Best sell real estate investing author Larry Goins & Co-Host Kandas, will show you the many ways real estate creates the I.D.E.A.L. investment. Whether you want to Flip houses or become a passive investor making double-digit returns while others do all the work. You will learn how here on BRAG Radio.
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Larry: Hello, hello, hello, what’s happening? How are you doing?
Kandas: How are you all? How are you all?
Larry: Are you texting?
Kandas: I’m working.
Larry: You’re working?
Larry: I hear you. So, welcome to the BRAG show. If you’re just joining us and this is your first show, Be Rich and Generous, that’s what this is also about. Okay. Be Rich and Generous where we teach people how to flip houses, buy and sell houses, day trade real estate, a model we call Filthy Riches. Other stuffs like that and then we want you to go out and be generous, right? Be Rich and Generous with your blessings and help others as well. We have a new camera that’s kinda up high a little bit. What do you think about that? If you’re not very familiar with us, if you want to get a free Investor’s Kit, a copy of my book, you can get this book right here, Getting Started in Real Estate Day Trading. Paul Wells, hey, man I was gonna call you yesterday. I was driving for 3 hours to TREIAto speak and got on the phone, calling somebody else and I wasn’t able to give you a call before I got there. Anyway, John Bently is in the house too. Look, “The Integrator”.
Kandas: That’s right.
Larry: There you go. So, if you want a free copy of this book, go to 877-LARRY-GO.
Kandas: He said he saw you last night John too at TREIA.
Larry: Yup. I did. We hangout a little bit.
Kandas: You hangout.
Larry: We hangout a smidge, you know, as much as I could.
Kandas: It’s all right. It’s okay John. You’ll get to hangout with me in a couple of months. Thanks for settling last night.
Larry: Settling? Wait a sec.
Kandas: I’m just kidding. I love you too.
Larry: Alrighty then. So, let’s see. If you want to get a free copy of the book call 877-LARRY-GO, talk to Zenobia. She’ll be glad to get that for you. Also, let’s talk about deal of the week. The deal of the week is the mobile home park. We sold that mobile home park, wait yesterday. Was it yesterday or Monday?
Kandas: Today is Wednesday, we sold it Monday.
Larry: We sold it on Monday.
Kandas: Gone. Out of the year.
Larry: Just sold another house a few minutes ago for 20 grand.
Larry: Of course he would have.
Kandas: He loves me.
Kandas: The one with a scratchy throat.
Larry: Yeah. She’s been coughing and hacking and sneezing and wheezing and nagging and gnawing and mawning and groaning about her, you know, about her sickness.
Kandas: It’s because I’m not getting over it. That’s the problem.
Larry: That’s a good point. That’s a good point.
Kandas: Anyway, mobile home park. This deal we told you about this--
Larry: This was your deal. Tell them about your deal.
Kandas: This deal we told you that it was a good one. We told everybody when we were able to hand out the flier, last week at the REIAthat it was gonna go quick and it did. As soon as we start the marketing, it was gone in 4 days, four days.
Larry: This was the deal, it was actually gone the day that people started going to look at it.
Kandas: Well, we handed the flier out on Thursday. We talked about it the week before. We had a flier at our 3-day event and so I guess marketing, if you had to get tackle about that we start on the 9th of August and it’s the 21st but people didn’t start going out to it on the 9th. I think the first people that started going out to it, yeah, were last--
Larry: A day or two before it’s sold. So, anyway, this is the deal bringing in $3,625 per month, three thousand six hundred and twenty five dollars per month.
Kandas: And you couldn’t ask for a better seller than this.
Larry: Oh, this guy is awesome.
Kandas: This seller has been so forthcoming with information. We spent like 4 hours together walking through the properties, letting me get pictures, telling me about everything. I’ve talked to the tenants. I mean he has been one of the best sellers that I’ve ever been able to work with.
Larry: He’s awesome.
Kandas: And he’s even gonna walk our new buyer through the property to help with the transition to--
Larry: Hand off.
Kandas: The hand off, yeah. To make all the tenants feel secure as to who has taken over the property. He’s phenomenal.
Larry: Yeah. He didn’t mind doing that the other day and he just finished rehabbing the last unit. He’s already got it rented. So, basically we’re gonna close in a couple of weeks I think. First week in September, right?
Kandas: First week in September.
Larry: But we bought it for 100,000 and we are selling it for 129,900. I’m sure we could have gotten more for it.
Kandas: We definitely could with as quick as it was sold, you know, we could have gotten more for it.
Larry: We should have asked 149,900.
Kandas: But that’s okay because I mean--
Larry: They got a good deal.
Kandas: They got a great deal. We got what ultimately what we were looking to get anyway. So, everybody is happy.
Larry: I mentioned that deal last night when I was speaking at TREIA and I said with an income of 3,625 what would you pay for? Somebody said 300,060. Somebody said 300,000. I’m like, wow.
Kandas: We were shocked with answers like that. Well, I mean look at that up in there. I know without a shout of a doubt that we could have gotten more money for it because the way that this guy has rehabbed these single wideswith this mobile home park, he’s remodelled 3 and it’s been about 1 a year for the last 3 years. And his most recent one, he’s just finishing it and the tenants moving in on Saturday. But this is not I mean he goes all out when he remodels. I know we could have sold it for more but our end buyer is happy, our seller got what he wanted to get and I mean it’s a good deal, all the way around.
Larry: Look, who just hopped on.
Larry: What’s up? Korn, you are the world traveler.
Kandas: Thanks Kenny. It looks like a mess, but it matches the Van Halen so I’m going with it. You should have seen it this morning. It was a crazy mop.
Larry: I told her this morning when she walked in, I said, what has happened to your hair? You have the rockstar groupie hairdo. She said, it’s just getting in the shower and doing nothing with it. She said, so it matches my t-shirt. So, that’s the deal of the week. We bought it for 100. We sold it for 129,900. Yeah, 129,900. It’s closing in the first week of September. We actually have two other people, two other backups that wanted as well if this person doesn’t close.
Kandas: I don’t think we’re gonna have a problem with the first person.
Larry: I don’t think we are anyway either. He’s gonna get the money from his IRA, his self-directed IRA. Speaking of which, let’s talk about that. Self-directed IRA accounts. Now, you may be watching this and you may think you can’t buy real estate in your IRA. You can buy real estate, you can buy options, you can buy tax liens, tax deed. You can buy notes. You can buy property that create the note then you can kick the note or sell the note. You can put options on properties. You can option equipment, cars, vehicles.
Kandas: Medical equipment.
Larry: Medical equipment. We know a guy that’s doing that. You can put an option on just about anything and make money with in your self-directed IRA account. What you need is what’s called an SDIRA accounts (Self-Directed Individual Retirement Account), okay. Now, there’s a lot of different types of accounts and we’re gonna go through on them in a few minutes but I have a few that we use. We use CamaPlan. Carl Fischer, I know him very, very well. We’ve been used to him for years and years and years. We also use Quest IRA, I think it’s QuestTrust.com now.
Larry: They just converted from Quest IRA to Quest Trust and we also use Equity Trust.
Kandas: Equity Trust, mm-hmm.
Larry: Trustetc.com. So, I’ve been with Equity Trust since they were a Mid-Ohio Securities back in the 90s. So, anyway, those are the 3 that we use, work with and recommend. Although do your own due diligence, you know, whatever works best for you. So, there’s a lot of different types of accounts and I just want to kinda give you a rundown of those accounts. The first one I wanna talk about is obvious, an IRA, and there’s two different types of IRAs. There’s a traditional and a Roth. Traditional IRA, when you put the money in, you got a tax deduction in the year that you put the money in, right? In other words, let’s say you make $52,000 a year. If you put $2,000 in a traditional IRA, now your adjusted income is now $50,000 per year, but you get a deduction. However, when you retire and you start pulling that money out for retirement, you will have to pay taxes on that because you didn’t pay taxes on it when you put it in.
Kandas: Ultimately, one way or the other, you’re gonna pay taxes.
Kandas: They’re gonna make sure of that.
Larry: Well, there are some ways that you don’t have to pay taxes on that and it’s by converting it to a Roth as an investment.
Kandas: Paying taxes on and off.
Larry: But that’s a whole another training right there. A big topic, right? So, anyway, there’s also a Roth IRA. In a Roth IRA, you do not get the deduction when you put it in there but you can grow it, grow it, grow it, grow it, and then you can grow it out tax free. You’ll never pay money on the tax, right? So, I finally got all of my traditional converted to Roth, so now all I have is Roth IRA money.
Kandas: I have one more to convert.
Larry: There you go. And the reason you wanna convert it is if you believe the tax rate in the future will be higher than it is now then convert. Not leave itthe way that it is. Okay. If you think taxes are higher now than they will eventually be then leave it as traditional. Now, there’s another type of IRA called a SIMPLE. SIMPLE is an acronym for Savings, Incentive, Match Plan, Employees. What that means is you have employees in your organization and you want to be able to provide some retirement for them, you can set up what’s called a SIMPLE as opposed to a 401(k) because a 401(k) has a lot more administration, right?
Kandas: Right. That’s right.
Larry: And with employees, you cannot do a solo 401(k) which we are gonna talk about it in a minute. With a SIMPLE, it’s an IRA and you can set it up for your employees, but the cool part about it is as an employer, you do not have to contribute unless, unless they contribute, right? And you can contribute up to 3% of their income, so I’ll tell people, if you just contribute… When we have a SIMPLE, we don’t anymore, but when we have a SIMPLE, I say you wanna pull your money without making an investment, 3% of your salary and I’ll match, right?
Kandas: He wouldn’t do it. Isn’t that crazy?
Larry: You did.
Kandas: Well, I did.
Larry: Yeah, a few people did. But not everybody.
Kandas: Mostly everybody didn’t. I don’t understand it’s for a money. Anyway, we don’t have that kind anymore.
Larry: So, that’s a SIMPLE, right? Now, there’s also a regular 401(k) and a solo 401(k). If you do not have employees, you want to get a solo 401(k). That’s where you’re gonna have the biggest bang for your buck, get the most money in, okay. Plus there’s some advantages to 401(k)s that are not allowable or it’s not relevant to IRA, okay. For example, with the solo 401(k), there’s no UDFI (Unrelated Debt-Financed Income) in other words, if you buy a property with an IRA and you borrow money on that property, in other words, you use leverage in an IRA owned property, you will pay what’s called UDFI (Unrelated Debt-Financed Income) which means you will pay taxes on the portion or the percentage that you borrowed. If you borrowed 50%, you bought a house for 100 grand, you borrowed 50 and you put 50 from the IRA, you’re gonna pay taxes on 50%. However, you also get to deduct and depreciate other expenses when you do that, right? So, you can’t net it out if you don’t have a lot of cash flow, okay. There’s also a Roth component to 401(k) as well. You can do traditional we have or you can do Roth, okay. Now, what we have moved to from the SIMPLE is what’s called a Safe Harbor 401(k). Once again, there’s no UDFI with that. It has a Roth component. It’s also good with employees and it’s very similar to a SIMPLE except it allows you to contribute higher dollar amount than a SIMPLE does, okay. So, that’s the difference there. That’s a Safe Harbor. It’s good if you have just a few employees. Next is SEP IRA, that’s a Self-Employment, you can do, I believe it’s up to $54,000 or 20% of your income at SEP (Self-Employment Plan).
Kandas: Per year.
Larry: Per year. Now, next what I wanna talk about is really, really important. It’s an HSA that stands for Health Savings Account. With an HSA you use it similar to a cafeteria plan, right? If you have an HSA, you have to have the type of insurance policy called an HDHP Plan that stands for High-Deductible Health Plan. I thought I was gonna forget about there for a second.
Kandas: Some companies don’t offer that anymore.
Larry: No, but you can do it on your own. You can do it on your own as far as the HSA but just contact your insurance carrier. Mine is Blue Cross Blue Shield, contact them and tell them you need an HDHP plan that qualifies for an HSA. Not all health care plans that have a High-Deductible or an HDHP plan.
Kandas: That’s right.
Larry: So, it’s got to be labeled HDHP, right? So make sure you tell them it’s for an HSA. With an HSA, you can put money into it to use for your, what’s called qualified medical expenses. Qualified being the key word. The IRS has a set of guidelines of what is qualified.
Kandas: Don’t they for everything?
Larry: Yeah. Well, they do. They have a set of guidelines and there are some things that can be used for and certain things it cannot be used for, right? Like certain types of cosmetic surgery would not be covered, right?
Kandas: Poor thing.
Larry: I know right. Anyway, so with the qualified medical expenses, there’s a lot of things that are included even over-the-counter drugs if your doctor writes a prescription for it. Also, mileage for the doctor, mileage to the pharmacy I believe is included, mileage to doctor’s visits or to the hospital, you can deduct those mileage. Now, one of the really cool things about an HSA is it is not use it or lose it. What that means is like I’ve had mine about 7 years and my wife has this big binder of every one of our qualified medical expenses for the year. She’s got separated out by year and--
Kandas: She looks like she goes to the doctors a lot.
Larry: It’s over 7 years come on and plus that’s with, you know, Noah and Linda a while back as well. But anyway she’s got everything. She’s got the mileage written down, what doctor’s appointment for Noah, where they went, what the mileage was and all that kinds of stuff.
Kandas: All the prescription and information if there was something prescribed.
Larry: Exactly. Anything we spent on qualified medical expenses, she’s got it in that binder. Now, because an HSA is not use it or lose it, let’s say I grow that HSA to $500,000 and let’s say that that HSA is 500,000 and I wanna start pulling some money out next year. I can go back those receipts 7 years ago, 6, 5, 4, 3, 2, last year and I could cash out all of those receipts and take a distribution tax free, tax free.
Kandas: And you could do that every year, right? Instead of saving them up.
Larry: You can do it every year.
Kandas: You could whatever year.
Larry: You don’t have to save it.
Kandas: You don’t have to save it. I just want to throw that out there too.
Larry: You can also have 2 different accounts if you want to. You can’t contribute to two over the maximum amount of your contribution, allowable contribution, but you could have one account that just has a debit card typed to it and another account that you’re gonna grow through your self-directed, you know, nontraditional investments, flipping houses or whatever, right? So, you could use one as a debit card and every time you go to the doctor, just use it and it comes right out of there, right? So, you can always transfer a little bit of money over there and have it into debit card for that HSA. The other cool thing about HSA is once you turned I believe at 62, it might be 60, it might be 65 but I believe it’s 62, once you turned that age, you can pull the money out without a penalty, you just pay the tax. So, in other words, a lot of people use their HSA as a retirement account because if you have more money in there than you are spending on medical expenses, you could pull other money out and just pay taxes on it like a traditional IRA.
Kandas: Yeah, just pay the pullout penalty.
Larry: There’s no penalty.
Larry: There’s no penalty. It’s just like a traditional IRA, you pay taxes when you pull it out.
Kandas: Pull it out. Okay. So, it’s just taxes on the amount you pull out.
Larry: It’s just taxes. In another words, once you turn, I believe the number is 62, once you turn 62 then you can pull the money out same as an IRA, a traditional IRA, right? No penalty, you just pay taxes on it just like an IRA, right? So, now let’s talk about the last type of account. That’s an ESA (Education Savings Account). ESA is used to send your kids to school, it could be primary school, it could be kindergarten, it could be college, it could be private school, it could be Christian school. It doesn’t really matter. The only thing you can’t use it for is homeschool, okay. You cannot use it for homeschool. So, my son is 15, he was at a private Christian school, we use his ESA to reimburse ourselves for his education expenses and there’s also a list, the IRShas list of what’s called qualified education expenses as well, right? So, we use that to reimburse ourselves but now this year, he is homeschool, so what I have to do is reimburse myself every bit that I can get for the private school and anything he had whether it would be books or studying material or whatever up until that time and now we can’t use it for the homeschooling, so, what do you do? Here’s a cool thing about an ESA. You contains the beneficiary of the ESA multiple times. For example, I’ve got two grandchildren now believe it or not. I’ve got two grandkids now, so I could transfer my ESA ownership over to a beneficiary over to them or I could just keep it and keep it growing until Noah graduates college, I don’t need it anymore then I can transfer beneficial address to either Amber or Keagan, right? Either one of them. And if you don’t have anybody that is using it, like it’s temporary, let’s say Noah is not gonna use it, he’s in school for two more years, he won’t need it and Amber is gonna need it in two years, I could transfer it to one of Kandas’ children for two years, right?
Larry: And then--
Kandas: In the interim.
Larry: --she could transfer it back to Amber or Keagan or Amber whenever she starts kindergarten.
Kandas: When it’s needed.
Larry: Change the official interest, right? So, you can do that as well. So, those are the different types of self-directed accounts that you can use. You’ve got traditional and Roth IRA, you got 401(k), Solo 401(k), you got SIMPLE, you got Safe Harbor 401(k), SEP and then HSA and ESA as well. You have checkbook control self-directed Roth IRA. We had a very bad experience with American IRA. Yeah, I haven’t used them. I know who they are but I haven’t used them. But I would caution people to set up a checkbook IRA unless you know exactly what you are doing, okay. Unless you know exactly what you are doing. You need to have somebody do it that knows what they are doing like if you look in the comments below, John Hyre made a comment as soon as I made this stuff post and we were going live today, he made a post about Solo 401(k). He’s the person you want to get to send yours up. That’s who set up mine. That’s who set up Kandas’. You know, he’s the one that you want to get set it up for you. He’s not cheap but he does it right so you don’t have any problem and he also tells you what you need to do to manage it to make sure you do it correctly because the last thing in the world you wanna do is what’s called a prohibited transaction.
Kandas: That’s right.
Larry: If you do a prohibited transaction in an IRA, your IRA blows up. There’s penalties and you pay taxes on it and there is no more IRA, right? So, make sure you have somebody like John do it for you and then that way you have it done right and he’ll show you what to do and how to do it like if I have a rental property in my Self-Directed IRA, I don’t manage it. I’ll hire a third party to manage it. I won’t do it. I wanna keep myself separate from my IRA. I’ll hire a third party to do that. There are certain things like that that John will tell you. He’s very conservative. He’s very good. He’s very aggressive but he is very conservative and wants to make sure that you do things to the letter of the law so you don’t get into trouble, you know, there is no gray areas, black and white, right? So, if you do that, use somebody like John Hyre. Tell him I set you up. He’s not gonna pay me anything. It’s good to know that, you know, it’s good for him to know if I’m referring people to him, right? So, that gets me better service when I make something.
Kandas: It also can just let him know upfront maybe the contacts that you’re gonna come to him because he knows we educate people, so it’s good to have a little bit of a contact and it says how much experience you already have.
Larry: Exactly. Exactly. So, if you wanna work with us as a partner, we have a few partners that we work with, not a whole lot, but you can apply at LarryGoins.com/Apply.
Kandas: We’ll have partners in here in a couple of weeks. I’m not sure how many slots we have left. I think it was almost full last week when I checked with the guys.
Larry: I’m not sure if we have slots for this time or not.
Kandas: It’s maybe full.
Larry: But you’re coming in and you’ll spend 3 days in our office and we get all your marketing set up for you, we get your systems and processes and procedures set up. When you go home, your phone starts to ringing then you’d negotiate deals.
Kandas: Yup. This is definitely application. It’s not the education part. We’ve got courses for that and when you’re part of the partner program, you get all the education for free. It is making sure that were not free is included but when you are here, it’s making sure that you take time away from whatever else is happening in life and you focus on the real estate that you’ve said is the most important thing to get you where you wanna go.
Larry: There you go. That’s exactly right. Which by the way Jimmy and Brenda have a closing today. They are our partners from last month or whenever it was. They’ve got I think 6 or 7 deals under contract and have their first closing today, which is really cool.
Kandas: That’s awesome. Yeah.
Larry: I’m really happy for them. That’s awesome.
Kandas: They’ve been working hard.
Larry: They have. So, if you want to apply LarryGoins.com/Apply. We appreciate you guys watching. Please share the video if you like what you see and we will see you later. Thanks guys.