2013.4.2 david coe presentation slides

the power of REAL ESTATEinside your

RETIREMENT ACCOUNT

Proprietary & Confidential, Property of Freedom Growth

who we are

Real EstateInvestment Advisors

Self Directed IRAConsultants

Proprietary & Confidential, Property of Freedom Growth

what we do

Self Directed IRA

Proprietary & Confidential, Property of Freedom Growth

agenda

Intro to self-directed retirement accounts

Actual Client Case Studies

Final Exam

Section 1

Introduction to Self-Directed

Retirement Accounts

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Art

Proprietary & Confidential, Property of Freedom Growth

investment restrictions

Collectibles

Life Insurance

S Corps

Prohibited Assets

Proprietary & Confidential, Property of Freedom Growth

disqualified persons

Certain family members cannot do business with your IRA

• YOU!• Your Spouse• Your Parents• Your Grandparents• Your Children• Your Grandchildren• Spouses of Lineal

Descendants• IRA Fiduciary

IRA

Proprietary & Confidential, Property of Freedom Growth

what can go into an ira

IRA =Special Safe

Real Estate

Superbowl Tix

Private Biz Bonds

Cash StocksMutual Funds

Precious Metals

Foreign Currency

takeaway #1

Self-Directed =

Unrestricted

Proprietary & Confidential, Property of Freedom Growth

types of retirement accounts

Traditional IRA.....................................................Roth IRA...............................................................SEP or SIMPLE IRA...............................................401(k)..................................................................Pension Plan.........................................................Individual 401(k) or Solo(k)..............................529 College Plan.................................................Educational Savings Account or ESA..............Flexible Spending Account or FSA.................Health Savings Account or HSA......................

YESYESYES

MAYBEYESNOYESNOYES

MAYBE

Proprietary & Confidential, Property of Freedom Growth

3 step process

1. Open Account

2. Fund IRA

3. Invest

takeaway #2

#1 Set up SD IRA#2 Find an Investment

Proprietary & Confidential, Property of Freedom Growth

the players

CUSTODIANS PROFESSIONALS INVESTMENTS

Section 2Case Studies

Jim - SD IRA

Barbara and William - SP LLC

Gabby and Michael - Solo(k)

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Proprietary & Confidential, Property of Freedom Growth

case study #1

Jim - Medical Professional

Age 47

$85K in previous 401(k) plan

Looking for cash flow and growth

Wants to be moderately passive

Willing to leverage

takeaway #3Start by Saving

YOU CAN’T INVEST MONEY YOU DON’T HAVE

Proprietary & Confidential, Property of Freedom Growth

how it works

Traditional IRA

$200,000-$85,000$115,000

$85,000-$80,000

$5,000

$36,000

Rental House

Self DirectedIRA Custodian

$11,000

Trust Deed

$33,000

Note

Proprietary & Confidential, Property of Freedom Growth

taking title in an ira

Owner Investment

Another Party in Escrow

IRA takes title

“IRA Custodian Name FBO Client Name #XXXXXX”

IRA “owns” property

Client can manage the investment

Self DirectedIRA Custodian

Proprietary & Confidential, Property of Freedom Growth

taxes on iras

Unrelated Business Income Tax - UBIT

Tax on non-taxable entities that make profit unrelated to their “purpose”

Applies to fix-and-flippers using retirement accounts

Needs to be a hobby, not a business

Unrelated Debt Financed Income - UDFI

Tax on leveraged profits for a non-taxable entity

Profit taxed based on % leveraged

•A 40% loan will require that 40% of profits are taxed

Proprietary & Confidential, Property of Freedom Growth

case study #1

Proprietary & Confidential, Property of Freedom Growth

sd ira real estate - pop quiz

Owning real estate inside of your IRA doesn’t make sense if there are no tax breaks, right?

NoIf I buy the property in Mammoth, can I use it for one

week a year?

NoCan I rent it to my son if he pays full market rent?

No

Proprietary & Confidential, Property of Freedom Growth

sd ira real estate - pop quiz

Do I have to hire a property manager if I want to hold real estate in my IRA?

NoCan I get a loan to create leverage?

YesIs it possible to avoid or minimize UDFI if I take a loan?

Yes

Proprietary & Confidential, Property of Freedom Growth

case study #2

Barbara - Nurse, William - Auto ProfessionalAge 65 & 67Recently retired

Barbara from large hospital groupWilliam from auto dealership

Barbara, pension vs. lump sum distributionLooking for cash flow and capital preservation

Utilizing cash flow for living expensesWant to be completely passive

Proprietary & Confidential, Property of Freedom Growth

setting up a special purchase LLC

Both opened a SD IRA

Attorney created LLC

LLC has separate bank account

Make investments via LLC

Check writing capabilities• Checkbook IRA or Real Estate IRA

IRA owner is Manager

SP LLC

Wife

Husband

Proprietary & Confidential, Property of Freedom Growth

checkbook ira investing

Self-Directed IRA

$350,000-$350,000

$0

$350,000-$250,000$100,000

$250,000-$245,000

$3,000

SP LLC

Special Purpose LLCPension Plan

$50,000TD Fund

$25,000Note Fund

Note$42,000

MHP Fund$50,000

Fund Flip$75,000

Proprietary & Confidential, Property of Freedom Growth

flip renovations

takeaway #4

No sweat equity is allowed

The IRS ProhibitsNon-Cash Contributions

Proprietary & Confidential, Property of Freedom Growth

case study #2

Proprietary & Confidential, Property of Freedom Growth

sd ira real estate deal- pop quiz

If I’m a real estate agent, can I take a commission on the purchase or sale?

NoIt’s OK if I do some of the work, right?

NoMy brother is a contractor. Can I hire him to do the work?

Yes

Proprietary & Confidential, Property of Freedom Growth

sd ira real estate deal- pop quiz

If I hold it for more than a year, can I avoid capital gains?

YESHow many properties can I safely flip before UBIT kicks in?

~THREEIf I run out of money, can I transfer more money to my IRA?

YES

Proprietary & Confidential, Property of Freedom Growth

case study #3

Gabby - Realtor, Michael - AttorneyAge 54 & 56Gabby long time self-employed

Entering her primeMichael long time employee at a firm

Recently started his own practiceWant to limit exposure to the stock marketTwo kids in college

Proprietary & Confidential, Property of Freedom Growth

solo(k)s are awesome

SEP on steroidsContribute as employer and employee

Who’s eligibleSolo business owners with no full time

employees

AdvantagesHigher contributions for moderate earnersFaster to $50K per yearNo income limitations on RothLoans- can be used for college!UDFI exempt

Custodian not necessary!

Individual 401(k)or

Solo(k)

Proprietary & Confidential, Property of Freedom Growth

how it works

$300,000-$190,000$110,000

$190,000-$184,000

$6,000

Self DirectedSolo(k)

Old 401(k)

Note$43,000

Note$41,000

$50,000TD Fund

Fund Flip$50,000

Proprietary & Confidential, Property of Freedom Growth

case study #3

Proprietary & Confidential, Property of Freedom Growth

final exam - real estate in your IRA

When deciding on an investment, I should always look for the highest possible return?

No!Should I wait to find an investment and then open up a

self-directed retirement account?

NoWhat’s more important, the operator or the investment?

The OperatorWhat’s the most important thing to learn about being a

real estate investor?

Evaluating Risk

takeaway #5

WHO YOU INVEST WITH

MATTERS MORE THAN

WHAT YOU INVEST IN

Thanks!To get a copy of this presentation

Text “Freedom” to 24587

David Coedavid@freedomgrowth.com

www.freedomgrowth.com

https://www.facebook.com/FreedomGrowth