In today's show, Larry and Kandas talked about self-directed individual retirement accounts. They also discussed the things you can and cannot do with your self-directed IRAs. In addition, they also touched on the things you should be aware of when dealing with your retirement account.
Welcome to BRAG Radio which is all about being rich and generous. Every week your hosts Kandas and bestselling author Larry Goins will show you how to be rich and generous by investing in real estate. Broadcasting around the world on the BRAG Radio Network from the flagship station WBT in beautiful Uptown Charlotte, here are your hosts the rock stars of real estate; Kandas and Larry.
Larry: Hello Kandas, how are you?
Kandas: I’m good, how are you?
Larry: I am doing excellent. Hey listen if you’re just joining us this is BRAG Radio Network from the flagship station in-what is it- Uptown?
Kandas &Chad: Uptown.
Larry: Uptown Charlotte North Carolina. And on BRAG Radio we talk all about being rich and generous. And how do we do that Kandas?
Kandas: How are we rich and generous?
Kandas: Through real estate.
Larry: That’s right. We teach you how to invest in real estate, right that’s what we do. We’ve been investing I’ve been investing for over 30 years and Kandas has been investing for a long time.
Kandas: Well I’ve been helping you invest for a long time.
Larry: Yes she’s been helping me invest for a long time, at least probably 15-ish. And we teach, we coach, we mentor people and through this show we’re able to help a lot of people and then we encourage you to go out and be generous with your blessings. Right Kandas?
Kandas: That’s the whole goal, get people to a point where they can start helping others.
Larry: That’s exactly right. And on today’s show what we’re going to talk about is self-directed retirement accounts, right.
Kandas: What do you mean? Like what can you do with them?
Larry: Well what is a self-directed retirement account?
Kandas: Explain it Lucy.
Larry: Yeah. So a self-directed retirement account is a lot of people call them SDIRAs right, Self-Directed Individual Retirement Accounts. But most people have an account at say a Schwab or Fidelity or something like that. But with a self-directed retirement account, it’s actually a custodian or custodians that will allow you to use your IRA or retirement funds for alternative investments. In other words, not traditional type investments.
Kandas: Not traditional right.
Larry: Traditional type investments are like mutual funds, stocks, bonds, maybe even options or things like that. But non-traditional investments or what’s called alternative investments, there’s a tremendous amount of things you can invest in, right Kandas?
Kandas: That’s right. we’ve had students come up or let us know some just crazy things that they have used their IRAs to invest in. we had somebody come up and talk to us at a three day event about some type of machine. He buys them in his IRA, refurbishes them and then resells them.
Larry: That’s exactly right.
Kandas: I can’t remember, some type of medical equipment.
Larry: Now the cool thing about it is anybody who’s involved in real estate or going to be involved in real estate is probably either familiar with it, or you will be soon. Because if you’re investing in mutual funds or stocks or bonds and you’re learning real estate and you want to get better returns whether it’s flipping houses or wholesaling houses or being a landlord or whatever, then you want to be able to control or direct.
Kandas: Direct yeah.
Larry: That’s where self-directed comes in. you can determine what you invest in, right. And there’s a lot of things you can but the first thing I want to mention are the things that you cannot invest in because I think that’s important. Don’t you?
Kandas: To know what you can’t do? Yeah sometimes it’s more important to know what you can.
Larry: That is so true. There’s a lot of things that you can invest in but first I want to cover the things that you cannot, okay. Now the law does not- and when I say the law this is the IRS because they are the law when it comes to IRAs.
Kandas: Even if people interpret it differently, apparently yes.
Larry: That’s exactly right. I mean even right on their website they will give a list of all this, but the law does not permit an IRA- and first of all when I say IRA, I want you to think about this, I’m not just talking about IRAs I’m talking about IRAs whether it’s traditional or rough. I’m talking about 401Ks or even HSA, Health Savings Account or an ESA, Education Savings Accounts.
And there are simple IRAs and there’s other things as well. But any type of retirement or tax deferred or tax free account can be self-directed. Now the law does not permit IRA funds to be invested in the life insurance or collectables. You cannot have your IRA buy a life insurance policy on your spouse or anybody else, right.
Larry: The IRS does not allow that, okay. And then the other thing is your IRA cannot invest in collectables okay. That’s very important.
Kandas: Collectables like stamps where stamps are artwork or coins or something like that.
Larry: Yeah absolutely. In fact now before I get into the list and I’m going to give you the list. But before I get into the list, it’s very important to note that if you invest in something, you may have to pay like an additional 10% tax on early distributions.
I wouldn’t say it’s what’s called a prohibited transaction but if you did invest in a collectable and I’m getting ready to give you the list, if you did invest in a collectable and the IRS disallowed that, then you would have to take what’s called an early distribution and then you would pay an additional 10% tax on that, right. Does that make sense?
Kandas: It does.
Larry: Good. So here’s some examples of collectables, okay; artwork. You can’t buy a painting and hang in your living room through your IRA. You just can’t do that, you can’t do it. Any kind of artwork you couldn’t buy a statue, you couldn’t buy any type of artwork, okay. The next thing you can’t buy in your IRA is any kind of rugs like oriental rugs or whatever. Does that make sense?
Larry: You cannot buy antiques in your retirement account. You can’t buy any metals, right with the exception of there are certain kinds of bullion that you can’t buy. And if you’re working with the custodian that they’re trying to sell you that you know what you can get, okay. You cannot buy any gems or jewelry or anything like that. No gems like gemstones or whatever.
Kandas: So what I’m hearing is nothing pretty. You just can’t buy anything pretty or shiny or glittery. That’s what I’m hearing.
Larry: Pretty much so. So yeah like I couldn’t buy my wife a ring and so, “Oh that’s a nice ring.” “Yeah that’s her retirement.”
Kandas: What about cars?
Larry: Well let’s see, you can flip cars right. You can’t buy any collectables.
Kandas: But you could flip them.
Larry: You could flip a car, you can buy a car a resell it. You couldn’t buy like a collectable car to keep for long term investment, right.
Larry: But I have even seen people buy horses like race horses. They’ve bought race horses, and rent them in race or whatever you call that. It wouldn’t be what you call that because I’ve rented my horse in a race, right. So they buy race horses and then they win money and then they sell them at a profit. But you cannot also- you mentioned this earlier Kandas, you cannot buy stamps.
Kandas: I knew the stamp point there.
Larry: You couldn’t buy the-what is it called- the inverted genie, right. Is that the one with the airplane upside down?
Kandas: Something upside down or backwards, ain’t that what inverted means.
Larry: That’s what they call that little stamp, the inverted genie.
Kandas: I hear you.
Larry: But you can’t buy coins. Now there are some exceptions to coins. There are certain coins that you absolutely can buy, right. There are certain coins that you can buy but for the most part you cannot have a coin collection in your retirement account, okay. That’s very important. You can’t buy any alcoholic beverages. You couldn’t buy like $1000 bottle of wine you just can’t do it.
Kandas: So nothing fine and nothing shiny. We got it.
Larry: Right. And the other thing that the IRS, this is kind of what they say is certain types of tangible personal property. Basically the bottom line is they don’t want you buying anything in your retirement account that you can put at your house. That you can put in the safe, that you could store at home or that you could do anything like that, right. Does that make sense?
Kandas: Nothing pretty. Nothing shiny, nothing at home.
Larry: Yeah. So I know it’s-
Kandas: Nothing fun at all that yet. We’re getting to the part.
Larry: It is the IRS, right. So all those are things that are tangible, all those are things that are collectables; artworks, rugs, coins, gems, stamps, alcoholic beverages or whatever like that. But now there are certain things that you can buy. In fact there’s a lot of different things that you can buy. And some of the most exciting things that you can buy in real estate, you can also get the biggest returns on. Does that make sense?
[09:16] [Break] [09:24]
Larry: Welcome back to BRAG Radio, leading the world to be rich and generous. That’s what BRAG is all about, right Kandas?
Kandas: That’s what we do.
Larry: That’s exactly right. So if you’re just now joining us we’re talking about self-directed retirement accounts. Not many people know that you can invest your retirement funds whether it’s an HAS, an ESA or IRA or 401K or whatever, not many people know that you can do that in a self-directed type account with a different kind of custodian.
Okay, not many people know that. But you do have to have what’s called a self-directed custodian. And there’s a lot of them out there in fact on our website I did a webinar with a good friend of mine that owns one of them. If you go to larryhgoins.com/IRA.
Kandas: Right yeah.
Larry: larryhgoins.com/IRA will be an interview with Carl and myself. And owns a self-directed custodian called CamaPlan.
Kandas: Great guy, great company.
Larry: Oh yeah phenomenal. And they also have a lot of good information on their website about things you can do and can’t do.
Kandas: We’ve also had him come to a few of our three day events. And we’ll have him at some our coming in 2018 as well, he won’t be with us in Portland. Anyway he won’t be at that one but he will be-
Larry: A couple of months a month-ish last month, next month I don’t know.
Kandas: Sometimes it’s hard to remember where we’re going. But he will be at some of our events throughout this year too and if you guys want to get registered for one of our upcoming three day events you can go to Larry Goins Live.
Larry: There you go because we do them all over the country.
Kandas: Yeah and he or whoever we have the custodian that we have come and spend an hour and a half usually on the second day talking about everything that you can do. Not really so much of the stuff you can’t but a lot of the stuff you can do in a deeper dive.
Larry: That’s exactly right. that’s because there’s many things that you can invest in but there’s also as we talked about in the first segment, there’s many things you cannot which are like insurance and collectables like artwork, rugs, antiques, gems precious metals stamps, coins, alcoholic beverages and other such tangible personal properties, right. So now that we’ve covered everything that you cannot invest in. I want to talk about some of the things that you actually can invest in.
Kandas: The fun stuff now.
Larry: The good stuff.
Larry: What do you mean maybe?
Kandas: I hope so, it’s got to be brighter than the last list we went over.
Larry: I know right. So there are certain gold and precious metals that you can, right. Like certain coins, if it’s a US minted coin, there are certain coins that you can invest in, alright. But if you’re going to buy coins in your IRA, you do not want to have the coins shipped to your house, right. You want to have it with a third party custodian that is going to hold that investment for you on behalf of your IRA, right.
Kandas: Okay, I did not know that part.
Larry: Well that is true you don’t want to have anything that you’re going to have at home with you, right. you want to make sure that it something that if it an allowable type gold or bullion that you are allowed to do, then you want to use a custodian that’s going to actually hold that for you for safekeeping as they call it.
Larry: Right. The second type is real estate.
Kandas: Ta-da, there it is.
Larry: That’s good I love it. So self-directed account holders, they can buy real estate. Now the cool thing about this is, with real estate in your retirement account, there are so many things that you can do. For example, it’s not just buy rental property and hold rental property. It’s not just that. But you can buy a house and fix it up and flip it, okay.
You can do that. You can buy a house and fix it up and keep it as a rental. You could do that as well. The next thing you can do, you can buy a house, fix it up and seller finance it, right. Where maybe they give you $5000 or $10,000 down or whatever, five or 10%.
And then you carry the mortgage, you be the banker or your IRA basically or your retirement account is the lender on the property. Let’s say for example we did a deal not too long ago where we picked it up for $30,000 and we sold it for $69,900 and they put $5,000 down. So now we have a $64,900 note, right.
Larry: And they’re paying 9% for 20 years. The payment is just under $600 a month. So what they’re doing is they’re making payments to the IRA, right. So the IRA bought a property for 30 and it turned that $30,000 investment into a $25,000 investment because the person put five down.
And now the IRA has about $600 a month coming in for the next 20 years, right. I mean that’s a great return on your money. I mean think about it if it’s $25,000 investment and let’s say it’s bringing in 600, right. That’s $7200 a year that a $25,000 investment is bringing in, right.
Kandas: You looked surprised than me.
Larry: That’s a lot of money. That’s almost 30% return on your money.
Kandas: It’s awesome.
Larry: That’s great. So you could invest in real estate whether it’s to buy to fix and flip, or whether it’s to buy fix up and rent, or buy fix up and seller finance. Now the one thing that you don’t want to do, okay you don’t want to be wholesaling in your retirement account, okay. Because the IRS doesn’t like you operating a business inside your retirement account.
And we’re going to talk about business here in just a couple of minutes. But the one thing that the IRS doesn’t like is you to create or operate a business inside your retirement account. So if you are doing a lot of fix and flips or if you’re doing a lot and I say a lot it’s probably more than five to 10, right. The IRS doesn’t give you a number.
But if they do say, “Okay you’re operating a business inside your retirement account, then they’re going to charge you with what’s called UBIT, Unrelated Business Income Tax which basically all that means is that your IRA is going to have to pay tax on that income that it receives.
Kandas: And the whole purpose of doing them in your IRA is to try to do them tax deferred or tax free yeah.
Larry: Tax deferred or tax free if it’s a Ross.
Larry: That’s exactly right. So that’s the thing you want to be careful about, and that’s one of the things I cover in my Getting Started in Real Estate Day Trading book. All about doing deals in your self-directed retirement accounts, what to do and what not to do, right.
Kandas: Right. And that book you can get a copy of if you text the word BRAG to 803-897-6063 or you could call me on 877-LARRY-GO and I can get a copy of the book which is also- I can get you the whole kit pretty much the investor’s kit. And it’s got a copy of the book he was just talking about that goes into this topic that we’re covering. And also the HUD book’s in there and some other trainings as well.
Larry: And the next thing that you can do besides real estate because we talked about you can do certain types of gold and precious metals. You can do real estate, any type of real estate I don’t care if it’s residential or commercial or triple net lease or whatever is, right. Before I let you know the next one, the other thing you want to be aware of is you can also borrow money on real estate.
So let’s say your IRA only has $1000 in it. You could literally buy a house and go borrow the money from a private money investor. Now it’s has to be what’s called a Non-Recourse Loan, right. But you could do that and you could borrow the money and still create an income with just a small amount of money in your retirement account. And that’s the way I’ve seen a lot of people grow their retirement account, right.
Kandas: Just to get started yeah.
Larry: That’s exactly right.
Kandas: And then all the income comes back into the retirement account. So the next deal that you do could be a little bit bigger.
Larry: That’s exactly right. We’re talking about buying real estate in your self-directed retirement accounts. Not a lot of people know that you can do that, you can buy real estate in your retirement accounts any type of retirement account.
So if you want to get a copy or if you want to see the webinar that Carl and I did from CamaPlan, he’s a self-directed custodian, so go to larryhgoins.com/IRA, that’s larryhgoins.com/IRA and you’ll see a webinar there where it talks all about what you can’t do in an IRA.
[18:55] [Break] [19:14]
Larry: Welcome back to BRAG Radio, leading the world to be rich and generous that’s what we do, right?
Larry: Good job. So on BRAG Radio we’re all about being rich and generous. We are local real estate investors in the Charlotte Metropolitan Statistical Area, MSA right we’re in Lake Wylie.
Larry: And we teach people how to invest as well. I’ve written a few books about it and we travel around the country and do seminar and boot camps and coach and mentor people. And we’ve got a lot of successful students. The cool thing that I get a big kick out of is when people start investing in their retirement account which is what we’re talking about today, right.
We’re talking about being able to use what’s called a self-directed individual retirement account, SDIRA they call it. You have to use what’s called a self-directed custodian. You can’t call up Schwab or your Fidelity account manager and say, “Hey I want to buy a house in my IRA.” That’s not going to work, is it?
Kandas: A what kind of house in your IRA?
Larry: A house. You can’t call up Fidelity and say, “I want to buy a house in my IRA.”
Kandas: No. Charles Schwab they don’t know nothing like that.
Larry: They don’t have a clue. And we’ve talked about what you cannot buy in your retirement account. And we started talking about what you can buy. Now you can buy certain gold and other precious metals and you can buy real estate. Now whether you want to do fix and flips or you want to be a landlord or seller finance or whatever. And as I mentioned in the last segment, you can even borrow money to buy real estate.
Kandas: Are you going to get into that at all or no?
Larry: Well let’s say you only had $1000 in a retirement account because I know a lot of people starting out, they may not have built up a large nest egg in their retirement account. So you could literally start with $1000, right and then you could identify a property that you wanted to buy, buy it through your retirement account and literally borrow let’s say you were buying it for $30,000, you could go borrow $29,500.
Right put $500 of your own money in there, borrow $29,500 and you could either flip that property or you could rent it out and collect the monthly cash flow. And you have a lender that you’re making a monthly payment to.
Kandas: Now in that instance is your IRA making the monthly payment on the borrowed money?
Larry: That’s a very important thing.
Kandas: It’s the important part.
Larry: Yeah you’ve got to keep the money separate. In other words if you were buying a property in your IRA, you can’t go down to Lo’s and get some material and pay for it with your personal debit card, right or your personal credit card. You’ve got to keep everything separate from being co-mingled. Otherwise that’s what’s called a prohibited transaction which is not good.
Kandas: Very bad.
Larry: So we’ve talked about gold, we’ve talked about real estate. The third thing you can invest in, in your retirement account is debt. I mentioned earlier-
Kandas: What? Why would anybody want to do that?
Larry: Well think about this, I just mentioned that if you only have say $1000 in your retirement account and you wanted to borrow the money to buy a property, you could do that. Borrow the money as private money. So what if you were on the other end you wanted to loan somebody money from your retirement account?
A lot of people do that and you know Kandas not a lot of people know this, but there’s billions and billions of dollars sitting in retirement accounts that aren’t even invested. They’re sitting in cash right now. They haven’t even been invested in anything, right.
Kandas: Well I know I have some money that’s it personally.
Larry: I know yeah exactly. You have some money that’s sitting idle, I’ve got some money sitting idle.
Kandas: I knew.
Larry: My wife has some money sitting idle. And it’s not from lack of not wanting to it’s just hard to keep all that money working all the time, right.
Larry: So anyway there’s a lot of money out there sitting on the sidelines. But you can invest in debt. In other words let’s say you found a fix and flip investor and they like to buy properties, fix them up and sell them, okay. Now they don’t have so much money and you’ve got some money sitting in your retirement account, you could loan them the money through your self-directed retirement account.
And you could get paid one of several ways. You could get paid just interest, right. You could say, “Okay I’m going to charge you 12% interest which is 1% per month. If you loan them $100,000 you’re going to get $1000 a month interest. And listen if you were investing your money if you had your money at the bank it’s earning 1% a year.
Kandas: Or less.
Larry: Not 1% a month.
Larry: And listen it’s going to be like $100 a month instead of $1000. So anyway you could do that, you could charge them a flat interest rate. You could charge them points as well. In other words let’s say that you wanted to charge them 12% and five points. If it’s $100,000 loan, you could still charge them five points or $5000 to loan the money to them. Right, banks do it all the time.
Kandas: Right and it goes right into there I mean it all stays right in your retirement account.
Larry: Absolutely, it really does. And I talk a lot about this, all these different strategies, in my book, Getting Started in Real Estate Day Trading.
Kandas: Right. Well and the three day event. So the book you get it if you want to give me a call at 877-LARRY-GO, or you could text the word BRAG to 803-897-6063. But getting back to the live event that we do all over the country, Larry Goins Live is where you could see the next two that are upcoming and register for one of those, Larry Goins Live.
Larry: That’s exactly right, .com.
Kandas: I was trying to give you a little bit of time to get back into the mic because you’d stepped away.
Larry: That’s funny. So yeah if you’re loaning money through your IRA you could charge interest, you could charge points, you could even get a percentage of the profits. I’ve done deals where one person finds the deal and I put up the money and we split the profits. So you can make a bigger return. Now you also have a risk of not making any money if they lose money on the deal, right.
You have a risk of that. That’s why it’s very important that you make sure that you work with an experienced investor. If you’re going to loan your money to someone make sure you loan your money to someone and you are not their first lender.
Kandas: Lender yeah you’re not their first lender.
Larry: You’re not their first deal, right. You are not their first deal that they’ve done. That’s very important, okay. So there’s many different ways to do that. I’ve even seen guys-
Kandas: Well with that too there I want to back up just a second because I feel like it’s important. Even if you don’t want to be the one that is in the details of doing the deal, dealing with the contractors and all of that stuff, you still need to have a really good grasp on what all that entails. Because it is your money after all and if something happens to this borrower that you lend for, you’re going to get that house back.
Larry: That’s true.
Kandas: And you need to know the ins and outs of how to or how the deal should be structured and what your borrower should be doing. And we got a course for that too.
Larry: That’s why it’s important that you get yourself some edumacation.
Kandas: Yeah you wrote the book on that too. It’s not really a book like the hard money I mean it’s not really a book like Real Estate Day Trading but it’s more of a course, The Hard Money Millions.
Larry: Exactly hardmoneymillions.com, we’ve got webinars about that to teach you how to be a lender.
Kandas: And it teaches you the borrower side too which is why I wanted to bring it up, is you do need to know what’s going on to know what type of a pulse the deal has before you get into it.
Larry: That’s exactly right. If you’re just now joining us, you’re listening to BRAG Radio, it’s all about being rich and generous. We’re talking about how to buy and sell or buy and hold real estate in a self-directed retirement account. Not a lot of people know that, do they?
Kandas: I don’t think so and not the same ones, you don’t want to buy and sell in the one you buy and hold.
Larry: That’s true. You got to keep them separate there’s a lot of things that-
Kandas: Keep them separated, ain’t there a song about that somewhere?
Chad: The Offspring.
Kandas: There you go.
Larry: That’s true. So you want to make sure you don’t do any prohibited transactions but you can buy certain gold and precious metals, you can buy certain real estate, you can be a lender, you can loan money in your retirement account. And the other thing you can do is you can buy a business. Now you don’t want to operate a business inside your retirement account but you can be a passive investor and own a business in your retirement account.
And it’s very important that you know what you’re doing and how to do it and there are certain ways that you can do it, and there are certain ways that you can’t because you’ll end up still paying what’s called UBIT, Unrelated Business Income Tax if you do it the wrong way.
So I want to make sure that I teach you and show you exactly what to do and how to do it the correct way so you don’t mess up and either have to pay a penalty or so you don’t mess up and your retirement account doesn’t blow up. And you end up paying a huge tax loan.
[28:40] [Break] [28:57]
Larry: Welcome back to BRAG Radio, leading the world to be rich and generous. It’s the show all about real estate investing whether you want to be a passive investor or an active investor, right. And then we want you to go out and BRAG, be rich and generous and help other people as well.
And that’s what this show is all about. We have told people all around the country even around the world in the US, Canada, Australia, New Zealand, Japan, China, Israel, the Philippines, Ireland, Chile and Denmark and even in Lake Wylie.
Kandas: It was a lot slower that time when you said it all. You did good.
Larry: Lake Wylie.
Kandas: They court hear what you said there.
Larry: Ernest [Inaudible] [29:40] right. So on today’s show, we’re talking about self-directed retirement accounts. Now if you aren’t familiar with a self-directed retirement account, it just means that you can buy real estate and certain other what’s called non-traditional investments. And you can do that in a retirement account such as an IRA, it could be a traditional or Roth.
It could be a 401K, it could be an ESA, Education Savings Account for your kids or grandkids, it could even be an HAS a Health Savings Account or even the different kinds of IRAs like SIMPLE, Savings Incentive Match Plan for Employees. And first we went over the things that you could not buy in your retirement account like insurance policies or collectables.
Art, gems, stamps, that sort of thing. And now what we’re doing is we’re going over what you can buy in a self-directed retirement account. Like you can buy certain gold and precious metals, you can buy real estate. And there’s many different types of real estate you can do; commercial, residential, multifamily, whatever. You can even borrow money with what’s called a non-recourse loan, and I don’t have time to go into that but it’s all in my book.
Kandas: I have a question, to me multifamily is a business right. But I mean maybe in the terms or in the view of the IRS it’s not a business. So you can do multifamily as a buy and hold inside your retirement account even though the multifamily complex in and of itself is a business.
Larry: Well multifamily has to have a property manager.
Larry: But it doesn’t have to be you that’s the property manager okay.
Kandas: Right and I would not want to be.
Larry: No, listen I don’t want to deal with the tenants either right.
Larry: No, you don’t want to have to be. So yes you can buy multifamily in a retirement account. You could buy a single family, an apartment, a complex, you could buy a duplex a triplex a quad a 10-unit, a 50-unit, 100-unit.
Kandas: So you just wouldn’t want to buy and sell apartment complexes or quads or five-plexes or anything through the IRA. You wouldn’t want to buy and hold in it?
Larry: Did you say bi-plexes?
Kandas: No. I said five plexes.
Larry: Okay, five-plexes okay.
Kandas: Thought you was going to get me didn’t you but no, sir.
Larry: I did. So yeah you could do that, you could buy and sell apartment buildings or multifamily projects like that. You just don’t want to operate them yourself. In other words if you owned a 20-unit building in your IRA, you physically could not go out there and work on it. You couldn’t replace the floor.
Kandas: Change the locks.
Larry: No couldn’t do any of that stuff because it’s your retirement account you got to have other people to do that, right. And in my book I cover all the details about what you can and can’t do and that’s very important that you make sure you understand that.
Kandas: So you need to get it now, give me a call 877-LARRY-GO.
Larry: There you go.
Kandas: Shameless plug. Or text the word BRAG to 803-897-6063.
Larry: There you go.
Chad: I have a question Larry.
Kandas: Of course you do.
Chad: When it comes to this, where do contribution limits fall into place on these self-directed version of the IRA versus the regular one?
Larry: You know what, the contribution limits are no different for self-directed than they are for a traditional. The IRS sets the contribution limits what’s being self-directed has to do with it is what you’re able to invest in, right.
So whether you have an account at Schwab or Fidelity or E-Trade or one of the ones we recommend like Equity Trust or CamaPlan or Quest IRA who all three of those do self-directed and there’s a list of them in the book that Kandas plugged a minute ago. But the contribution portion is no different, the IRS sets that limit. Good question Chad.
Chad: Thank you.
Larry: I like that. So back to what you can buy, okay. You can buy certain gold and precious metals, real estate, you can invest in debt. In other words you can be a lender. You can also invest in businesses within your SDIRA or self-directed IRA either in their entirety or in part.
For example if you want to use your self-directed retirement account to buy a convenience store, hey you can do that. But there’s several rules that will kind of govern the ownership to businesses in that self-directed IRA. So it’s definitely a good idea to reach out to like an attorney or somebody at the custodian that knows what they’re doing before you get started, right.
Like specifically you cannot use your IRA to invest in anything that’s going to benefit you now as opposed to when you retire. So you need to be very careful and make sure any IRA owned business doesn’t do that. For example let’s say you bought a convenience store or your IRA bought a convenience store is what I meant to say.
Larry: If your IRA buys a conveniences store you could employ your child to work at it. You couldn’t work in the store yourself. It has to be an investment, not your business where you are running and operating that business. Let’s say for example, there’s somebody out there listening and maybe you are an HVAC contractor, right.
Your IRA cannot invest in your small HVAC business if you’re out there installing units and running appointments and all that. Couldn’t do that, that would be what’s called a prohibited transaction because you’re operating the business and you’re doing business with yourself you can’t comingle that, okay. That’s very important.
But there are a lot of people that buy franchises like let’s say Subway. Subway is a franchise that a lot of people buy there are Subways everywhere. So your IRA or retirement account could invest in a Subway but you wouldn’t work there and neither would any of your family members or anything like that.
And you wouldn’t go in there and get free food either. So the last thing that I want to talk about that your IRA can invest in is digital currency, cryptocurrency like Bitcoin, okay. Did you know your IRA can invest in Bitcoin Kandas?
Larry: Yeah it can. It can invest in Bitcoin and there’s a lot of them out there.
Kandas: See I wouldn’t go for that just because I can’t control not the inflation that’s not the word, the inconsistency of the value.
Larry: That’s true.
Kandas: Right. For me that’s a little bit scarier than a real estate deal where I can put actual physical worth on it.
Larry: That’s true and I made it a point a long time ago. I don’t invest in anything that I can’t control anymore. I want to make sure that I am under control and I know what I’m doing because I know real estate and I’ve taught a lot of people real estate. And we have people now, students of ours that now they generate all of their income from a tax free retirement account.
Larry: That they’ve built over the years and now they’re making great money with real estate as their investment and they’re not paying any tax. If it’s Roth or if it’s traditional, they’re only paying taxes they pull out the money based on what’s called RMD or Required Minimum Distribution. Right, so like I said I mentioned this a time or two but in our book, Getting Started in Real Estate Day Trading, it’s available wherever books are sold. You can go to Barnes &Noble, Borders, Books a Million.
Larry: Amazon wherever you can pick up a copy. Or if you would like for Kandas to send you a free copy of the book along with a few other bonuses as well we’ve got some other training, some audio and video training to kind of complement it that talks a lot about what we’re doing here with the self-directed accounts. As well as many other topics.
And the book is called Getting Started in Real Estate Day Trading written by me, Larry Goins and you can pick it up wherever books are sold but get a free copy. Just call Kandas, right.
Kandas: Right we’ve got it in the digital investor’s kit or you could come by the office if you’re close enough. Do a tour, and pick up the physical kit to learn a little bit more about that. Give me a call 877-LARRY-GO or you could text the word BRAG to 803-897-6063.
Thank you Kandas and thank you Larry. Make sure to tune in every Saturday for BRAG Radio leading the world to be rich and generous. Larry and Kandas will show how to invest in real estate and the many ways real estate creates the ideal investment.
For more information about what Larry and Kandas talked about on today’s BRAG Radio or to get a free investor’s kit, call 877-LARRY-GO, 877-527-7946. You can also text the word BRAG to 803-897-6063. It’s BRAG Radio be rich and generous on News Talk 1110993WBT.
[End of Recording] [38:53]