE FOREVER! </li></ul><ul><li>No income limits for contributions . </li></ul>
  29. 29. Health Savings Account (HSA) <ul><li>Catch up contributions are permitted after age 55. </li></ul><ul><li>Must have a High Deductible Health Plan (HDHP). </li></ul><ul><li>Contributions after Medicare enrollment are not permitted (currently age 65). </li></ul>
  30. 30. Coverdell Education Savings Account (ESA) <ul><li>Used to pay qualified education expenses. </li></ul><ul><li>Eligible expenses include college expenses as well as expenses for elementary or secondary school. </li></ul><ul><li>Contributions are not deductible, but distributions for qualified education expenses are TAX FREE FOREVER! </li></ul>
  31. 31. How much can you contribute with $30,000 in wage income (2009)? <ul><li>Roth IRA – Husband (50+) $ 6,000 </li></ul><ul><li>Roth IRA – Wife (50+) $ 6,000 </li></ul><ul><li>Roth 401(k) Salary Deferral (50+) $22,000 </li></ul><ul><li>Profit Sharing Contribution (25%) $ 7,500 </li></ul><ul><li>Health Savings Account (Family) $ 5,950 </li></ul><ul><li>(Catch Up Contribution $1,000 if 55) </li></ul><ul><li>Education Savings Account (1 child) $ 2,000 </li></ul><ul><li>Totals $49,450 </li></ul>
  32. 32. Restrictions on IRAs People Restrictions Transaction Restrictions Investment Restrictions
  33. 33. People Restrictions on IRAs Disqualified Persons = Those persons who cannot benefit from or enter into transactions with your IRA or other plan.
  34. 34. Think of your IRA as Mr. Ira You Mr. Ira People Restrictions on IRAs
  35. 35. Disqualified persons may not enter into transactions with Mr. Ira You Mr. Ira NO NO People Restrictions on IRAs
  36. 36. Mr. Ira Fiduciary Disqualified Persons People Restrictions on IRAs
  37. 37. Fiduciary “F” (includes IRA Owner) Member of F’s Family Corporation “C” if F owns (directly or indirectly) 50% or more of vote or value of stock Partnership “P” if F owns (directly or indirectly) 50% or more of capital or profits interest in P Trust or Estate “T” if F owns (directly or indirectly) 50% or more of Beneficial interest in T 10% or more partner or joint venturer with C F’s Spouse F’s Ancestor F’s Lineal Descendant “LD” LD’s Spouse Officer or Director of C Highly Compensated Employee of C (10% or more of wages) 10% or more shareholder of C Person with management or administrative functions of P Highly Compensated Employee of P (10% or more of wages) 10% or more partner of P Trustee of T Highly Compensated Employee of T (10% or more of wages) 10% or more beneficial interest owner of T 10% or more partner or joint venturer with P 10% or more partner or joint venturer with T IRA
  38. 38. Prohibited Transaction Restrictions Any direct or indirect Sale, exchange, or lease
  39. 39. Lending Money Prohibited Transaction Restrictions Any direct or indirect
  40. 40. Goods, Services, or Facilities Prohibited Transaction Restrictions Any direct or indirect
  41. 41. Fiduciary self dealing Prohibited Transaction Restrictions Any direct or indirect
  42. 42. What is the effect of a prohibited transaction? Is there an IRA Jail?
  43. 43. What is the effect of a prohibited transaction?
  44. 44. What is the effect of a prohibited transaction?
  45. 45. Investment Restrictions Life Insurance Contracts
  46. 46. Investment Restrictions Collectibles
  47. 47. Investment Restrictions <ul><ul><li>Collectibles are defined as: </li></ul></ul><ul><ul><li>Any work of art; </li></ul></ul><ul><ul><li>Any rug or antique; </li></ul></ul><ul><ul><li>Any metal or gem; </li></ul></ul><ul><ul><li>Any stamp or coin; </li></ul></ul><ul><ul><li>Any alcoholic beverage. </li></ul></ul><ul><ul><li>An exception exists for certain U.S. minted gold, silver and platinum coins, coins issued by U.S. states, and gold, silver, platinum or palladium bullion. </li></ul></ul>
  48. 48. Owning a Business Unrelated Business Income (UBI) Renting Personal Property
  49. 49. Debt Financed Rental Income Unrelated Debt Financed Income (UDFI) Debt Financed Capital Gains
  50. 50. Unrelated Business Income Tax Partnership Income
  51. 51. 401(k) Exemption Unrelated Debt Financed Income (UDFI)
  52. 52. What can I invest in with my IRA?
  53. 53. What investments are you knowledgeable about? You can buy that in your IRA!
  54. 54. Investment Choices <ul><ul><li>Real Estate, including foreign property </li></ul></ul><ul><ul><li>Real Estate Notes </li></ul></ul><ul><ul><li>Secured/Unsecured Notes </li></ul></ul><ul><ul><li>Limited Liability Companies </li></ul></ul><ul><ul><li>Limited Partnerships </li></ul></ul><ul><ul><li>Private Stock </li></ul></ul><ul><ul><li>And a whole lot more…… </li></ul></ul>
  55. 55. Horses Investment Choices
  56. 56. Steps to Purchasing Real Estate Assets in a Retirement Plan <ul><ul><li>1. Open a self-directed IRA </li></ul></ul><ul><ul><li>2. Contribute or move funds </li></ul></ul><ul><ul><li>into the self-directed IRA </li></ul></ul><ul><ul><li>3. Locate an investment </li></ul></ul><ul><ul><li>Complete the proper documentation to purchase the asset </li></ul></ul><ul><ul><li>(Buy Direction Letter, Private Placement Instructions, Note, etc…) </li></ul></ul><ul><ul><li>5. “Read and Approve” all the documents prior to closing </li></ul></ul>
  57. 57. <ul><ul><li>6. After your approval of all documents, Entrust signs the closing documents and funds your transaction </li></ul></ul><ul><ul><li>7. Asset is recorded in the name of your IRA, for example: </li></ul></ul><ul><ul><li>Entrust Retirement Services, Inc. FBO John Smith IRA #12345-11 </li></ul></ul><ul><ul><li>8. All expenses come from your IRA and all income stays in your IRA </li></ul></ul>Steps to Purchasing Real Estate Assets in a Retirement Plan
  58. 58. Case Studies <ul><ul><li>Rental Property </li></ul></ul><ul><ul><li>Rehab Real Estate </li></ul></ul><ul><ul><li>Flipping </li></ul></ul><ul><ul><li>Options/Assignments </li></ul></ul><ul><ul><li>Real Estate Note </li></ul></ul><ul><ul><li>Entity Investment </li></ul></ul>
  59. 59. Purchase Rental Real Estate for Cash Example #1
  60. 60. Example #1 <ul><li>Purchase Price: $330,000 </li></ul><ul><li>No. of Units: 10 </li></ul><ul><li>Gross Rents Collected in April, 2008: $5,235 </li></ul><ul><li>Gross Rents for Year: $62,820 or 19% </li></ul><ul><li>(Still have yet to account for appreciation) </li></ul>
  61. 61. Example #1 <ul><li>Purchase Price: $40,000 </li></ul><ul><li>Tax Value: $94,000 </li></ul><ul><li>Square Footage: 2,928 </li></ul>
  62. 62. Tales from The Money Vault <ul><li>Purchase Price: $438,900 </li></ul><ul><li>Loan Amount: $307,000 </li></ul><ul><li>Loan Terms: 8.15% fixed, non-recourse, annual payments </li></ul><ul><li>Cash from IRA: $137,391 </li></ul>
  63. 63. Tales from The Money Vault <ul><li>Sales Price 18 Months Later: $614,460 </li></ul><ul><li>Net Profit Before UDFI Tax: $124,462 </li></ul><ul><li>UDFI Tax : $12,591 </li></ul><ul><li>Net Profit After Paying UDFI Tax: $111,871 </li></ul><ul><li>Net Return on Investment: 81.43% </li></ul>
  64. 64. Example #2 Purchase, Rehab and Resale
  65. 65. Example #2 <ul><li>Purchase Price: $101,000 </li></ul><ul><li>Rehab Costs: $30,000 </li></ul><ul><li>Sales Price: $239,000 </li></ul><ul><li>Profit After Sales and Holding Costs: $94,000 </li></ul>
  66. 66. Tales from The Money Vault Purchase and Immediate Resale (Flipping)
  67. 67. Tales from The Money Vault <ul><li>Purchase Price: $503,553.60 </li></ul><ul><li>Sales Price: $650,000.00 </li></ul><ul><li>Net Proceeds to IRA/401(k): $146,281.40 </li></ul>
  68. 68. Tales from The Money Vault Assignments and Options – Getting Paid NOT to Buy!
  69. 69. Tales from The Money Vault <ul><li>Purchase Price: $5,500 </li></ul><ul><li>Earnest Money: $100 </li></ul><ul><li>Assignment Fee: $8,500 </li></ul><ul><li>Profit in Only 30 Days: 8,400%! </li></ul>
  70. 70. Example #3 Hard Money Lending/Private Money
  71. 71. <ul><li>Jack Brown has $100,000 in an IRA and wants to loan $70,000 to an investor as a first mortgage on a $100,000 investment home. </li></ul><ul><ul><ul><li>70% LTV (loan to value) </li></ul></ul></ul><ul><ul><ul><li>12% interest rate </li></ul></ul></ul><ul><ul><ul><li>Interest only payments with </li></ul></ul></ul><ul><ul><ul><li>balloon payment in 1 year </li></ul></ul></ul><ul><ul><ul><li>Minimum loan term of 3 months </li></ul></ul></ul><ul><ul><ul><li>3% origination fee </li></ul></ul></ul><ul><ul><ul><li>Borrower pays all costs for legal and Entrust fees </li></ul></ul></ul>Example #3: Real Estate Note
  72. 72. Does lending work? <ul><li>Balance of Account 9/25/2006: $64,960.09 </li></ul><ul><li>Anticipated Balance 3/24/2009: $87,257.43 </li></ul><ul><li>Dollar Increase in 30 Months: $22,297.34 </li></ul><ul><li>Percentage Increase in 30 Months: 34.32% </li></ul>
  73. 73. Example #4 Private Placements Private Stock
  74. 74. Example #4 <ul><li>Initial Investment: $50,000 </li></ul><ul><li>Partnership Distributions: $59,321 </li></ul><ul><li>Current Estimated Equity: $31,598 </li></ul><ul><li>Estimated ROI in 36 months: 82% </li></ul>
  75. 75. Example #4 <ul><li>Purchase Price Feb. 2007: $10 per share </li></ul><ul><li>Purchase Price April 2009: $15 per share </li></ul><ul><li>Total Assets as of 4-30-2009: $250,000,000 </li></ul><ul><li>ROI after 2 years: 50% </li></ul>
  76. 76. <ul><ul><li>IRAs can hold all types of investments, not just securities. </li></ul></ul><ul><ul><li>2. Partnerships and split ownerships are allowed. </li></ul></ul><ul><ul><li>3. IRAs and other Entrust self-directed plans grow tax deferred or tax free. </li></ul></ul><ul><ul><li>All plans qualify & partial transfers are allowed. </li></ul></ul><ul><ul><li>Take control of your retirement today! </li></ul></ul>5 Key Points
  77. 77. How can I get more information? <ul><li>www.EntrustTexas.com </li></ul><ul><li>800-320-5950 or 214-800-3488 </li></ul><ul><li>[email_address] </li></ul>For More Information:

×