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Hard Money Lending and IRAs with Casey Mericle
In this episode, Larry interviewed Casey Mericle from Springfield, Missouri. Casey is an investor, entrepreneur, and business owner. He spends a lot of his time and energy partnering with other people doing hard money loans, options, self-directed retirement accounts, and many more.
Casey shared some of his unique strategies and discussed some of the things he does. He also talked about hard money lending and IRAs.
- Things Casey does
- How paying attention can help lock up a deal
- His background
- His hard money lending business
- Venturing outside
- Self-directed retirement accounts
- Getting into inherited self-directed Roth IRA
- Why inherited IRA is important
- Non-stretch account versus stretch IRA (Inherited IRA)
- Why invest in a self-directed IRA
- Terms of his hard money lending
- Finding investors
- Yields his investors typically make
- Triple secure hard money lending
- What 10/31 exchange is
- How an option works
- Ways to grow a small retirement account
- “Variety is the spice of life.”
- “Pick the things you like the best.”
- “You don't need to have a lot of money in your Self-directed retirement account to grow them exponentially.”
RESOURCES AND LINKS FROM THIS SHOW:
- Casey's Email Address: firstname.lastname@example.org
Larry: Welcome to the Brain Pick-A-Pro Show live from Lake Wylie, South Carolina I am really excited today because we have a special guest on and his name is Casey Mericle. How are you doing buddy?
Casey: I’m doing great!
Larry: Awesome, awesome. So, let me tell you guys a little bit about Casey, okay? He’s an entrepreneur, he’s an investor, business owner, he is over in Springfield, Missouri. Right Casey?
Larry: Yeah. And he spends a lot of his time and energy right now partnering with other people doing hard money loans, doing options, doing stuff in self-directed retirement accounts, doing 10/31 exchanges, all kind of stuffs, so I’m just really excited to have him on today and to be able to have him, share a lot about what he is doing. This is gonna be a little bit different, it’s not gonna be, you know, just straight wholesaling or straight marketing or whatever. He’s got some really unique strategies in things that he does. So welcome Casey, what’s been going on?
Casey: Hi, Larry. To be honest with you, all kinds of stuff. You know, of those things I would say you know my primary business is hard money lending but, you know, I’m constantly doing all kinds of different things. You know finding people for 10/31s, helping people grow their self-directed retirement accounts, partnering and starting businesses so a sprinkle of everything. Variety is the spice of life, you know.
Larry: That’s awesome man, that’s awesome. I love it! I love it! That’s the cool thing about real estate. There are so many different things you can do with real estate, right?
Casey: Exactly, exactly! You just got to pick the thing you like the best which you gotta… it takes a while to go through all of the things so you can pick the thing you like the best, you know.
Larry: And you know what’s funny is you said something earlier before we started recording, you know, the more complicated, the better for you, right?
Casey: Well you know, it’s not… I don’t necessarily try to make it complicated but I find that if it is a little bit more complex that other people don’t necessarily understand and I don’t have as much competition or it locks up the deal for my investors better, you know, just I don’t try to go super complicated. In fact, I try to make it as simple as possible when I’m dealing with people. But paying attention can really help you lock up a deal.
Larry: That’s really cool! So why don’t… let’s kinda start with the basics. Tell us a little bit about yourself, your background, how long have you been in business and then we’ll go from there.
Casey: Sure. I started out in real estate about 15 years ago. I was flipping houses, buying houses on the Courthouse Steps back when you could get deals on the Courthouse Steps. And I have two children, got married with a wife and I sat there and said to myself, “Okay, well how do I make more money and not work as hard?” I’m sure plenty of people have been there and you know, I got into some different things, I got into notes and mortgages. I still do that today. I like that business a lot. And then I got into create a financing of all sorts. And then you know, self-directed IRAs, Solo 401(k) and then eventually I got into lending which I probably like the best out of all of the things that I do. Although, I would say lending with options and my self-directed IRA and my investors’ self-directed IRAs is about my most favorite thing.
Casey: So, that’s kind of the journey.
Larry: That is cool. That is cool. So, tell us a little bit about your hard money lending business, how does that work?
Casey: Yeah! So, over the years I’ve developed a network of investors and a network of deal-finders, really, bird-dogs what have you, I consider them partners. You know, they bring me deals. I vet the deals. I go back to my investors and I say, “Hey, this does look like a deal. Would you be interested in investing?” A lot of times they’ll put up some of the money, I’ll put up some of the money. Other times they’ll put up all of the money, and I’ll put up none of the money. And you know, I’ll give them above average rate of return. And then the borrower will flip the house or they’ll fix it up if it needs it, refinance, buy me out, buy us out, really. Or find an end buyer. And so, nothin’, nothin’ fancy about that that anybody else isn’t doing but there’s, there’s some complexity I guess and how I do it, so.
Larry: Right. Now are you only lending primarily in your local market?
Casey: I would say for the most part, yes, but I get request all over the place and actually I’m starting to branch out from that. I really don’t like to lend on to something that I don’t know about the market and don’t have a good idea. However, I’m trying to expand my reach a little bit, I have been venturing outside. But only in places where I have some other contacts where, you know, they can help me understand the market, where it’s at and value is.
Larry: That’s really good, that is really good. Now, you’re really big on using self-directed retirement accounts, right?
Casey: I am. I am.
Larry: Tell us a little bit about that.
Casey: Yeah, so, uhm, in fact I tried to get all of the people that invest with me to… it ends to self-directed retirement account. So, there’s, there’s several flavors of self-directed retirement accounts. The one that I use primarily is the self-directed IRA, although you know, Solo 401(k), you know, there’s HSA. There’s, there’s, there’s a million of them out there.
I really like that and I like that for my investors because I try to set them up with a raw. So they pay the tax upfront. And then like a snowball rolling down the hill, you know, you start out, you’re growing what they have or what I have. And you basically never have to pay tax, you know. The other thing that I’ve recently gotten into via our friend, Walter Wofford, is an inherited self-directed Roth IRA, which uhm, I’m not 59 and a half yet so this snowball that I’ve been building up over the years is getting bigger and bigger but I can’t touch it without penalty until I’m 59 and a half.
Casey: Advantage to the inherited part of this is I can take distributions immediately if it’s a seasoned Roth inherited account which this one that I just got is. So, I’m looking forward to doing as many deals as I possibly can and that especially with options in lending.
Larry: So let’s talk a little bit about that stretch IRA and that’s what a lot of people call an inherited IRA. Tell our listeners why that is so important and why you have, for lack of a better word, acquired an inherited IRA and why you’re going to focus on that?
Casey: Sure. So basically it’s… I’ve got one non-stretch account and one stretch account right now. So the non-stretch account, both accounts are Roth, so the, the tax has been paid, right? So there’s no penalty for me. But I’ve got to wait until I’m 59 and a half to take distributions without penalty. Whereas the stretch IRA or the inherited IRA, I can take distributions immediately. Now there’s some rules about that and you know, I would, I would encourage everyone to… I would really, really encourage everyone to figure out the rules before they go forward because that’s something you don’t wanna mess up. But being able to do real estate deals, completely tax free and touch them, you know, I’m 38 so before I’m 59 and a half I’ve got 20 years to get there is highly advantageous. It’s gonna save me you know, 30%–40% of my taxes every year. 30%-40% more on every deal I do.
Larry: Awesome, awesome. And guys what Casey is talking about is if someone has an IRA and you inherit that IRA, which you have not, right? And there’s some people out there now that will, even, for lack of a better word, sell you on. I don’t like to use that term but that’s kind of what it is. You can become a beneficiary of an IRA so when someone passes along then you inherit that IRA. And what Casey means by a stretch is that when you inherit that IRA you can take a tax-free distribution over your life span. So like Casey, you’re 38 years old, so let’s say that the actuary tables are 80 years old, okay? So you’ve got 42 years that you can take a distribution of that IRA of an equal share until you’re 80 years old. And also, you can continue to grow that IRA, you can’t add to it as far as the contribution but you can grow the money that’s already in there. And grow it as much as you can. And basically live tax-free for the rest of your life as long you could grow it enough, correct?
Casey: Correct. And what’s funny is you know, people ask me and I’m sure they ask you all the time, “Hey, why would I invest in a self-directed IRA or even in Solo 401(k), there’s so little money I can put in it, right? However, I’ve never ever contributed to one of my self-directed retirement accounts ever.” You know what I do is I find deals, I wrap the money and I join venture deal and then you know, I’ll grow it by a multiple, 10 or 20X isn’t hard to do at all. You don’t need to have a lot of money in your self-directed retirement accounts to grow them exponentially.
Larry: That is so true. Give us an example of, of a type of deal where you can 10 or 20 X a small amount in an IRA.
Casey: Sure. So you know, like I said, I, I do hard money lending all the time, right? So let’s say I get in a hard money loan, let’s say there’s a loan I do on a house for $75,000, right? I might have one of my investors put up majority of that. I might have them put up 74 out of the 75. I might put a thousand of my own money from my self-directed stretch IRA in there. I might say, “Okay, you know you’re, you’re gonna get 8% of this deal.” I’m gonna get everything over 8% of this deal and let’s say you know, the, the bar or cash is out at 15%. Well, that’s an easy way to multiply your money. You do that a couple of times, that’s pretty nice.
Larry: That’s sweet. Now you also do, you do some wraps as well and some options, right?
Casey: Yeah! So, uhm, my favorite thing to do in my IRA is options, sounds like you and I are in agreement there. It’s the highest form of leverage with very little risk, you know. So, uhm, I do the same kinda thing with options. In fact, I got a fairly new venture with a business partner of mine. I, I don’t partner with him in this business but he sells me options, these option loans. And that’s, that’s exactly what I do. I wrap other people’s money in them. I put a little bit of my money in them. And then we either exercise or we don’t exercise and wait for a payoff. Yeah.
Larry: There you go. What kind of terms is your hard money lending?
Casey: Yeah, so well I start everyone at 10% but I go up a couple percent every month just because, I don’t know about you Larry, but I don’t really like going and looking at these places. I find that after I go and look it at the first time if the price goes up then the borrower knows that they need to get done. And I don’t have to go babysit it anymore.
Casey: So, I don’t like babysitting so that’s a good way to stop that. So that’s the hard part of it, you know. The easy part of it is I’ll give somebody a, a no-money-down deal if they get a good enough deal. I’ll even finance their repairs if they get a good enough deal. ‘Cause I, I know my market like the back of my hand. I’ve been here 15 years and I’ve got that part values I’ve got down. The other nice thing I do is I’ll balloon it all at the end ‘cause I don’t really like keeping track of monthly payments. So, I find that if a borrower can get in for no-money-down and a borrower doesn’t have to make monthly payments, I usually put them on 6-month terms. Then they’re pretty happy even if they have to pay a little bit more.
Larry: Right, that’s good. And you don’t have to keep up with the payments. You just have a big pay day at the end. Now, I’m assuming most of these loans are what we would call a rehab-loan where somebody is buying the property to fix it up and re-sell it or fix it up and re-finance and pay you off and then rent it out.
Casey: Yeah, the majority. Although, you know, from time to time I’ll get something else. Like the other day I got a guy that lives here in Springfield ask me about a, a beach house he has in Amelia Island to went on. So, I mean it is super nice. So, so you never know, you never know.
Larry: That’s awesome. That is good. Now how do you find most of your investors that are, that you loan out their money and partner with them?
Casey: Yeah, so different ways. So, uhm, you know early on it was just kinda friends and family just like everyone else. Then you get to a critical mass and you say to yourself, “Okay I’ve got more deals and I have money coming in.” So from that, you know… I found that you know, I don’t have to tell that many people you know. You give somebody a really nice return on their money and you do what you say you’re gonna do. And typically they’ll talk to their friends. So word-of-mouth is great, right? Referrals are amazing. Self-directed IRAs are also great or 401(k), self-directed retirement account in people. There’s a ton of money out there that’s just sitting fallow that somebody would love to make, you know, five, six, seven, eight percent on their money, it’s not that hard to do if you’ve got the deals. If you don’t have the deal flow then it is hard to do of course.
Larry: You know, that’s the key man. That’s the key, you gotta have two things to do real estate, deal flow and money.
Casey: Yup, that’s it. So, hey people, do what you say you’re gonna do. Do it when you say you’re gonna do it. And uhm, it’s, it’s really not too hard to find the money. And like I said, self-directed accounts, people are looking to put that money to work and they just don’t know how all the time. So, I help pull that, you know.
Larry: What kinda yields do you typically… do your investors typically make? Like you said, five, six, seven, eight?
Casey: Yeah, yeah. So, I mean it depends, right? So I give my family members a really good yield if they invest with me but I give them a better yield than I would give somebody else. But, you know, right now, I’ve been paying people five percent on 6-month term. So that’s ten percent in a year. You know, I don’t guarantee anything to whom I say, “Hey, this is the deal, you know. We’re gonna lock this up. I’m gonna triple secure you, here’s how.” And uhm, we’re pretty happy with ten percent. Sometimes I can put their money three times a year. So you know, if they’re willing to give me something at five percent, I’m gonna try really hard to put their money three times a year.
Larry: So explain this triple-secure hard money lending. Explain that a little bit.
Casey: Yeah, yeah. So if you talk to a traditional hard money lender, I feel like I’m giving, giving away all my secrets here. If you talk to a traditional hard money lender, they’re gonna say, “Hey, I’m giving you your first mortgage. It’s gonna be great, it’s gonna take this long. And I’m gonna try to pay you this amount, right.” I come from the Jack Miller-Jack Shay School of Lending. In fact Jack Shay is, I think you know him. He’s the one who taught me this. So it’s not my idea, I’m no genius. But I lend under the guides of buying, really. So, I’m a big trust guy. Take title when to trust, you know. I allow the, the borrower to be the trustee. Myself and my investors are the beneficiaries. So, we actually own the title to the property, so that’s one there. Second layer is first mortgage, typically, not always, sometimes you know. Sometimes you got an out-of-the-box deal and you’ve gotta do somethin’ else. Third deal is, our third layer of security is, I have him sign an unrecorded quit claim. You could do a deed in lieu too which is really nice, you stick in your drawer and if you ever have problems then you’ve got that on file. And really I, I try to go fourth layer. I try to have a nice healthy reserve on hand at all time just in case the deal does blow up that I can come in and buy my investor out.
Larry: So in the trust, you, and your investor are the beneficiaries but the borrower is the trustee.
Casey: Yeah, the trustee… basically ‘cause most of these are rehab loans like you said, right? So they’ve got to go turn on the, the utilities and such. So they need to have their name on it but if they do anything fishy, you know, they can be fired. So, they can be fired, so they’d be out of the trust, you know. The mortgage gives that additional security if they go to sell it out from under us, you know, they’d have a really hard time doing that. And then the, the deed in lieu or the quit claim is just, you know, extra security if one or two doesn’t work then three definitely will, you know.
Larry: That’s really good! I like that! I like that a lot. Haven’t heard of anybody doing all three of those. So tell us a little bit about, you, you, you also do some 10/31s, right? Explain what the 10/31 is first. I’ve done a couple of them and so I’m familiar with them and getting ready to do another one. But just for our listeners, explain what the 10/31 is.
Casey: So 10/31 exchange is a, is a basically a tax deferred exchange where if you’re selling real estate you can enter into a 10/31 with a qualified intermediary, it is what they call it. At the sale you basically place your money with the qualified intermediary. You’ve got 45 days to go find one or more new properties of equal or greater value from the property you sold. From there you have, after you, after you find and provide those, those properties you’ve got 120 days to close on them. And if you complete that with a qualified intermediary, you can’t hold the money, you have to have them hold the money. Then you don’t get charge any tax. You basically defer the tax to a later date. So it’s a great way to pyramid your assets and your real estate activities, tax deferred for a very long time. So you can, you can build your world tremendously. So it’s a great thing to do. So you know, I have people that come to me with money and they say, “Hey Casey you’ve got deal flow. I don’t have deal flow. Can you find somewhere to place X amount of money and uhm, you know, in a short amount of time.” And that’s really right up my alley most of the time.
Larry: That is really cool. That is good. 10/31 can be really good where a lot of people make a mistake and think they can do a 10/31 in of buying and selling properties. Like if you’re a fix and flip or you’re a wholesaler, you can’t do that. You typically need to hold the property. I’ve had some CPAs tell me two tax returns but you know it’s got to be a property that’s held for investment. Not a property that you’re gonna flip, right?
Casey: Yup, correct.
Larry: Yeah, a quick example is that, when I bought my office building, I had a lot. I paid 770 for my office building and I had a lot that I had $40,000 in.
Larry: But it was a commercial lot. So, I, whenever I bought that building I traded that lot as part of the down payment and I 10/31 it into my building at a $300,000 value.
Larry: So, so I only had 40 in it so I deferred the game from 40 to 300 and now I’m getting ready to sell my office building for 1.2.
Larry: And then I’m gonna 10/31 that into a, into a multi-family property.
Casey: Yeah, that’s exactly how it works.
Larry: There you go, that’s good. So tell us a little bit about option. Do you use some options and you really like that as well? Explain a little about what is an option. How does it work? And how are you specifically using them?
Casey: Yeah, I use them in a number of ways. But an option is the right but not the obligation to buy. You’ll see option in just about every MLS contract. Every MLS contract, you’ll see a financing option. You’ll also see an inspection option a lot of times. So, it’s just a contingency in the contract. So, I use options by going and getting contracts or people sell me contracts to purchase properties you know, at deeply discounted prices for putting in very little money, you know. I might pick up an option for a couple thousand dollars on a hundred and fifty thousand dollar house. I might have an option to buy let’s say a hundred less the five thousand that I put up for option consideration, somethin’ like that.
Casey: I love to use options in my self-directed retirement accounts. So I have other people do that in their self-directed retirement accounts. And I’ve, I’ve been really getting into what I call option loans but they’re really kinda, kinda my favorite thing. So I’ve got a, a friend that I partner with in another business and he, he provides me these, these option loans if you will. In my retirement account a lot of times I’ll wrap them with other people. So the only difference between an option and an option loan is really… well there’s, there’s a way to cancel for the, for the person who, who gives me the option or gives us the option I guess. So. But there’s you know, the longer it goes the better it is. I think it’s the greatest thing ever. It, it’s a great way to, you know, hundred extra money.
Larry: That’s awesome. That’s really, really good. So Casey what are some other ways that people can grow a small retirement account? Because a lot of people, you even mentioned this earlier, lot of people may have a retirement account and they’re like. “I can’t put much money in it.” Or even an ESA or an HSA which are both great types of accounts but you can’t put a lot of money into it one time. What are some other ways that people can take a small amount of money and grow it in 10x or 20x that that money and really make a difference. Because you’re not gonna make much money or you’re not gonna do much difference if you got an HSA and you only got $2,000 in there. And you’re, you’re earning 500 bucks a year, you know. So what are some, some… just give us a little rundown of some different ways people can really beef up a small account.
Casey: Yeah, you know, I think if we don’t have deal flow then let’s go to people like yourself Larry or me and say, “Hey, you know, do you have anything that I can do with this, right?” So, what, what I really like to do with people that have small IRAs is try to find deals where I can double their money and try to do that a couple of times with them. So, the same kinda thing we’ve been talking about. You know, let’s say I get one of these option loans. Let’s say it’s for $10,000. I would be willing to put up $9,000, the extra thousand dollars maybe the, the small IRA person could put up. We joint venture. I’d say to them, “Hey, you know, I’ll double your money whenever this pays out”, you know, whatever the agreement is. It just depends on what the agreement is. And uhm, you know, I’ll take the rest and I find that if I do that a couple of times I found a friend.
Larry: There you go. I bet so.
Casey: Yeah, so, you know, that’s, that’s a great way to do it, I think. But finding someone who has deal flow is really helpful because if you find somebody who has deal flow that, that knows what they’re doing, they, they can you know, double your money let’s say. No, they’re not gonna double your money for the rest of your life, right, you know. I, I’m not gonna double anybody’s money for the rest of their life. But I’d probably double it a couple times to get a big enough where two, three, four times to get it big enough where they could go buy a house on their own if they wanted to, you know.
Larry: That’s really cool. And then you help them and then they’re gonna help you at the same time.
Casey: Yeah if they want to, you know. I try to do stuff, I’ve gotten to the point in my life where I just say, “Hey, life is good, you know. If you wanna do that, fine. If you wanna go buy somethin’ else, fine.” But, you know, I find that people typically are pretty happy with you and they’ll like to do business with you again if you are nice enough to do somethin’ like that. So, I’m not looking for reciprocation but it does come my way occasionally.
Larry: That’s good. That is good. So, obviously you being 38 years old, you’re not able to live off the money in your retirement account yet ‘cause you’re not 59 and a half. So what is kind of a day and a life look like for you and are you doing deals outside of your retirement account as well to pay the bills?
Casey: Yes and yes. Yeah I’m doin’, well, primarily hard money loans but like I said I’ll buy and sell something if I find a good deal. I don’t really look for good deals that often anymore ‘cause I have other people that bring me deals that are really good and I don’t have to try that hard. Now that’s disappointing for somebody that’s a beginner because I get asked that all the time. “Hey how, how do you find deals? How do you have deal flow?” And Larry, I am sure you’re like this. I really had a hassle back in the day to build up deal flow. Like I felt for years and years I was grinding every single day all the time to try to find deals. And then, you know, fast forward to the day, I just… apple falls off the tree and hits me in the head with deals. So, keep grinding, you’ll get there. That is what I would say. But as far as, yes, I primarily lend in my personal account to grow my personal wealth still, so I’ve got my own money, I’ve got a couple IRAs, my families got IRAs. So, I’m basically juggling phone calls and paperwork for deals and calling investors and that’s a typical day for me.
Larry: That’s awesome, that’s really good. So, man, Casey this has been a really, really good stuff. I really appreciate you sharing. It’s a lot of, lot of unique things that you’re doing. Like you said at the beginning, you like, you like the deal structure, all that. No wonder you like Walter and those guys ‘cause they can do some pretty complicated deals, right?
Casey: Oh yeah, exactly. I do. I like it. So when you say real estate I’m there.
Larry: That’s awesome. That’s good. So, if somebody wanted to reach out to you, maybe talk to you about what you’re doin’ and maybe you guys work together or something, how would they reach you?
Casey: They can just email me at email@example.com. C-A-S-E-Y @streamlineholdingsllc, so stream like a river, line like a line on a page, holdings plural with an S, llc.com, yeah.
Larry: That’s awesome. That’s awesome. Casey, do you have any parting words for somebody that maybe out there that are just getting started, maybe they’re ready to start growing an IRA, may be they have a small IRA. You have any kind of parting words for them of encouragement?
Casey: Yeah! Don’t get discouraged. It took me years and years before I pulled the trigger on a deal. There are plenty of people out there that are shady and will take your money, so I would say check references and check as many references as you can. But there are plenty of people out there, I mean go to an IRA event. There are plenty of people out there that have good deals that are just looking for money and if you wanna be passive it’s, it’s a pretty easy thing to do, you know.
Larry: That’s so true. Man, I really appreciate you being home today. Thanks a lot for taking the time.
Casey: Yeah, thank you for having me Larry. It’s nice of you.
Larry: That’s awesome man. Thanks a lot. You take care.
Casey: You too, bye now.