How to turn $20K into $10MM tax free

Discover the secrets of turning $20,000 into a staggering $10 million, all while enjoying the benefits of tax-free gains. We unravel the strategies and tactics that can propel your wealth to unprecedented heights. Explore investment opportunities, leverage tax advantages, and navigate the intricacies of wealth creation.


Wonderful stories and lessons awaiting for you


kind of with your did you work in Corporate America where you what did kind of what life look like when you first came out of college yeah so our
graduated as a as an engineer in a French University I’m French and uh came
to the United States in 2002 started to work as a consultant for you late Packard for a number of years and as I
was doing uh that job I had a hobby to invest in real estate so we’ve done a
few deals along the way and about six seven years ago I decided to go full time since then uh you know we bought a
lot of properties about 35 to 45 every year all in Colorado this is my background in physics in engineering and
branching out to real estate investing it’s more fun actually awesome so when did you kind of make that jump so you work in W-2 which I could totally relate
to I’m an engineer as well worked a W-2 job for 10 years and then was doing real estate on the side but I’m curious what
did it look like for you when did you at what point did you start doing some real estate investing I assume it was while you’re still in your W-2 job yes exactly
so you start slowly like we used to do two or three Deals a year kind of get a
hang of it and then we decided to go into rental properties initially we did
flips a lot and at some point it becomes to a decision where you have to see if
it’s worth it having a W-2 job that pays a few bills but doesn’t really get you anywhere compared to real estate where
you can really grow your portfolio your assets your net worth significantly faster than having a full-time job so I
remember one time I was looking at my net worth and the 20 rental property we had increased the value by a million
dollars a year just with appreciation and I look at my W-2 salary in comparison to a million dollar net worth
increase and it was just not making sense to continue working for somebody else anymore wow okay repeat that you
said you’re basically you had grown and accumulated enough assets that the appreciation alone was gaining you a
million dollars a year that’s phenomenal how many properties was did that and how long did it take you to kind of get to
that build that portfolio it took a while oh at least 12 years so you know
initially like I said we are flipping properties so it’s a good replacement of your current job it makes a good big
checks but it’s a job compared to rental property so yeah it took us about 10 12 years to accumulate about 20 rental
property and then we continue doing that now so it’s a process it doesn’t come overnight and we did a majority of
investing in self-directed Roth IRA where we have the checkbook LMC and now
we use 401ks so we don’t pay taxes on those profits they got reinvested into
the the retirement accounts without taking any distribution therefore we can make it grow a lot faster than when we
have to pay Uncle Sam you know 20 30 taxes on our profit so that’s another
reason that it goes faster yeah I’m excited to dive into that before we quite go there were you in in different
so we can definitely talk about sounds like you’ve been using your 401k to help grow your portfolio or sorry you’re
self-directed both self-directed IRAs to grow your portfolio have you also used
leveraged other people’s um self-directed IRAs to invest in your deals or partner have you done any of
that I never partner with anybody else’s 401k or IRAs we only use our own so
initially we use the little money we have in it as a earnest money and then we did some Wholesale in order to grow
because you can only contribute so much per year into those retirement accounts so it doesn’t go that fast but having
the ability to use solely the 401K or the IRA and the money take taken from there as a down payment and then you
will sell so you can make 20 30k very quickly and ultimately we use it to partner with other investors but it was
their own money it wasn’t any type of IRAs or 401ks not so many people do that frankly it’s pretty rare to have
investors using IRAs and 401ks it’s just unfortunately don’t know the benefit of it and that’s a shame because huge tax
advantage that may or may not go away at some point they always talk about getting rid of those tax advantages from
those accounts so we have to use it now as we can that may very well disappear in the future yes and yeah and talk more
about that Christopher why it is so rare you think that people are using self-directed IRAs well you know
everybody I talk to I tell them about what I do and how I do it and they are excited and like anything you would tell
100 people about it and maybe two or three are really going to do it at the end I mean it’s maybe it’s complex you
have to learn how to do it the right way because it’s dangerous if you do it wrong you can lose it so and you have to
get started slowly like I said it’s a six seven thousand dollar a year you can contribute to an IRA it’s not that much
to get you a deal these days but you can partner with somebody else you can borrow money eventually you can use it
as a way to secure the deal and more sales so you make it grow somewhat fast you just have to get started on the
first one and learn how to do it and document and train and go to presentations and seminars on how to do
it the right way so some time investment needed to do it but about 75 percent of our assets are owned by those retirement
accounts we’ve done 300 deals and uh yeah I would say about 75 of those deals
were done this way wow okay that’s yeah so let’s jump in from like the basics so the first one how did you first open the
account if you don’t mind walk us through the very beginning of the first deal you did in your in your self-directed IRA yeah so I started with
a self-directed Roth IRA you have a choice between Ross and traditional I did the Ross because it’s uh it’s tax
free versus tax deferred for the traditional very first day like I said we founded it with a few thousand dollar
and we use that money as earnest money on a deal that we bought in Greeley
there was a twenty thousand dollar deal at a time it was vehicle and it was uh it was already got it so the investor
before didn’t do much so the bank took over and so we put a two thousand dollar down payment or so and then we will sell
it for about double than what we pay so we made about 15 000 profit on this Bank on property and the funny thing is all
about paperwork was known as I was on vacation overseas so you know it was pretty easy to just sign a few paperwork
and send it to the custodian at the time we used several different custodians uh one it was called Equity Trust that’s
the first one I think it’s probably the biggest one in the US based in Ohio and it’s such a big firm and big team that
you never really with the same person twice in a row so it was kind of a little bit annoying and then we switched
to a company in uh in California which was cheaper on the fees so you certainly have some fees to pay on transactions to
use a custodian but you know it’s in comparison to paying taxes it’s a lot lower so that’s how we did our very
first couple of deals and then we partnered with somebody else where the investor will put all the money up front because we bought properties a lot at
those auctions and the money is due immediately and then we were reimbursing them a week or two later when we had
access to the money and be able to process this paperwork so partnering and wall selling is the way I started to use
those tools and make them grow at the point where we didn’t need to partner with anybody or do you know need a
wholesale we could keep those properties for ourselves so just do it on our own so it took a little while to build it up
to a certain level about 75 000 where we could go to the full route of being
self-directed with a checkbook LLC so when you want to go to that route you need to have enough money because you
can fund your these LLC once so you don’t start with a significant amount of money not like five thousand dollars
because that’s not going to be enough at the end but so it was a transition slowly to go from war selling to
partnering to being self-funded and having the money we needed to to do the deals ourselves okay so to break that
first one down he was you had two thousand dollars of earnest money which was already in a self-directed IRA
account now what you did is you put that as earnest money on your wholesale deal and then you made 20 000 from the
wholesale deal you’re saying roughly profit so then back into your account comes I guess twenty two thousand
dollars is now in your self-directed IRA account after that essentially okay and then all that is tax free right because
it was you already paid because you already paid 2 000 you were taxed on your initial 2000 from The Rock the
sorry from the Roth IRA correct yeah because you invest the money you know from a salary or whatever money you get
uh so it has been taxed already before so now you’ve been in your pocket you do whatever you want and one of the things
you do is invest in these uh IRAs as well yes that’s the way to do that perfect so then you basically have 22
000 in there and now you’re ready to roll that 20. so now you could go potentially invest 22 000 on a property
I know you can’t buy a property for twenty two thousand but say you could go buy a heavily discounted property for twenty two thousand flip that for 40 or
something then that’s basically how you continue to grow it that’s exactly it you know you start small you find a deal
that doesn’t require that much money and usually those wholesale leads you tied up the contract and then you assign it
to somebody else you do double close all the paperwork was signed by my custodian I couldn’t really sign anything so we
the title company send them paperwork they sign everything they fax it back to the town company the money never touched
my account it goes directly I mean personal account he goes to the IRA to the tile company and back to the IRA so
I never really received the money in my pocket at all right it’s straight to the IRA so you don’t come in on anything and
there are certain rules that you cannot do any type of work yourself on the on the property so you know you cannot
change your light bulb or paint the door or anything like that so it has to be you know you cannot contribute your time
on the property because there will be additional contribution to the IRA so that’s how the IRA sees it so you have
to know those kind of limitations but in our case it was just a set of paperwork and then you you make it grow you know
from 2K to 20 to 40 to 75 and when you have a certain amount you can just do this on your own so that’s really the
The Snowball Effect but once again everything is uh is tax free Iris what
it is it’s worse but you know file any of the complex tax returns or anything
like that it’s just uh telling the address what it is yeah that makes sense Okay so just wrapping my head around it
too so you you got into the rules so let’s say on the say you had gotten your IRA up to 75 000 and you wanted to go do
a flip and you paid cash let’s say again bought it for 50 000 pay the contractor 75 sorry paid him 25 000. so we’re all
in at 75 used all of our Ira money or self-directed Roth so then at that point
if you go sell that house for 150 basically now you got 150 in your Roth IRA and that’s you’re following all the
rules that way right because you managed it you managed the flu completely your example is straight on and this is exactly how we do it you find somebody
to uh you know take care of all the repairs and things like that you have the custodian putting together all the forms and paying the contractors
directly you know at the time so you have a like a little online form where you say pay this person that much money
and they sometimes want to verify if it’s a big amount it’s like okay are you sure you know is it fine but usually
it’s straightforward it was all not that big of an amount really and you send a check directly to the contractor and
when you go to closing everything is uh in the name of your IRA and the custodian will sign all of this
paperwork and the money goes back directly to your IRA account so you are here to organize the PCS but obviously
you know touch a hammer you don’t write the checks things like that so there’s a third party company doing that for you
very interesting okay so now to put this in perspective for people that same FL if you were to go wholesale a deal that
you got under contract and you double closed and then you waited to do well let’s just talk about that one first say
you made twenty thousand dollar profit yeah that’s going to be taxed at normal rates basically self-income right if you
were to do a wholesale deal yep in general okay not not diving into someone’s specific tax situation but in
general they’re going to pay normal taxes on that but instead of this situation you paid no taxes on it and then as you continue to do it now you
went did a flip and same situation if you go buy a house for 75 000 or buy it for 50 put 75 25 into it all in the 75
and sell it for 150. that 75 000 a profit is going to be taxed but again what Christoph is saying is he’s
continued to roll it in and he’s not paying taxes at any point in that right and and when would you pay taxes down
the road Kristoff ever you never pay taxes on the Ross Ira that’s that’s very a beautiful thing now if I were to take
money now that I’m less than 59 and a half year old I will pay some early distribution type of taxes and penalties
because I’m not old enough but if I weighed the 59 and a half and I start taking distributions it’s completely tax
free it’s a beautiful tool it’s really amazing and that’s why they want to take it away I mean there are so many
discussions with every electoral time they are quite stupid to be true you know so you have to stop now and you
should be grandfathered for the future if let’s say they change the rules and things like that because type of things may really well go away so let’s let’s
take advantage now but imagine how quickly you can build a portfolio without having to pay those you know
short-term capital gain 25 30 taxes every time you sell something that’s significantly faster to do it this way
disadvantage frankly is yeah we cannot touch the money so we want to go on vacation well that’s not some money we
can access except if we do the early distribution and pay the penalties so you have to do a balance I don’t think
you can do every single thing in real estate with your IRA or 401K because you still need money to pay your bills and
have fun but dedicating maybe 50 of it makes complete sense to me so I wish
more people will do it it’s a beautiful tool yeah so it sounds like two paths you could do it like you did it where you just started with yeah you said the
minimum contribution or the max per year is what six thousand is that right two inches every years right about 7 000
this year I think so yeah you could max out one year have seven thousand dollars and basically kind of yeah just
basically parlay it put in one deal and keep part laying it and growing and growing it the other route is you have
been contributing this for years or I guess I suppose you could also use a 401k right that you’ve been using with
your company that you’ve had through your employer right if you it is the rules that you have to change jobs to be
able to now self-direct that and start because say I’ve got a hundred thousand dollar 401K with my W-2 company can I
start to use that I don’t think so I don’t think your employer will allow you to self-direct they usually want some
mutual like bonds and stocks and things like that in order to roll over your
401k to self-directed option you cannot be at that job anymore so you can quit for a week eventually if your employer
allows you to do that that could be a trick or yeah you have to change jobs and then roll it over to a custodian
that allows these type of things so that’s what we did after you know 15 years of of W-2 employees we had a some
money into a 401k that we roll over into a self-directed one and we’re completely
you know we are the trustee the administrator of the plan we do everything ourselves and we also have a checkbook LLC on that 401k with a local
bank here in Colorado First Bank allows these type of things not every Banks do it really so you have to know which one
to go and we continue the process with the 401K the same way we did with the IRA so I will cautious people not to use
it as a vehicle to to flip too much right so the purpose of this return German account is long-term wealth and
building some assets for the future and using this vehicle to do flip and flip and flip too many times maybe seen as
you using that retirement account as a way to operate a business which is not so much what the IRS really wants so
building long-term wealth with real estate rentals is really the best way to go so that’s where we have our rental
properties now the measuring or rental properties are owned with IRAs and 401ks currently that’s what we use it for got
it that’s a really good point Kristoff because yeah if you’re continuing to use it to flip yeah you’re kind of really
living in the gray area but but you got to get build it up somehow so you’re telling us the best ways to build it is
is to do some wholesaling and some and some flipping to start out to grow it that’s option a option b is you have a
401k from another company or or maybe you left your company and then you could you could change it then right after you
leave your company or leave your W-2 job you could then decide to have it self-directed and if you’ve got if
you’ve built up a good portal polio are just a good balance you could start to do that rentals right because the challenge is owning rentals is can be
very Capital intensive right is there any other kind of tips you would give us to to being able to and how you really started to build your portfolio into it
I mean you’ve talked a bit quite a bit about how you basically parlayed it but what advice would you give somebody that
maybe isn’t able to Parlay doesn’t know how to wholesale doesn’t know how to flip but wants to buy rental properties and they’ve got maybe a couple hundred
thousand dollars that can be self-directed how is that how you would advise them to move forward well yeah I
mean real estate is so much more expensive now than what it was 15 years ago still 200 000 won’t get you that far
in Colorado anymore you know there was a Vehicles like we invest a lot in tax liens I see a lot of IRAs and 401ks
owners investing in this vehicle is pretty cheap you know for like two or three thousand dollars you can get a tax
lien and maybe four hundred thousand dollar you get whatever 50 tax liens so that’s a good way to make some money I
think and make it grow also with like a capital is not enough to get rental property honoring is a good thing you
know you you should not partner with your bloodline like your parents or your kids because it’s disqualified and
prohibited transactions but you can partner with a friend or some you know other investors and do a 50 50 I mean
why not so when you do such things every expense of income has to be speed the exact same way as the ownership and the
initial Capital so you have to keep track of how it’s done I mean yeah one selling is where usually investors start
with low Capital it’s kind of bird dog and find a deal and assign it to somebody else how we we did a few of
those especially with the IRAs because that’s all the money we had I didn’t know much about taxing at the time but I
certainly invest in tax liens with uh you know with this 50k 75k you have there that’s enough to get started and
be involved in real estate and controlling the type of Investments you do it’s a big thing I mean there are
certain investment you cannot do like life insurance or Collectibles or art or things like that with IRAs and stuff but
the majority of things are allowed you can get precious metal as long as you know keep it inside your own Vault you
have a third party person keeping track of these gold and silver but you can do it this way too so if you don’t have
that much Capital to begin with and you don’t know how to wholesale and I mean you’re gonna have to learn something somewhere I mean you know you don’t know
today but you may know in six months so I mean taxing is an easy way to get in there are probably some options and
things like that but I don’t know much about it yeah well that’s good and so let’s dive into how it would look like
to partner or how someone else could use a their self-directed 401k to invest
with somebody else who maybe has the knowledge and and knows how to flip or knows how to manage your own property so how would that work for again let’s use
example a high earner High W2 earner the size to leave his job and he’s had a
401K with this company for several years Maggie’s been there for 10 years and he’s built up a really nice 401K let’s
say it’s 500 000 for easy numbers he leaves he decides at that point he is able to self-direct that his retirement
account so he could go partner with someone else to go buy real real estate I mean obviously he can go buy the
property himself right he could go take out a loan and go and create his own self-directed IRA and manage it himself
or let’s talk about the option of him partnering with somebody else who maybe has the experience in real estate what
would that look like and what would it look like for the partner too does he have to use does he he couldn’t distribute to himself until he was 59
just a couple random questions here yeah that’s that’s really you know the beautiful thing about a partnership it
can be done in any ways uh shape or form that you want you know as long as the two people agree on how to do it so you
know when you do a partnership you have an nt5 who is going to bring the money is it you know the 50 50 which is
easiest who’s going to bring the experience the deal the time to to repair it and things like that and then
you know you can find investors as local real estate investment clubs for example that’s how we found a lot of all about
Partners or friends and so you agree on what deal to buy and how to split everything the profit and the losses we
do a simple joint venture agreement it’s two pages and it’s you know writing down who does what and who brings what to the
table and how people are compensated I mean we like the 50 50 I think it’s pretty straightforward and uh and then
you draw the paperwork and and you take ownership of the property as a 50 50 basis or you know 75-25 based on
whatever Partners agree and it’s good to um I mean we don’t record it some people may want to recall the agreement it’s
really up to you but if you have a good relationship with the investor you shouldn’t have to really record all of that stuff I mean you trust each other
and uh So you you’re going to the deal you you know each bring let’s say 50 of
the money to the tower company and then the record they did with two owners on there and uh when you sell it’s the same
thing the other way so it’s split the only thing when you have an IRA involved it takes a bit more time to process
paperwork things get lost along the way more than once you can get it you know done eventually faster paying a rush fee
and so on but it doesn’t really only it doesn’t really help much so you have to make sure that it’s going to be maybe a
longer time time frame to close you know closing in three days I forget it it’s not going to happen but you know 30 days
seems more realistic when you have IRAs you have more paperwork more verification the custodian wants to see
certain things and then verify especially when there’s a partnership they want to make sure you’re not related by blood so but that’s pretty
straightforward I mean it’s not any complex more complex or easier than having a partner outside any type of
IRAs or 401K so it takes a bit of time I mean when I meet people who say hey I want to buy with my 401ks I’m like well
have you even started the rollover say no this is going to take 45 to 60 days a road over is not like a quick process
you know there’s the current custodian E-Trade or Fidelity or whoever that has to transfer the money to the new one and
you have to verify so many things and sell your stocks and stuff like that so you have to be aware of those timing it
can take a bit longer than having just a regular bank or private lender or whoever also with the owner of the 401K
can do is simply lend the money from that 1K it doesn’t have to be you know an owner of it and they can do a private
loan at 10 12 percent whatever works and we’ve done a number of those and once again the payment is sent to the
custodian not to the lender person itself just the custodian intermediary and that worked for us and that worked
for them so it’s completely passive type of investment for for the IRA owner you know the the lender there so that works
good too that’s what I wanted to dive into too Kristoff I think it’s a really cool way for people to be investors in
real estate not be active not having to change light bulbs manage tenants and they can be a lender or manage a flip
right so I’m going to walk through this and make sure I got it covered so basically somebody who has a self-directed IRA and as you just stated
if you wanna if you want to do this don’t it’s not a zero to 0-100 in in two weeks it’s like hey plan
45 to 60 days but but make a plan Say Hey I want to invest in real estate as a
lender so that this person could again he gets prepared gives himself 45 to 60 days and then at that point he would go
and be a lender on the deal so if for example we do this all the time as well if we’ve identified a property we want
to flip but we we want to use another lender’s money and not go through a bank we could go somebody go through somebody
with a self-directed IRA so the way we would do that is we would agree upon the terms and the interest rate they
obviously have to have their 401 their self-directed everything ready to go and when as far as the title and the closing
looks like sounds like we just go to the title company just like we would on any other transaction except for working
with a bank we work with this person their self-directed IRA and sounds like they’re custodian their custodian would
have to sign off on it sounds like on a mortgage and all in a promissory note is that generally the flow of it pretty
much so you know in Colorado we have a promissory note and a dito trust the one big difference doing it this way is the
loan sorry the borrower cannot be personally guaranteeing the loan so he
has to be a non-recourse load so the majority of the type of loans you’re getting from the banks are because you
know you personally guarantee the payment of the loan but when you borrow
for your IRA as a borrower you cannot guarantee the payment personally so it
has to be a non-recourse loan and how it’s done it’s just a couple of lines to add to a Data Trust or promissory note
or even the title of the Dido trust is not recalled Data Trust and contributing extra to the IRA by using your own
Financial your own personal finances to guarantee the payment on a loan made to
the IRA so that’s a big one to be aware and that’s why most of the banks will not lend to Ira borrower because of that
so private lenders are okay they look at the assets more than the strengths of the borrower but Banks look at the
strengths of or a lot and whatever the Assets in the area are is not enough so
we definitely have difficulties borrowing money from Banks when the deal is in the ira for this reason some local
banks will do it I think First Bank is the biggest one that will do it but they want a high Equity so very low loan to
value like 50 60 loan to value you have to have a lot of stake a lot of equity yourself for your IRA so those are
limitations but private lenders are like hey we just care about the deal and making sure it’s going to be fixed and
paid and we sold within six months so they are not as strict they just need to be aware of the limitation of the notary
course so got it so if again so if I’m the investor and I want to buy a property use somebody else’s
self-directed IRA funds when we go to sign the promissory note and or the D to trust it’s not recourse right so they I
can’t have a recourse or I can’t have a personal guarantee as a borrower okay makes sense but I was also I think you
answered my question I was gonna ask how do you make these private lenders feel comfortable with that but it sounds like it’s based on the asset right they
understand that hey we bought this asset at a discount and you are protected with a hard asset pretty much and they look
at it on a Case bike as bases I mean they’re only going to go after every single one of your assets and just this one in particular and they make sure
that the on the right with the criteria they have it’s just harder to get a big Banks to finance those so when the asset
is owned by the IRA they’re getting nervous because of the non-recourse and because they don’t do so many of these
type of loans they don’t want to create a product just for your needs you as a one-time borrower boring maybe for one
or two flips here or there they’re not going to create the product just to be the non-recourse and all that so it’s a
little bit tricky but private lenders you know are more open to that and they look at the assets usually do it in
their own State and they can visit it and see the progress and whatever they need to do so that comfortable doing it
this way so it’s a beautiful thing so the money comes from you know a local lender and the asset is local and so
that makes it a lot easier to do using an IRA so the IRA is the owner and the borrower in that case How about if a
self-directed IRA owner wants to invest their funds into a fund or syndication is it work the same way as it would as
we talked about as being a lender or partnering on a deal really essentially they are a partner if it’s a if they’re
a limited partner yeah we’re just saying that you’re right I’ve seen that being done where somebody wants to participate
into a bigger deal like let’s say a military units I see a lot of that or commercial investment in general but
they only have 25 000 but they really like the deal and that solely can really invest so they will uh put together the
syndication and private policemen memorandum and gather money from so many different sources and it’s fully proved
to be done using Ira money so that could be another way to to invest a little bit of money into a bigger deal and because
you own less than 50 percent of it anyway and it’s managed by the investor
who puts it together so that can be a very efficient way to to invest and make your IRA grow within maybe one or two
years depending on the time frame they have to sell it or to refinance it or anything like that but I’ve seen it I’ve
never done it but I’ve seen it probably yeah it sounds like a great way based on you said you can parlay it yourself from
wholesaling just kind of kind of snowballing it as you said or you can easily if you don’t have the time to do
it but also want it to grow and want to start small yeah you could take that five thousand dollar or seven thousand
from a year or maybe you’ve been contributing for the last five years and you’re up to let’s say yeah 35 000 into
a Roth IRA you could roll that into a fund right so you put it in the fund completely passive you don’t have to
worry about it and then a lot of funds might double your money in five years so now and it was completely passive and
backed by a by a hard asset so in that scenario it was 35 000 in five years you got 70 000 tax free right and then you
could go put in another fund or do whatever you want is that am I tracking absolutely yes I’ve seen them many many
times in uh in those private placement memorandum they disclose the list of current investors and I see a good fifty
percent of them being IRAs and 401ks so syndication is a way to get started with that too got it so what advice would you
give Kristoff to people who haven’t have not contributed to a self-directed IRA at this point to count you mentioned
it’s about a 45 to 60 day process but what would you what would you mention to people to get started um places they
could go what would you recommend well the way I got started is I read a book from Patrick rice about the IRA wealth
or IRA investment type of things so you can find on Amazon you know you can read it in a day it gives you the different
approach on how to do it how to do it right so get educated meet local custodian we only have one in Colorado
unfortunately a new Direction Ira they have seminars they have presentations you can meet their their team and and
see you know if it’s something they can put together and how quickly and then talk to all the investors who are doing
it and see how the Dynamics work learn the rules you know prohibited transactions ubit is one of them you
have a disqualified person talk to eventually attorneys who’s been dealing with IRAs and tell you exactly how to do
and and what to avoid and things like that so get educated and at some point you just have to make a jump you know
you have to start it and yeah initially you know with five seven thousand you’re not going to do that much with it but
the second year you have another seven thousand and then the third year the oven is a seven thousand and now with 20 000 you can do a few things so it takes
a bit of time initially for the IRA route now I think you can only contribute to an IRA when you your
income is up to a certain level I think it’s maybe 200 000 or so dollar income if you make more than that you cannot
contribute to an error anymore so maybe it’s good to do it when you can whereas a 401k if you work in a job for 10 15
years you have a decent size 401ks you can roll over into those self-directed custodian and and have you know money to
stop much quicker so you know it’s always one piece at a time I mean you get educated you see what you can do
with it whether you like it or you don’t if you need income you can potentially take it from the from the account paying
some fees and the only distribution and penalties that’s what it is it’s not impossible so and you know get your
first deal I mean it’s the scariest and it’s going to be a bunch of paperwork to review and become familiar with I mean a
lot of forms are different but intimately it’s like any other transaction you’re going to have the title company involved and they will
process all these things and you’re gonna have a third party person signing it eventually like a power of attorney could so and they’re going to verify
everything on your behalf so it’s it’s less scary because you have a third party person making sure it’s not the
right way and and then you move on from there I mean it’s the first one is just curious It’s a bunch of paperwork and
rules to follow and things like that but that’s what it is like you have to learn how to play the game and then and then
you improve on the second one and the third one and you make it go like that it’s just one by one yeah that’s a great
Point uh so if you’re worried about it really you’re going to go through a title company they’re going to be familiar with it so that should fit a
lot of people’s people in mind right you’re gonna go through your title company anyway they’re gonna make sure you you’ve taken care of the different the right the different paperwork and
walk you through it so that’s a really good one thing else I was gonna ask Kristoff is and I’m sure you I’m
assuming you guys done this too is okay let’s say I’ve got 7000 in my Roth IRA I want to get started but the deal that I
want to put together requires thirty thousand so I want to use a little bit of Roth or sorry yeah self-directed Ira
money and other funds wherever it might come from how do you appropriate that and not mix it all up I got mixed
opinions on that I will personally never commingle my personal phones with my IRA
phones some experts tell you it’s okay as long as you keep the same percentage
of what you bring as a individual and what your IRA brings and you keep good books and then every type of either the
area or you split up you know the expenses the exact same way same percent and so on I just don’t feel comfortable
with it I’ve never done it I am not sure I know anybody who’s done it but you could tell in theory do it it’s possible
to partner like your IRA partners with yourself and you do a deal like that where you know you you split the
percentage on the entire thing like profit certain expenses and cost and whatever so somebody will have to do
some research on exactly how to do it the right way I’ve not done it and I will personally shy away from it so yeah
so definitely take away is it’s got to be separate and yeah maybe if you’re looking at getting into a fun or being a
lender yeah you’re just creating separate paperwork for the the money that’s coming from the self-directed and
then the money that’s coming from whatever other source it sounds like it’s got to be clearly separated yeah it
was meaning all the souls like your personal account if you partner with a friend that’s completely fine that’s
much easier to you know split everything the right way so the way we did it we keep in the spreadsheet and then we make
sure the 50 50 rule was followed sometimes they pay that bill I pay that bill so I’m a little bit more or less on
the 50 50 and then at the end that closing we reconcile everything and make sure the percentage is followed and move
to the next deal so that was pretty easy like that I prefer it this way versus my let’s say my other business and my array
partnering I just will want to avoid that myself and talk to me a little bit more about you mentioned the checks
eventually if you’ve got a big enough account let’s say you’ve now got a hundred thousand dollar Roth or self-directed IRA you can write checks
on different is that only just for like say you’re working on a project and you’re writing checks for expenses or
could you literally write checks for different deals like hey my self-directed IRA is going to invest 50
000 with this fund and it’s going to be a lender with this person and I’m just writing checks once you’ve set it up or
is that still all going through the custodian or is that like a one-time setup with the custodian and then you write the checks so effectively when you
have enough knowledge experience with order these rules the next step is to have a checkbook LLC so what happened is
oil and sea is fully owned by the IRA and the LLC has its own uh Bank a bank
account like any other lnc so we have the checkbook on the LLC and that LLC is
owned by the IRA so when we go and buy property at auction let’s say the money is due in two hours we don’t need a
custodian anymore to approve it review it we we don’t have the time to do that so we go ourselves to the bank and get
the money when we pay a contractor we pay using that checkbook LLC directly so
the money is in the LLC States in LLC and once a year we have to provide evaluation to the IRS saying what is the
LLC worth what does he have what kind of assets is he cash is it real estate so
we provide those numbers in the form I forgot the name of it the number so the IRA owns the LLC and the LLC owns the
assets and then yes we have access to the checkbook I do not recommend that when you start I would say do 10 deals
with the custodian so they review everything for you they tell you what’s going on and how to do it the right way and when you’re comfortable with it and
you say Hey you know I really figure out all these rules to stay out or travel then you get yourself an LLC and a
checkbook associated with that LLC so there is you know when you access the money it can be can be challenging and
you want to do the right way so that’s the way to do it so you go with a custodian that control towards
everything and then you do it on your own we still have a custodial but all you want to know is once a year what do you have going on we don’t contribute
anything to the IRA or the uh for one case anymore we don’t have to add another seven thousand dollar and if we
were to do that the seven thousand dollar will go directly to the custodian not the LLC so there will be another
process to make it grow enough to create another LLC remember the LLC can be
funded once using the IRA money therefore if we had to start from scratch and and found the IRA again it
will take another who knows one two three years to be worth something and then eventually create another LLC and
which is another time to do it and we don’t have any advantage doing it anymore so we don’t contribute anything to an IRA for quite some time it has
what it what it needs at this point so ever any concerns on the liability on that point so you’ve got it in an LLC
but just knowing that you’ve once you’ve built it up and say it’s several hundred thousand maybe several million dollars
of assets held in one LLC do you worry um so they’re not going to have have so if something happens one of those
properties they’re not coming after you personally which is good but say you’ve got a bunch of Assets Now grouped into
that LLC do you guys or as your attorney feedback ever been any concern of them being able to go after all those assets
or is there an extra protection because it’s in a Roth or in the self-directed ira basics for protection yes because of
the retirement account no I don’t remember the code but not only there is
a protection of the United NC but on top of that if whoever has a judgment against that LLC will be even harder to
collect because of the extra protection of the retirement accounts so you add one on top of the other which is
beneficial obviously all of your rentals have some type of insurance and we have an umbrella policy on top of it you know
we’ve never been sued by any disgruntled tenant or contractor or anything like
that not saying it won’t happen that’s part of life but it makes it a lot harder for somebody to connect assets
owned by an IRA or 401K that’s a really good point because yeah it’s like how far are they gonna take it knowing they
could get a judgment but it’s hard to collect on a on a self-directed retirement account how about the fees
too other people I’m sure that’s all my question a lot of people’s question is for the intermediary or sorry the uh the
custodian what do they typically charge is it per deal per per year both so the
first one we started with the Equity Trust charge payout transaction give or take maybe about 300 pay a transaction
to sign paperwork to FedEx to do the wire and you know review things and and
sometimes there’s a rush fee we have to pay to to get it done faster so about 300 give or take pay transaction and
then on top of that there is a maintenance fee per quarter currently we pay about 200 per quarter and they look
at also how many assets you have so we have wanted to see really a little bit of cash there so you know depending how
many your volume of deals but let’s say you make three divs four days a year initially to get started plus the
maintenance fee you may pay a couple of thousand dollar a year to have this type of assets so yeah there is a fee it’s
still you know when you look at the tax advantage and the benefits and the savings I mean there is no comparison
here they also you know the custodian process the the reporting to the IRS on the yearly basis on what really is going
on so it can be a bit costly I mean you know depends it’s making sense if you
use it if you put money there for five years do nothing you say oh you know my assets are going down because of all
these fees yes it is but you know inflation is going to eat some of it anyway from your bank account your regular one so it’s working if you use
it so the idea is yeah contribute a few years get enough money do War sell or
tax lien or syndication so it’s actually you see the benefit of it but there’s a ton of money just sitting there that
people won’t use in those IRAs and 401ks you know it’s the untapped source of money that’s why private Landing can be
a good one to go after because the money is there and people don’t invest it they are afraid from stocks they don’t like
it they don’t know how to do it with real estate so by getting the knowledge and convincing lenders or people who
have this 401K sitting there doing nothing from a previous job can be very beneficial but there is a little bit of fees absolutely yeah what advice that’s
a personal one question what advice would you have to identify those people that do have money just sitting in a
self-directed IRA and making nothing for them but they could be investing in real estate when people like myself and like
you are are looking for we’re looking for to deploy capital what’s the best way to connect and network with people
like that funny profit lenders I mean the easiest way is to find um you know so you go to local clubs and
you see who’s done a deal with it and you approach the same lenders you can go to public recalls and you see who’s done
and Dido trust using a 401k near Maine all the IRA so the same people we learn over and over again and you don’t need
25 different private lenders really you just need like two or three so I mean you know Community we easily have access
to five seven private lenders that you find over and over you know the transactions and referrals and stuff
like that so you approach these people and they’ll familiar with the assets and how to secure it with a digital trust
yeah I mean you don’t have to necessarily Network in the country club and talk to 100 people to eventually find one I mean just find the ones
who’ve done it already and say yeah you know my oven is a deal coming up you meet with them see if it meets their
criteria in terms of location price range you have enough experience doing it how much money you’re going to put on the table and so on and those private
letters will say Hey you know we’re looking for this this type of deals and they are like five or seven active ones
just approach them I wouldn’t spend so much time trying to find new ones it’s extremely time consuming and you have to
explain to them the process and it’s just not worth it just look at the ones who are already doing it so the public records the best way to find it because
they already yeah that’s a good point just going through and searching on the title search of yeah Deeds or mortgages
are recorded with Ira or 401K on us probably a good place to start and even custodians do you think our custodians
are they legally even allowed to make introductions so do they do like meetups to where you could get in front of people
um I haven’t found any of that now maybe the custodian put together a training to teach about certain things you can go
there and hope to find other members or clients of this custodian they do some
national events that you know I will think some some clients who have money are ready to invest we do that but I
don’t think they’re going to introduce you to that specific person who has two million dollars to invest tomorrow I don’t think that would happen I haven’t
already tried that you could who knows I mean if you have a good relationship with them and they know what you’re doing and they like your profile and
your success they can definitely refer you you know it’s something to try I haven’t really look into that yeah
that’s that’s great great feedback well cool well Kristoff we can kind of start to wrap what else would you share though with somebody who’s thinking about
getting started and using a self-directed IRA anything that you’d love to share that I haven’t asked of
you I think I share most of it I mean you start small like anything and then you you build it up along the way and
you learn and you know you want to surround yourself with successful people who have done it and kind of really make
sure you do it the right way and I will start with a local custodian once again who provides the training the support
you know somebody you can meet have the same person in the office you can talk to and run some deals and scenarios and
see if you can or cannot do it and there’s a ton of resource online there’s some good books written about it and you
know start with your first one I mean it’s really the it’s gonna be the hardest you’re gonna learn a lot more than what you want maybe but that’s how
we all start you know just one piece at a time yeah there’s lots of there’s tons of content out there books as you said
ways to learn about it and then it’s just starting small the last thing I’ll ask you Christopher kind of already painted or talk about a little bit but
yeah walk us through how much did you initially start and what is it with your self-directed IRA when you first started
how much did you contribute and then how much I’d love to hear how much it’s worth now and maybe even how much it’s cash flow it’s throwing off if you’re
comfortable sharing that so the 401K sorry we start with the IRA so it’s the oldest one I started it
maybe in 2010 so I contributed I would say maybe 25
000 30 000 overall you know every year for five years in a row the maximum contribution so the IRA itself well we
have currently 14 rentals in it free and clear and we are building five more that
will have a loan on it so that would be 19 rentals give or take maybe worse 400k
each maybe 450k kind of depends which one so if you run it up maybe 10 million
dollars or so and the IR and the 401K we roll it over from a job we got a little
less than 300K when we started and maybe was more than five million today something with that wow and that’s
that’s Equity right that’s not your that’s not capturing any loans that’s like literally you’ve turned 300 000
into 5 million in how many years yeah you know we avoid loans now as much as we can so we could probably we buy more
but if we decide to have more loans better approach is not to have loans and debt we kind of started this way and it
was a great tool so we want to cell phone ourselves so not many loans along the way anymore perfect well that’s if
anybody hears that that’s what they should hear is hey through self-directed IRAs you can take a small investment of
25 000 over roughly 12 to 13 years turning into 10 million dollars right granted Kristoff is a great he’s a Savvy
real estate investor knows how to find good deals but that just shows you the potential and that 10 million dollars is
tax free and you can’t pull on it he’s not going to be using it but at this point he doesn’t really need to what the beauty is once he turns 59 and a half he
can start to draw on that use it freely again completely tax-free I can only imagine how much uh if we ran the math
on how much taxes you would be paying on that if you had not taken that strategy so it’s incredible cool anything else
you want to add any no no you you sign me up very well absolutely that’s the entire thing
great well right on time just under an hour so yeah this was good I got a lot of personally I wanted to ask a lot of this
and think it’d be really cool to share with other people so if you’re comfortable are you on Instagram or Facebook or any social link yeah all of
that I don’t use much of it but I’m there okay cool I’ll make sure I add you in a couple of those places and and tag
you and okay if you’re good with it yeah you’re comfortable sharing anything from here that works thank you awesome well
thanks Kristoff man uh we’ll be in touch as you may have learned by tuning in to this episode of Gregor sense the easiest
way to make real estate investing hard is by going at it alone so as you continue learning and seeking knowledge
of the industry I want to encourage you to build relationships with other professionals who are passionate about real estate whether that’s an agent a
business owner or a managing investor like myself there are Pros that want to see you succeed and are willing to help
you by sharing their experience you can always reach me by visiting and scheduling a
call I look forward to connecting with you and continuing to share my experience with you here on Gregor since mobile until next time I’m Casey
Gregerson thanks for tuning in