SDIRA Real Estate Investing Part 2: How to Buy Investment Properties

SDIRA Real Estate Investing Part 2: How to Buy Investment Properties



how to buy real estate inside of your self-directed IRA that's today's show let's dive into it how to buy real estate in that self-directed IRA at the end of today's show you are gonna know the step by step process it will take you in order to buy real estate inside of your self-directed account what the tax benefits look like and how you can enjoy that passive income tax free yes indeed we are gonna do that I'm Clayton Morris I'm Natali Morris and in 2017 we both basically retired from our day jobs in order to focus on passive income we have built up enough passive income from our real estate in order to say goodbye to the man goodbye the nine-to-five and now we want to help you build financial intelligence and also create that passive income that can let you get out of the rat race as well right yes so if you've watched these other episodes inside of our playlist here where we talk about the self-directed IRA if you haven't please go and check those out but this is a little bit more detail now diving into actually purchasing a house inside of that account that we set up the other day okay so in the previous episode we told you what a self-directed IRA is you should have a really good idea of it we told you how you can sort of make it happen now let's pretend you've gone through the steps and you said I don't want my IRA in the stock market I want to choose where it goes right and so I am going to then put it into a custodian that gives me the freedom to do whatever I want with it right okay so you've chosen a company and all it is is you just roll over it like you open an account like you open any bank account and then you say I'm going to fund this with this IRA that's currently at etrade or whatever account number one two three four five so you say go to Scottrade get that money out and then you set the rollover and process it takes a few days and then Willa you open it up you have a dashboard there is your money right there ready for you to use so we do this we can help you with this – at our company and you can use whoever you the heck you want I don't care but we make it pretty simple for you so if you go to Morris invest calm and you click on the book a call link if you would you get down I think it's question seven or eight where asks you how you want to buy your first rental property click on I'm gonna unlock retirement funds and that will take you to one of our IR a specialists who can help you set all of this up and handle all of the backend process very very simple so we just did this with our own team because we just bought one of our own properties inside of our self-directed IRA so we bought a property in Texas we had about sixty five ish in our account in our self-directed account sixty-five thousand in our self-directed account to buy a property and we said great we're gonna buy one so we did that all inside of the self-directed IRA we'll walk you through what that process looks like now right I want to be careful about using the word hour because it cannot be to people's retirement account you are both actually eligible as a as a couple each person who has income is eligible for their own IRA so good point so this was my it's actually Clayton's property this one okay talking about so this was one from my day job for many many years had a an IRA that I rolled over into a self-directed account and again this is not the video for that we've already explained that process in a previous one now Natalie had her own retirement accounts she rolled over separately our children also have self-directed Roth IRAs we've done other videos about that you can find out about yes but Clayton had some uninvested money that was making me really itchy inside of this IRA because I don't want that sitting just in like a money market me no money I do write account right it was really bothering me and I go back and I look at these like every month or every other month and say how is this performing did these payments come in is it growing right because I want again these are Roth's so I want to be tact I don't want I want tax-free money when we retire it's gonna be so fabulous so you've identified a property and you have a self-directed account now when you go through and buy that property you are not buying as Clayton Morris the person right you are buying as let's pretend the company is growth I are sheis make that up sure claim paint growth IRA no no okay the the custodian instead of like Scottrade or etrade the name of the company the customer have a freedom freedom IRA fine freedom I cuz I like freedom financier how about freedom growth because you're free to grow okay they were annoying people with this conversation okay it's a freedom girls IRA okay our freedom growth is the company right so the person that owns the this property on the deed that then has the purchase agreement that then gets the tax bill on the deed it will say freedom growth company custodian for the benefit of Clayton Morris now I know that mouthful but it tells the I guess the government it tells the county that the house is in that the owner of this is not just Clayton Morris the person but Clayton Morris's IRA so anything and everything to do with this investment must must must go through this custodian okay so yes we have this long winded name again so freedom growth company custodian for the benefit of Clayton Morris blah blah blah they let you abbreviate a lot of times for the benefit of as FBO so a lot of times on the deed it will say freedom growth company comma custodian FBO Clayton Morris and the custodian a lot of times because they just want to make sure that the IRS doesn't come in and call foul on any of this so they tend to be pretty sticklers about the rules so recently I did a note out of my IRA and the note and the mortgage said between you know camera Homes LLC which was the investor and freedom growth for the benefit of and we had left out the word custodian and they made us redo the note and the notary and all of that stuff because they want it recorded properly and they want the government to know that this money only goes in this tax protected pup okay so it's important because there and we're bringing this up and kind of going on this diatribe about the name is because now that that name is in charge of this property so you may have bought the primary residence you live in you may have bought investment properties with cash and you just have it in an LLC it's a very basic now this self-directed custodian account owns this property okay and that means that the taxes the water bill anything else from the city needs to be paid by the custodian out of that account you Clayton Natalie can never touch the money there's also the rent that comes in can never come in to my personal account it also has to go into this custodian account right we once had a property where the property manager was managing it it's owned by Clayton's IRA and the property manager sent the check the rent check to Clayton Morris and I was like hot potato I was like oh no no I'm not gonna touch that don't touch it because if you do if we deposit it now you know I thought well what's the harm if I just put it in our account and then write a check to the IRA that's bad the government wants to see that none of this money comes out of the tax protected pot if they think that you are in any way touching this money for your present life they will find you and they will tax the value of the entire IRA at your current tax rate it would be so bad that you would cry for dough yeah don't do it so the bottom line is make sure when you're working with your custodian they're handling all of that the tax bill gets paid for out of that account you get a fine from the city for a high grass or we the lien or whatever the heck you get right that has to be paid for out of that custodian account you don't pay for it out of your personal account so now that we've got that out of the way what else do people need to know about buying a property I mean it's kind of like buying a property any day of the week if it hasn't it's no different you're identifying a great rental property and the reason we like investing in real estate inside of these accounts is because compared to the 1 or 2 percent return we might have been getting in they count before now we're getting eight nine ten eleven twelve percent return because of the passive income from a tenant living in a rental property that's the reason we do this just to buy houses right and I especially like I look at the rent that comes into our LLC's right our investment LLC's that we own now and then I look at the rent that comes inside of these IRAs and I know one is being taxed and the other is not and so I'm happy to have that as part of my portfolio I find it very exciting and you just manage it like you do any other asset now obviously this is not for people who are not willing to manage their own money right if you're a set it and forget it like I don't even open my bank statements I don't know what's going on in my retirement accounts this is not for you but I don't know why you've got this far in this podcast if you're that kind of person well right and our company is set up to help people do it passively so that you we help you identify a property make it very easy so that that is being purchased inside of your self-directed account and then the property management teams that we work with handle all of the back of your property to keep an eye on right when you watch the statements come in you watch where the money comes in you shouldn't get the tattoo a trivia like it's not like a mutual fund inside of an IRA where you literally do nothing like a 401k right that's not true there is onus to property management and property ownership so you have to do some stuff and you have to do it through only this pot right right I'm not saying that you then identify your own house if you don't want to we can do that for you right you can but there is some work involved and you are managing these assets right and if she makes a great point about you know passive income passive income yes that's what it is because it's creating passive monthly income from a tenant but you still have to take ownership of your portfolio absolutely you still have to know that you've got 40 properties and maybe these two aren't performing the way that you want let's get on the phone with the property management company and find out where No how do we increase the rent those types of things you have to take ownership of that but the whole reason mutual funds exist is because people don't want to people are lazy let's be honest they start working at a job they get a 401 K and they think that they're set up for retirement in the average 401 K at retirement is 96 thousand dollars that's alright I'm more comfortable using the word misinformed than lazy because most people think like oh this is great my money is they just don't know they haven't done the work in order to put oil back the curtain maybe but I would say if the person is watching this video right now specifically when hear or listen to this show this podcast specifically to learn this skill and to increase and improve their financial affairs right and it's that person up until now has had mutual funds they certainly are not lazy they just were misinformed I think I was that person for a long time okay so don't call me lazy she's defending all right you're not lazy then it's informed I was and now we're all better informed so again just think about finding an investment that performs right and you're sort of saying well okay in the stock market I can maybe get 4% and then every 10 years get a market correction kind of wipe out the last three years and then grow again right that's risky and expensive or you can find your own investments like real estate and then the returns are coming in to your own tax protected account and it's yours like there's something really awesome about knowing okay this isn't something that like I don't know some fund manager thought was great and then this isn't something that we bought we fixed up you know it's it's really it's an amazing feeling to see that grow right it really is powerful and this is exactly why I think a lot of these large financial institutions don't want you to know about it it Natalie made a point in another video that if you google self-directed IRAs a lot of these big companies like fidelity and Scott tree and Annie trade all those will buy ads so that they're trying to get your attention but they're not actually self-directed accounts belts you can pick and choose some of the stocks you get to invest in but if you tell them I want to buy a house a physical in my IRA they'll say sorry we can't do that yeah they don't like it or they let you they're gonna charge you exorbitant fee you know why yeah because they don't make any money off of it this there's a house there's a cellar you buy it there's a tenant there's no way for them to make any money as the middleman managing that portfolio so there you go so that is a look at buying real estate inside of a self-directed IRA please check out the other videos in this series on self direction because we walk you through the three ways of how to make money inside of your self-directed account it trumps any other form of investing that I can think of check that out as well as the other strategies for taxes in there as well now go out there take action become a real estate investor we believe it's the number one way to build wealth we'll see you next time