Seatlle investors club presentation on self-directed IRAs

Self-Directed IRA and 401(K) Tax Advantaged Funds for Real

Estate Investing

March 15, 2016

Presentation Agenda

About IRAs

Why people are using IRAs and 401(k) for real estate

Understanding self-directed IRAs

• Basics & benefits

• IRA plan types

• Investment options

• Rules, regulations and prohibited transactions

Borrowing and different ways you can partner an IRA

Case Study: Partnering Self-Directed IRAs

Logistics

What is a self-directed IRA?

Self-directed is an industry term for an IRA that invests in non-traditional assets such as Real Estate, Private Stock, Precious Metals, Promissory Notes, etc.

A self-directed IRA allows you to expand your investment options beyond stocks and CDs, providing a better opportunity to diversify your IRA portfolio.

You are not locked into the limited types of investments offered by banks and brokerages.

All IRAs, including self-directed, are regulated and governed by the same rules found within various sections of the Internal Revenue Code.

2000

2007

2008

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2013

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2014

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$5

$10

$15

$20

$25

Annu-ity Govt PlansDB PlansDC PlansIRAs

Trill

ions

Alternative Investments

Traditional Investments

Growing Your Business

Enhance peoples’ ability to invest in what you sell

Introduce new ways to invest

Show how to use alternative funding resources

Current State of Retirement in the U.S. 1991:

50% of workers expected to retire before age 65 11% of workers expected to retire after age 65

2013: 23% of workers expected to retire before age 65 36% of workers expected to retire after age 65

Over 30% of households have less than $50,000 saved for retirement

Nearly 50% of U.S. workers are not confident that they will retire comfortably

Sources: The 2013 Retirement Confidence Survey, Employee Benefit Research Institute and the Center for Disease Control’s National Center for Health Statistics.

Residential Real Estate Commercial Real Estate Precious Metals Limited Liability

Corporations Oil & Gas Secured and Unsecured

Loans Offshore Real Estate Trust Deeds Almost anything…

What Can I Invest In?

• Many Congressman during the enactment of ERISA owned businesses that were not owned in tax advantaged accounts.

Unfair Competition

• ERISA was intended to encourage saving for retirement.

Benefiting Today’s Lifestyle

• It would be too tempting for some people to pass wealth between generations.

Skipping Estate Taxes

Investment Restrictions

Collectibles • any work of art• any rug or antique• any metal* or gem• any stamp or coin*• any alcoholic beverage

Life Insurance

S Corporations

* Exceptions: Gold, Silver, Platinum & Palladium bullion of certain purity

Your Spouse Your Parents Your Grandparents Your Children Your Grandchildren Spouses of Lineal Descendants IRA Fiduciary

Disqualified Persons

Self-Directed IRAs: Learn to Leverage IRA Funds

Your IRA can partner with a third party or with yourself at the time the asset is purchased

Extend credit with non-secured & secured notes

Invest in private equities, investment funds, and joint ventures

Form an entity with multiple members

Self-directed IRAs can borrow e.g. non-recourse mortgage

Trusts and LLCs (entities)

Advantages: Affords “checkbook” control Immediate access to funds Ease of investing Savings on custodian transaction and other fees Limited liability protection from claims

Disadvantages: Cost to create You maintain records Decisions on ownership interests made at

inception

IRA Purchase of Vacation Property

IRA purchases vacation (rental) property in Hawaii

• Purchase contract must be signed by your administrator unless you have a trust

• Vesting must read “Your Admistrator. FBO J. Smith IRA account 12345 or Your Entity Name”

• All rents/expenses flow into/out of the IRA or IRA Trust

• Cannot stay there on holiday; cannot provide sweat equity

How About a Youth Baseball Park

IRA Purchased a Minority Interest in Park Corporation

The Business Owned a Lease

I Worked There For 2 Years I Earned a Salary Dividends Were Paid Into

My IRA

Example:

• Nephew graduating from college with $60,000 in student loan debt at 7.5% interest rate

• Uncle’s IRA Trust issues $60,000 promissory note to nephew at 4.5% interest rate.

• An attractive return for the lender and a substantial diminishment in rate for borrower

IRA invests in Promissory Note

Funds from a Qualified Plan, including 401(k), 403(b), 457 plans can be rolled into an IRA.

Plan Types

Traditional IRA

Roth IRA

Individual (k)

SEP & SIMPLE

Other Special Plans:

Coverdell (ESA)

Health Savings Accounts (HSA)

Thank You!

Joe DiDomenico| (425) 449-4554joe@wealthflex.com

Administrator A

Annual Account Fee $ 300

Per Asset Holding Fees for 1 Assets $ 200

Transaction Fees to Fund the LLC $ 150

Total with a $2,000 LLC Facilitator Fee

$2,650

WealthFlex

Annual Account Fee $ 299

Total with a $499 set Up Fee $ 798