Podcast 63 How to use a Self-Directed IRA to invest in Real Estate with Matthew Tillack


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What is a self-directed IRA?

A self-directed is a retirement account which allows you to defer taxes (traditional) when you invest money or avoid taxes from the gains you make in the account (ROTH). There are limits to how much money you can invest into an IRA each year, which should be discussed with your accountant or an expert like Matthew. Most large brokerage houses will let you invest with your IRA, but they limit what you can buy to stocks, mutual funds, bonds, and other traditional investments. The large brokerage houses may have self-directed IRA’s as well, but they will not let you buy real estate or other alternative investments. In order to buy rental properties with an IRA, you will most likely have to find a company that specializes in self-directed accounts.

How I bought my turn-key rental property.

What are some of the restrictions when investing with a retirement account?

When you invest into an IRA, there are many restrictions in order to get the best tax benefits.

  • You cannot take out money before you are 59 1/2.
  • You cannot personally buy or sell assets in your name. The IRA must buy and sell everything.
  • You cannot pay any expenses or take any income produced from assets in the IRA. All income and expenses must go through the IRA.
  • There are restrictions to what you can and cannot invest in.
  • You cannot run a business through your IRA, it is for investing only.

Why did I buy a turn-key property with my IRA?

I do not invest heavily into retirement accounts, because I am very impatient. I am 37 now and I don’t want to have my money sitting in an account with many restrictions for the next 20 years. However, I am a very aggressive investor and fairly young as well. Investing with an IRA or 401k makes sense for many other investors. I have an IRA that I slowly put money into when I was younger. I invested in mutual funds, REITs, and stocks with that IRA until last year. I was never a fan of the stock market and much prefer investing in real estate.

When I learned about self-directed IRA’s and that you could buy houses with them, I knew that would be much more fun than investing in stocks. I worked with a turn-key rental property company to buy a house in Cleveland for $45,000 which rented for about $750 a month. I happened to have about $50,000 in my IRA so it worked out perfectly. It can be tricky getting a loan with your IRA, so it was easier for me to pay cash. Matthew explains what the process is like to get a loan on a turn-key property on the podcast.

What are the advantages of buying real estate in a self-directed IRA?

The nice thing about IRA’s is they come with many tax advantages. You can defer taxes on gains or on money you invest into them. If you are trying to save money by paying less taxes, a retirement account works great. If you have already save a lot of money in your retirement account, investing in real estate may give you much better returns. The returns may also be more stable as we know how up and down the stock market can be. Real estate can go up and down as well, but the rents are usually pretty steady even if prices decline. If you have a company 401k, you may be able to roll that into a self-directed IRA account as well!

How can you get started investing with an IRA?

I have known Matthew for a while and he is even one of my Complete Blueprint for Successful Real Estate Investing students. He talks a lot about his investments on this podcast as well, but his day job is helping people invest with their IRA. You can reach Matthew at The iPlan Group website. They are happy to give free 30 minute consultations on how they can help you.

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[0:00:59.2] MF: Hey everyone, it’s Mark Ferguson with Invest Four More. Welcome to another episode of the Invest Four More Real Estate Podcast. Today I have a guest on who I’ve known for quite some time. He is very involved in the self-directed IRA scene, a real estate investor himself, he works with the iPlanGroup and has been specializing in self-directed IRA investing for over 10 years. He also has his own rentals, his own flips.


Matthew Tillack, thank you so much for being on the show. How are you doing?


[00:01:27.3] MT: Oh you’re welcome, I’m doing real good Mark. Thank you for having me on.


[00:01:30.0] MF: No, I appreciate you being on and taking the time to share your story and what you do and give us some information on self-directed IRA’s as well, which I know can be a confusing and complicated business investing out of those.


[00:01:42.2] MT: Yes sir.


[00:01:42.8] MF: Cool, well I’d like to start with how did you get started in the industry, how did your story start out to get involved in all this?


[00:01:49.3] MT: Well, I was in college and I was finishing up and I actually put my resume on a career board type thing where a self-directed IRA had contacted me to ask me to come in on kind of an entry level position. So I accepted it, thinking it was just something to do. So I finished my degree but it turned out as a career for me where I started off in customer service and worked my way up and then inbound sales and outbound sales and then became a travelling sales rep. So I just fell into it but I really liked it and I always like the connection between the self-directed IRA industry in real estate so I stuck with it because they’re both a passion for me.


[00:02:29.0] MF: What was your degree or emphasis in college?


[00:02:31.8] MT: At business, I did kind of a general degree and then towards the end, I tailored it towards business. So that what I was going for, yeah.


[00:02:41.5] MF: Okay, were you interested in real estate before getting involved with the IRA industry or did that come from being in that industry?


[00:02:49.0] MT: A little bit of both, I was always interested because I had family and friends that had done it or were interested but definitely burred my interest working in the business because of how many people I met. When you work in the self-directed IRA industry, I’d say about 90% of the vendors you work with are real estate companies of some sort or real estate education platforms.


So you’re just around it, you absorb it, learn from being around all these other great investors. And the cool thing is you get to go to a lot of the vendor meetings and a lot of these three or four day events and be a part of masterminds but you’re actually there as a vendor so that’s pretty cool too. So you get like it and inside knowledge if you will. It’s certainly great.


[00:03:32.8] MF: What do you think stuck out to you the most from being around all these investors and all these people in the real estate industry that really drew you more into it?


[00:03:41.1] MT: Real estate investors are just a different breed to me. They really want their entrepreneurs at heart, they love the deal, putting the deal together. They love to take something and turn it into something greater, I like to flip for instance or they just have that drive so it’s a different breed I’d like to say so that really attracted me because I find that that’s me. Even though I work in the IRA industry, I love what I do. I also love real estate and I think the two go together really well. So I see it, I just see those entrepreneurs out there putting deals together and being creative. I just love it.


[00:04:15.6] MF: Nice and so how did you get started investing? What was the first property you invested in and when did that happen?


[00:04:21.2] MT: That happened back in 2013. It’s a rental. I still own it today. I had a virtual assistant just calling some of my Craig’s List ads for me, for sale by owners, picked up for $15 grand, $15, 200, something like that really. It’s really inexpensive, I fixed it up, ended up refinancing it and I did a lease option on the first tenant and it didn’t work out so I went to put a section eight on it, put up and that’s been on there for several years and that property’s cash flowing around $350-$400 a month right now, which in that neighborhood and for what I picked up for is great so that was the first one I did.


I got really creative. You know how I bought it? Credit cards. I hate to say it but that’s how I got started. I don’t recommend everyone does that but with a lot of the rehab and everything, that’s what I used. I bought it cash but that’s what I used to put the money into it and then I refinanced. I did it smart though. I used a zero balance credit card and then refinanced and paid them off. So again, I don’t recommend everyone start that way but that’s what I did. I made it happen.


[00:05:27.3] MF: Was that property in the Ohio area?


[00:05:29.2] MT: Yeah, it’s in the Cleveland area here in Ohio.


[00:05:32.9] MF: Okay, I know people are going to be wondering where can I buy a house for $15,000?


[00:05:38.0] MT: Yeah, I know and this was a couple of years ago. I think the market started to pick up a little bit. This was back a couple of years ago where you could still pick up some houses with some really killer deals.


[00:05:48.5] MF: Nice and I own a property in Cleveland. I didn’t know if you know that, I own a turnkey in Cleveland. I’ve never seen it, I’ve never been to Cleveland but I have a house there, so I’m glad to hear that the market is doing better.


[00:05:58.8] MT: It’s really taken off I think. I’ve seen a lot of action here and solid rental, solid rental place. I mean I think I read somewhere it’s top five or something that I think I’ve seen some rentals. There’s some really good areas.


[00:06:11.7] MF: Nice, well no I’m glad to hear that for sure. So you bought the house for $15,000 what did you end up putting into it and what did it end up renting for?


[00:06:19.6] MT: I think I put probably $20 into it. I have to look back, not a terrible amount but I’ve got it rented for $795 but my mortgage is four, just a little over four. So I’m clearing over $300 on that one.


[00:06:33.5] MF: Nice and I’m curious, one thing that I’ve always heard is the difficulty in financing those low valued properties. Did you have problems running into that or did you find a bank pretty easily who would finance that property?


[00:06:44.4] MT: Good question, no I didn’t because it was such a solid house from the start. It has a really good bones that once I just prettied it up a little bit if you will, that appraised out where I didn’t need it to. I actually got a convectional 30 year fix on that and I did not have to go to one of those banks that does rental property. I’ve used those before too where that’s all they do.


For me, it was actually pretty easy but you also have to have good financials if you want to get a nice 30 year fix. You’ve got to have a pretty decent credit, having a job that doesn’t hurt and then of course, having the property rented with a lease in place, it puts you over the top.


[00:07:22.5] MF: Right, no for sure and what do you think that place is worth now if you have to guess?


[00:07:26.2] MT: Well over $50. I think if appraised, close to $70 believe it or not but I thought that was a little high but yeah, so I mean it’s worth over $50 for sure.


[00:07:35.8] MF: Nice, so that worked out well for you and after that first rental, it sounds like a pretty good success story I imagine you got most of your money out that you put into it or maybe even a little more.


[00:07:44.9] MT: A little bit more.


[00:07:45.9] MF: But how did your investing progressed? Did you go for more rentals? I know you’ve flipped houses as well too.


[00:07:50.8] MT: Yes, I just started flipping this year but right after that, I went and bought a three unit, rehabbed it, used some of the cash from the refinance on the other one and that three unit was pretty cool because I just sold it when it was fully rented. All three units, the net on it was about $1,200 a month so after all expenses, I was putting over $1,200 a month in my pocket. So that’s a really, really killer return. Same thing, bought it, fixed it up, got it all rented and refinanced it.


And then the market where it was, it was a really nice happen in town, I just put it up for sale at what I think was a very high price. I listed it at $190 just to see what I would get and we had an offer within 30 days, full asking price. So I sold that, put a nice check in my banking account and then I parlayed that into doing some more flips. I’ve actually got four other projects going right now so thanks to selling that three unit and making a nice profit and I just sold another one.


I just got an offer in today above asking, I had it listed for $189,900 and we just got an offer at $192 and that was for a flip I just did and then I just bought another rental. It’s almost done being rehabbed, picked up another flip in a really tiny town called Ohio City here in Cleveland. That’s going to be a really killer deal because I picked it up for $75 but ARV and that thing is about $250 to $300 just because it’s a really, really trendy area. So yeah, I’m just keep in some rentals because I love the idea of building wealth but I’m also gearing up to do a lot more flips too.


[00:09:23.8] MF: Nice and how are you finding most of your deals? Are you still doing kind of the off market properties that aren’t listed or are you finding some properties on the MLS as well?


[00:09:31.1] MT: You know, most of everything that I bought is either MLS or some of the auction sites, maybe like Hub Zero or something like that, which can be very, very challenging and difficult. So you’ve got to have a realtor that knows what they’re doing because they’re hard to close especially with financing in place. But off market too, like the one I bought in Ohio City was totally off market. It just came across my desk because the company that I borrow from on some of the rehab loans just brought it to me.


I said, “Hey, do you have any deals that you know of?” And he said, “Actually, I do,” and it just worked out like right place, right time. He introduced me to that seller who was a private seller and I bought it. So I am finding that the more I’m in the business, the more deals show up if you will.


[00:10:13.1] MF: No, that is for sure and just asking people like you said, it’s amazing at what people tell you and find out. It’s like, “Why don’t you just keep that deal for yourself?” It’s like just so many people, they don’t invest in real estate but they actually know of people who are selling and getting great deals. It’s amazing how that works.


[00:10:29.3] MT: Just worked out, the guy that was selling it just had too much on his plate. The lender is in the business to lend so he didn’t want it. So I took advantage of it and I really feel that when it’s all set and done, there could be a good hundred grand spread on this one if we do it right and we do it real high end just because of the location. So we’ll see, you know?


[00:10:49.5] MF: Nice. I’m curious about that deal, it sounds like there’s a ton of room. Is it one where you’re, I mean are you adding space? Is it just a complete gut? What kind of property is it?


[00:10:58.6] MT: Complete gut, it was already gutted when I bought it so it’s down to the studs. There is a little bit of fire damage upstairs but nothing to scare me away. We had a structural guy come in, he already fixed it. So what was so attractive was it’s already gutted, it’s already down to the studs. That’s half the battle in my book and here’s the really cool part, it already had an open floor plan. So when you walk in, the first floor is completely open. Kitchen, dining room, living room, then there’s stairs off to the left that goes up to the upstairs at work of course, where there is a second floor and it’s only a two floor house with a basement, and it’s a 3-2.


But the really cool thing is if you walk around the corner, there’s two new builds that went for high two’s and one just went for low threes but I like those as comps because they’re almost identical in square footage in the layout. When I looked at the one new build, you could see open floor plans, steps off to the left. Two floors, it was almost a cookie cutter of the house I bought so we’re going to go real high end on this one and kind of push the envelope and see what we can do.


[00:12:06.4] MF: Nice, that’s awesome and you love to hear those high dollar profit margin for flips. It doesn’t always happen that way, so very cool. Cool and now, I want to get into the self-directing IRA side of it as well here but before we do that, what are your plans or goals for the next couple of years? Are you trying to just keep flipping? Do you have a certain amount of rental properties you want to buy or are you just go with the flow and seeing what happens?


[00:12:29.4] MT: A little bit of both. I mean I definitely want to grow a really sizeable rental portfolio. I’d love to get to a hundred and then 200 and just really do that but also do flips and my goal in the next year is to double my volume. So if I do five, by this time next year I want to have at least 10 deals going at the same time and I’ve got friends that do it, I’ve got acquaintances and masterminds that do it, so I know it can be done. That’s where I’m shooting for.


[00:12:53.9] MF: Nice, very cool. Well good luck in that and I know you’ve moved pretty quickly from buying your first property in 2013 to getting to a point where you’ve got five deals at once. I’m not exactly sure about the timeframe but three years later about, that’s pretty quick movement in the real estate business.


[00:13:10.5] MT: Oh good to know and see I was always thinking I was being slow about it and I need to push myself but that’s such a good thing, right?


[00:13:16.0] MF: Yeah, well you still have a full time job as well right?


[00:13:18.5] MT: Sure I do, yeah.


[00:13:20.3] MF: Yeah, so I mean it’s basically a part time gig for you, which is pretty cool about flipping. If you do it right, if you have the systems in place and obviously contractors that work for you, it doesn’t take all of your time to flip houses that’s for sure.


[00:13:32.0] MT: Exactly. You’re there when they need to draw and then the rest is just, “Hey, give me a report,” you know?


[00:13:41.1] MF: Very cool, so let’s move back into the IRA business. I know you’ve been in this business a long time, what do you think are some of the most attractive things about IRA investing for real estate investors, people who are maybe traditionally with invest in the stock market or rental properties without their IRA, can you give us a breakdown or a little bit of history on it?


[00:14:00.9] MT: It’s really, it fits the real estate personality perfectly because like I mentioned earlier, real estate investors we’re entrepreneurs. We like to take control and do things ourselves. That’s what you’re doing with a self-directed IRA, is you’re taking your IRA, you’re moving it over from maybe an old employer 401(k) or maybe an old IRA that you have somewhere and what our investors or clients are doing is they’re moving out of that traditional stocks, bonds and mutual funds type of company and they’re moving it over to a self-directed custodian or administrator that allows them to invest into what they want to and what they choose.


And it just so happens that a lot of those types of people are real estate investors, that’s probably 85, 90% of what we see. But you’ve got these people that want to get out of the market and they to invest in the none traditional things like private companies or maybe they want to be a private lender to other real estate investors or maybe they just want to buy rentals or invest into an apartment syndication. I mean the sky’s the limit, so I think that’s the most attractive thing is the level of control where you not only choose where your money goes but typically these people are earning a higher yield.


Because for instance, if you loan your money out to a real estate investor on a rehab loan and you’re charging them 15%. Well, that 15% comes back to the IRA and that’s the second attractive thing about a self-directed IRA is as long as your income, all the income comes back to the account, you’re not paying taxes on the profits. It’s either tax deferred or tax free depending on the type of IRA you have. So those are the two big things to control and then your tax advantages.


[00:15:42.3] MF: Yes for sure and actually the property that I have bought in Cleveland, I bought with my IRA and I had it invested into just mutual funds, some REITs, it’s just so frustrating for me personally investing in the stock market or even REITs because I have no control over anything that’s done. It’s basically you give your money to somebody and hope they do a good job and there’s all there is to it and so when I could buy an actual house with my money, I’m like, “I get to choose the house.”


I used a turnkey company, I get to choose the company and it’s just so much more fun doing it that way and having controlled than just blindly investing in the stock market, which I know you can invest in stock market in different ways but I don’t have time to research and figure out all the intricacies of that. Very cool and I know when I invested in mine, I ended up using cash to buy the properties like 45,000. I know it’s a lot of different things to consider as far as loans and how you invest within self-directed IRA. Can you go into that a little bit?


[00:16:37.9] MT: Sure. There’s a few different ways and I think if we get into talking about loans, it’s almost a conversation that we can have one off with the prospect and then we can even talk about the banks that loan to IRA’s, and maybe give you some places to look and then you also want to bring in your accountant or your CPA or someone in that situation as well because taking out a loan instead of an IRA is a completely different ballgame than buying all cash.


I will give you for instance, if you buy all cash, all of your profits come back to the IRA without any taxes on them whereas if you go out and you use leverage, then because you use leverage your IRA could actually owe a tax called unrelated debt financed income depending on how much the leverage is versus your equity in the property and also how much income the property produces.


So typically, it’s not a deal killer but it is a tax that your IRA has to pay because it used leverage. Then you have to have your accountant or CPA file a 990T every year with the IRS to track and record that and calculate the amount of tax you have to pay on your income from that property. So as you can see, using leverage and using no cash are totally two different ballgames.


[00:17:53.7] MF: Right and then also I know when you’re buying with your self-directed IRA, I can’t personally buy anything. It’s the IRA that buys everything and would get the loan and all of that and like you said, finding a lender who will loan with an IRA, basically they can’t offer a personal guarantee or the investor can’t offer that because the IRA has to buy it without their involvement, right?


[00:18:14.2] MT: Yeah, that’s right. Very good point Mark because it does have to be a non-recourse loan. That’s an IRS rule and which means that, like you mentioned, the bank can only go after the property in the case of default. They cannot attach any liens to any of the other assets in the IRA or the IRA owner and if you do that, if you did file personally for a loan for your IRA that is considered an extension of credit prohibited transaction. You can be taxed and penalized so you don’t want to do it. So there’s only a handful of banks out there that will loan on a non-recourse basis to a property but the good news is, they’re out there and they do specialize in that.


[00:18:52.7] MF: Okay, cool and yeah I took the easy route and bought a cheap property for cash because of all of that.


[00:18:58.3] MT: It’s so much easier, yeah.


[00:18:59.8] MF: What other things? I know that when you’re buying a rental property with your IRA, can investors manage that themselves or they have to have a property manager? I mean there’s so many different things going on with an IRA and the rules, do you have any information on that side of it?


[00:19:14.0] MT: Sure and that’s one of those areas that I can get a little grey and I’ll tell you why, because it is your IRA, you can manage it. You can choose where the money goes and do your research on the investments and all of that but you’re not able to go and put any of your personal money into that deal. For instance, if your IRA buys a house, you cannot use your personal Home Depot credit card and go buy any supplies for it. So you literary have to keep your personal finances and your IRA completely separate.


So the IRA owns the house, the IRA has to pay for the expenses from the IRA, which we would handle for you here at iPlan Group where you just fill out an expense request and then we cover that expense. So similarly, if any income comes in, you have to make sure all that income comes back and is placed back into the IRA. You cannot be a conduit, meaning you can’t take that rental check, deposit it into your business account and then send it back to your custodian or administrator.


That’s a prohibited transaction so you have to literary keep your hands off of everything financially and make sure all the money comes back to the IRA and that you don’t use any personal assets including physical labor to go rehab that property or fix anything. So that’s a hard thing Mark for a lot of real estate investors when they use a self-directed IRA’s because a lot of them are so handy. They want to go do it themselves, they want to go fix that leaky sink or they want to replace a window and you can’t do that with a self-directed IRA.


[00:20:43.0] MF: No that’s a great point and something I’ve never thought off.


[00:20:46.4] MT: Yeah. So to your question about property management, you absolutely have to have one? Not necessarily. I mean you could just have the renter send the rent checks back to your IRA custodian or administrator, but I do think it makes things a lot easier for you if you have a property management company in place because it gives you that buffer between you and your account.


So there’s less of a chance that you doing something prohibited like accidentally depositing the check into your personal account or fixing something and using personal funds when you’re not allowed to. While it’s not necessarily a requirement, it’s probably a really good idea I think especially for the novice, just starting out.


[00:21:28.6] MF: Right, no that makes sense and one thing, I had some money for my IRA because I used to invest into it when I was younger, I completely stopped investing in any retirement accounts myself because I want all that money going into my flipping, into my rental properties and I didn’t want to be tied down and not being able to use it for a very long time.


Can you go into some of the rules on how long? Because all of the income, all of the expenses have to go into the IRA. You can’t just take some rent for yourself, like you said. How long do people have to have that money in the IRA before they can touch it and start to use it?


[00:21:59.3] MT: That’s a great question. So far all of the IRA’s out there, you cannot start taking distributions from the account for personal living expenses or personal use until 59 and a half, that’s when you can start to take the money out. So I do get a lot of people in that mindset that you just mentioned where it’s something off in the future, they don’t really want to mess with it but I think it’s important to look at the pros of having one.


The first one is, there’s seven different account types. So for instance, I get a lot of clients that come to us around tax time and their accountant just wants them to set up a traditional IRA or a SEP IRA for their business because any money they put in there, they get a tax deduction on. So I can’t tell you how many times I’ve had clients say, “My accountant says I have to open up a SEP and I’ve got to put X amount in it because they were going to try to drop me down a bracket rate or something at my taxes.”


So it’s not just something that’s a tool used for the future, you can use it as a tool right now and it’s very, very important. The other thing too is the Roth IRA, you can be starting one as early as possible because you grow that thing. It’s tax free growth so you don’t pay any taxes on the profits and then when you retire, you can also live on that money tax free. So imagine starting off at 18 and growing a Roth until you’re 60 something. Let’s say you’ve got a $1 million in there, you can do whatever you want with it. Because it’s a Roth IRA, you’re past retirement age, now you could pull the money out tax free. So they’re really important tools I think to get started early.


[00:23:30.3] MF: Right that makes sense. I still am not going to do it but I like my liquidity and flexibility but I understand why many people do do it. I have a pretty aggressive investing style myself.


So now what about 401(k)’s? If someone has a 401(k) through their corporate job or whatever, you can work with those as well too right?


[00:23:52.6] MT: Yes, we can. We can always roll over money from a 401(k) to an IRA and then they could use that money almost to go do a deal or what have you, buy a first property. The only catch is, if it’s with a current employer, they typically won’t allow you to move the money while still employed. You just have to call the 800 number on your statement and ask and see if you can do an in service roll over or not. Generally speaking, the answer is no.


So the 401(k)’s that are really good targets for clients to move over are the ones from previous employers. So you’ve got somebody that maybe worked at Ford. They no longer work there, there’s a hundred grand in that old 401(k), it’s just doing nothing, that’s the perfect account type to roll it over into a self-directed IRA. Now it’s within your grasp, you can control it, you can invest into what you want to, real estate being a huge investment opportunity there.


[00:24:47.2] MF: Right that makes sense. One question I have too I just thought of, do you have investors who flip in their self-directed IRA? Is that possible or feasible?


[00:24:56.2] MT: Not too often. Sometimes they do, with flips though you have to be very careful because if you do too many in a year, there’s no cut and dry stance on how many but if you start to really do a lot of flips inside of an IRA, the IRS can view that as an inventory more so like you’re running a business almost. So they start to view your account more like if you bought a company like a Subway franchise and if you go out and you buy a business with your IRA, then you have to pay what’s called an unrelated business income tax.


So if you do too many flips in a year that is an issue. That’s something to discuss with your CPA or your attorney but keep that in mind. Have I seen clients do one or two here and there? Yes but typically if you own a property for more than a year, then it’s not an issue. You don’t have to to worry about them viewing your IRA as running a business. It’s just a long term investment at that point.


So in short, rentals you don’t have to worry about that. Rental income is exempt from a type of tax and generally speaking, if you did one or two flips, you’re probably going to be okay. Again, run that by your CPA or your attorney but just keep in mind, if you really started to scale up and do a lot that could be an issue.


[00:26:15.7] MF: Okay, that makes sense and of course, the same thing I’m sure as far as doing work yourself on the properties, it can be an issue. I’m curious if it would ever be an issue because it takes a lot of work to find flips and hire contractors and do well with that. Do you think it would ever be an issue with people saying you’re doing all these work as a job or is that the same thing as it becomes a business, what you were just talking about?


[00:26:36.5] MT: Well, I wouldn’t worry about it unless that person was trying to pay themselves, which is not okay to do. That would be prohibited.


[00:26:43.6] MF: Okay.


[00:26:44.1] MT: So here’s the line there: you can make the investment choices in where you IRA is invested into but the moment that you were to personally benefit from what your IRA is doing or try to pay yourself a fee as like a contractor, that’s where it crosses the line into being a prohibited transaction. Okay? So one of the prohibited transaction is you cannot personally benefit from your IRA now, it’s intended to grow your wealth for retirement not for you to hire yourself as a contractor per se and pay yourself to go do work on the house now. Does that make sense?


[00:27:23.8] MF: Yep, no that makes sense. So there’s obviously a lot of intricacies and different things to watch out for when investing with your self-directed IRA and transitioning to that, tell us about iPlanGroup and what that company does and how they help investors who want to invest with their IRA.


[00:27:41.8] MT: Okay. So iPlanGroup, we specialize in this. We are a self-directed IRA administrator. We’re in Westlake, Ohio and like I mentioned earlier Mark, most of our clients are entrepreneurs. They are investing into non-traditional assets so they’re getting out of the market and they’re taking control and they’re buying real estate and things like that. So that’s what we specialize in. You have to have a company hold your IRA for you. You can’t do it yourself.


So what we do is we hold the plan, we assist clients and establish in the IRA, we assist clients in transferring or rolling over money into it so now that it’s funded and it can be invested and then once you find a deal that you want to deploy into, you call us. We tell you all of the supporting documentations that we need to see. We also explain to you how to properly title your documentations so it lists the IRA as the owner versus you personally. Which is a really, really important point when you’re just getting started out.


Let’s say you go buy a house, you have to make sure that that purchase contract, the deed, the HUD one, everything, list the IRA as the owner and purchaser not the IRA owner. So we give you proper titling to list your IRA and all of that supporting documentation. We also have you sign authorization forms where you are authorizing us to send the funds out to your account and make that investment.


What we do is we review all of that, all the signatures, all the supporting documents and then we fund that investment for you and then that asset is now held within your IRA. So for instance, you buy a rental property, your IRA owns that rental property, it’s on the deed. If you’re a private lender into another, let’s say rehabber and you do a note in the mortgage, your IRA is the lender and lien holder with that note and mortgage. If you buy a tax lien, your IRA owns the tax lien. If you buy shares in the private business, your IRA owns those units and shares.


So we basically do all of that for you and then as you grow that account and as you manage your investments, we’re there for you though all of that as well. So you’ve got to pay an expense to a plumber? Uou request it, we send a check out. When it comes in, we take it and deposit it back into your IRA. You also have an online log in, you’ve got a service team here you can call that will walk you through how to do your investments. It’s a specialty type of account, so if you go to some of the larger companies, they’re not going to allow you to invest into these non-traditional assets but we do. We’re about 2% of the market so it’s a small niche but that’s what we specialize in. That’s what we do in a nutshell.


[00:30:26.2] MF: That’s great and you bought up a couple of points that I want to talk on too. If you go to like a TD Ameritrade or Merrill Lynch and you say, “I want a self-directed IRA,” they’re going to tell you, you can’t do that. Even though you can, what they mean is you can’t do that with them. They don’t offer that account. That doesn’t mean you can’t do that and I’ve had that told to me too. It’s like, “Well you can’t do that.” I’m like, “What do you mean I can’t do it?” And what they mean is that they don’t do that. You have to go to a certain specialized company like yourself to do it.


[00:30:53.0] MT: Exactly, right. So I mean there’s only three things you cannot invest into if you look into the code on this and it’s life insurance. So you cannot buy life insurance on yourself or someone else. Collectibles, which is like paintings, art work, rugs, bottles of wine. So no booze, comic books, baseball cards. So no collectibles and then there’s a letter ruling that says your IRA cannot be an investor into an S Corporations. So life insurance, collectibles, S Corps. Typically everything else if you can show investment documentation for it and list that IRA as the owner, you could buy it.


So like you said, you go to them and say, “I want to buy a property,” they may have a self-directed IRA meaning you can self-direct it into stocks, bonds and mutual funds but you’re 100% correct Mark. They’re not going to allow you to buy property or private companies or notes and mortgages. It’s just not their bread and butter.


[00:31:48.0] MF: Right and something else you mentioned too, there is a different process with buying a property because the IRA has to buy it. So I know working on the seller side, some houses that I’ve had, we’ve had buyers buy with IRA’s and it’s taken some time to get all the documents together. How much extra time do you think someone should allocate if they’re buying with their IRA? Because you’ve got to send all the documents to the company, get them sent back and all of that on all the contracts on everything.


[00:32:12.8] MT: You know it’s going to depend on who you’re working with, where the IRA is. I mean there are some firms that that can take a few weeks. We pride ourselves on being very fast and efficient. We’re not the largest player on the block but we do carry all the same insurances and things like that. So because we are a smaller self-directed IRA company, we can operate a lot leaner meaning that most investments get in and out here within a day or two.


If everything is correct and you can assess all of your documentation before noon, our goal is to get that out in the same day for you. Now, to answer your question, how long should you give, I would say give yourself at least a couple of days because generally speaking, if it’s your first deal, there’s going to be maybe a mistake here and there on the documentation. We need to notify you, you need to correct it and there’s going to be a little bit of go back and forth. So I would give yourself a good couple of days.


Now here’s the catch though, it’s where a lot of people get hung up when they’re transferring money from another institution into a company like iPlan to do their investing, that’s where the holdup can be because I’m essentially powerless in how fast that other company can move money. So if you’re funding your account for the first time, I suggest you give yourself a good two to four weeks just to get it all set up, get the account funded, make sure there’s no hold on your funds, then go process your investments.


[00:33:39.1] MF: Okay, that makes sense and one question too, let’s say I want to make an offer on a house and I’ve got to act really fast to get a good deal, does the IRA, does iPlan have to sign that offer or can I sign for my IRA and then iPlan does the actual closing paperwork? How does that work?


[00:33:58.0] MT: That’s a great question. So I know how we do it here is as long as that purchase contract is in the name of the IRA, meaning you listed your IRA as the buyer, we are okay with the client signing the purchase contract only and then everything from that point on, we sign. So essentially anything that is a closing document or anything that’s recordable in nature and then we would sign on their behalf.


But we’ve had quite a few clients that will sign the purchase contract themselves. They’ll request earnest money check or wire from us. We try to be Johnny on the spot and get it out for you immediately, which we always do and then you’re good. You can move forward.


[00:34:43.9] MF: That’s another good point, I think, about the earnest money, you’d have to have that come from your IRA account. So hopefully sellers will understand if it’s your IRA buying it. You’d say, “Hey maybe do a three day or a couple of days earnest money.”


[00:34:55.1] MT: Exactly. That’s right, if you communicate that with them Mark, I have never seen it being an issue.


[00:35:01.6] MF: Very cool. Cool, well that’s a lot of information and some great stuff. Do you have anything else to add? I mean if someone is looking, say they have some money in an account and they want to move it to a self-directed IRA, what are some of the main things they should consider and think about before they really get involved in doing that?


[00:35:19.1] MT: Sure, you know what? I’d say if you’re on the fence or it’s something that might interest you, give us a call. You can go to our website, iPlanGroup.com. You can also go on there and set up a 30 minute strategy session so either myself or the other business development manager here, Eric, one of us will call you and set up a time to talk it over with you and we can send you additional information and get all of your questions answered and see if it’s something that’s a right fit for you.


[00:35:44.8] MF: Awesome, cool. Well Matthew, thank you so much for being on the show. I learned a lot. I’ve learned quite a bit going through the process myself but then there’s all kind of different intricacies and things to go on when you’re buying from your IRA or funding it. So thank you so much for all the information. I hope you have a great rest of the week and yeah, thanks again for being on the show.


[00:36:05.1] MT: My pleasure. Thank you for having me on Mark and I look forward to doing more business with you.


[00:36:09.9] MF: All right, thank you Matthew. Have a great day.


[00:36:12.0] MT: You too. Take care Mark.




  1. Kennedy August 27, 2016
    • Mark Ferguson August 29, 2016

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