Your Network is Your Net Worth

Ask any really successful real estate entrepreneur what resource has made them the most money, and if they’re answering truthfully, they’re going to say, “The people I’ve met.”

In fact, if you’re not making it a priority to spend time creating, growing, and nurturing your network of colleagues and financial friends, you’re making a big mistake.

I’m not a natural networker—I would, on any given evening, rather be curled up in front of a fire with a good book than at the hottest party in town.

In fact, if you’re ever AT a party with me, and you’re looking for me, I’m probably the one behind the potted plant playing with the host’s cat.

But, at the same time, I am very aware of how many millions of dollars my network has earned me in the past 2+ decades, and I’ve seen the nearly tragic consequences that NOT having a network when you need one can have.

Early on in my career, it was more experienced real estate association members who served as my backstop, confirming (or, in some cases, totally trashing) my evaluation of deals I was considering buying . Without them, I’d have made a lot of mistakes that I didn’t make and passed up a lot of opportunities I didn’t pass up.

Later in my business, when I started wholesaling, I rarely had to advertise my deals at all. And  I don’t just sell 90% of the deals I wholesale to members of my local REIA; I sell them to members of my local REIA BECAUSE I NETWORKED WITH THEM AND KNOW WHAT THEY’RE LOOKING FOR. I can send out emails about great deals all day long, but the person I sell it to will be the one that I call personally and say, “You know how you were telling me that you were looking for a small multi-family, but that you wanted at least 4 units and wanted one with some upside potential? Well, guess what, I have the perfect deal for you”.

Here’s more: most of the money I’ve raised to buy houses in the past 5 years has NOT been by standing in the front of the room and telling people I need money; it’s been by networking, and finding out from people that they have money that’s not performing the way they want it to, and finding out what they’re comfortable with in the way of investment amount and terms, and then connecting with them later and arranging a deal for them to be in.

Ad I’m not the only one: I was approached by a young man a couple of weeks ago in Indianapolis who told me that at last year’s OREIA National Summit, he randomly met another attendee from Indy who happened to have a property he wanted to get rid of, and he made a deal in the bar, and made $27,000 on the house.

So what am I telling you? Make it a priority to put yourself in the way of networking opportunities at your local association, conferences and summits, and wherever else real estate investors hang out.  Join your local real estate association and get to the meetings regularly. Spend time at events like the OREIA National Real Estate Strategies Summit (one of the best networking opportunities in the US, in my opinion) and expand your network across the country.

Talk to people. Ask questions. Be curious. Yes, even if you’re an introvert like me. Even though you’re not sure they want to talk to you. I’m telling you, you’ll do more real estate, and better real estate, when you do.

Posted in Uncategorized

Why You Need to Know Notes

After this past weekend’s No Excuses Retirement Wealth Summit (an event you REALLY should have attended…ask anyone…) I got to thinking about the fact that there were, in my estimation, 5 multi-millionaires in that room, and they all had one

Inner Circle e-lessons and all the other great benefits of Inner Circle membership (like weekly web classes, unlimited email coaching, and more!) are, sadly, restricted to Inner Circle Members. To try out the Inner Circle for one month for just a buck, click here.

And yes, I'm trying to get you addicted. And I will succeed.

Current members login here.
Posted in Inner Circle, Inner Circle Page, Uncategorized

IC Elesson: Member Deal Analysis of the month a $10 House

Here’s a picture: How did you find this deal? I was driving for dollars and saw that this house was vacant. I sent the owner a letter and he called me a few days later. How did you get it

Inner Circle e-lessons and all the other great benefits of Inner Circle membership (like weekly web classes, unlimited email coaching, and more!) are, sadly, restricted to Inner Circle Members. To try out the Inner Circle for one month for just a buck, click here.

And yes, I'm trying to get you addicted. And I will succeed.

Current members login here.
Posted in Inner Circle, Inner Circle Page

Inner Circle Form of the Month: Wholesale Closing Checklist

Selling wholesale deals is so easy right now that we tend to get a little sloppy in making sure that  we’ve got all the I’s dotted and t’s crossed. But there are some great reasons to make sure it’s all

Inner Circle e-lessons and all the other great benefits of Inner Circle membership (like weekly web classes, unlimited email coaching, and more!) are, sadly, restricted to Inner Circle Members. To try out the Inner Circle for one month for just a buck, click here.

And yes, I'm trying to get you addicted. And I will succeed.

Current members login here.
Posted in Inner Circle, Inner Circle Page Tagged with:

Guest Blogger Quincy Long: Ten Things You Need to Know About Self-Directed IRAs

Editor’s note: Listen, folks, if you don’t yet have a self-directed IRA or you have one but haven’t grown it enough to really support you in your old age, I’m BEGGING you to make the time to get to the No Excuses Retirement Wealth Summit on August 12th and 13th in Columbus.

 Even if you don’t think you have enough cash to get started—in fact, ESPECIALLY if you don’t know that you can create a huge IRA starting with only $500—you need to be there. Even if you think you’re too new and this is all over your head—in fact, ESPECIALLY if you think that—you need to be there.

Quincy and a half dozen other successful IRA investors and real-life folks will be there to show you your next steps, and YOU need to stop putting this off.

It’s only $197, and it will give you the information and motivation to FINALLY do what you need to do to create a prosperous retirement. Read more about it and register at https://www.centralohioreia.com/EventsPage.aspx?ID=The-No-Excuses-Retirement-Wealth-Summit-14-8-12-2017 before space runs out.

There is a lot of confusion over self-directed IRAs and what is and is not possible.  In this article I will discuss some of the most important things you need to know about self-directed IRAs.  I will explore these issues and a whole lot more when I speak at COREE’s Retire Rich With Real Estate and Self-Directed Retirement Plans on Aug 12th – 13th.  I look forward to seeing you there!

1)     IRAs Can Purchase Almost Anything.  A common misconception about IRAs is that purchasing anything other than CDs, stocks, mutual funds or annuities is illegal in an IRA.  This is false.  The only prohibitions contained in the Internal Revenue Code for IRAs are investments in life insurance contracts and in “collectibles.”  Since there are so few restrictions contained in the law, almost anything else which can be documented can be purchased in your IRA.  A “self-directed” IRA allows any investment not expressly prohibited by law.  Common investment choices include real estate, both domestic and foreign, options, secured and unsecured notes, including first and second liens against real estate, C corporation stock, limited liability companies, limited partnerships, trusts and a whole lot more.

2)     Seven Types of Accounts Can Be Self-Directed, Not Just Roth IRAs.  There are seven different types of accounts which can be self-directed.  They are the 1) Roth IRA, 2) the Traditional IRA, 3) the SEP IRA, 4) the SIMPLE IRA, 5) the Individual 401(k), including the Roth 401(k), 6) the Coverdell Education Savings Account (ESA, formerly known as the Education IRA), and 7) the Health Savings Account (HSA).  Not only can all of these accounts invest in non-traditional investments as indicated above, but they can be combined together to purchase a single investment.

3)     Almost Anyone Can Have a Self-Directed Account of Some Type.  Although there are income limits for contributing to a Roth IRA, having a retirement plan at work does not affect your ability to contribute to a Roth IRA, and there is no age limit either.  With a Traditional IRA, the fact that you or your spouse has a retirement plan at work may affect the deductibility of your contribution, but anyone with earned income who is under age 70 1/2 can contribute to a Traditional IRA.  There are no upper income limits for contributing to a Traditional IRA.  A Traditional IRA can also receive funds from a prior employer’s 401(k) or other qualified plan.  Additionally, you may be able to contribute to a Coverdell ESA for your children or grandchildren, nieces, nephews or even my children, if you are so inclined.  If you have the right type of health insurance, called a High Deductible Health Plan, you can contribute to an HSA regardless of your income level.  With an HSA, you may deduct your contributions to the account and qualified distributions are tax free forever!  All of this is in addition to any retirement plan you have at your job or for your self-employed business, including a SEP IRA, a SIMPLE IRA or a qualified plan such as a 401(k) plan or a 403(b) plan.

4)     Even Small Balance Accounts Can Participate in Non-Traditional Investing.  There are at least 4 ways you can participate in real estate investment even with a small IRA.  First, you can wholesale property.  You simply put the contract in the name of your IRA instead of your name.  The earnest money comes from the IRA.  When you assign the contract, the assignment fee goes back into your IRA.  If using a Roth IRA, a Roth 401(k), an HSA, or a Coverdell ESA, this profit can be tax-free forever as long as you take the money out as a qualified distribution.  Second, you can purchase an option on real estate, which then can be either exercised, assigned to a third party, or canceled for a fee.  Third, you can purchase property in your IRA subject to existing financing or with a non-recourse loan from a bank, a hard money lender, a financial friend or a motivated seller.  Profits from debt-financed property in your IRA may incur unrelated business income tax (UBIT), however.  Finally, your IRA can be a partner with other IRA or non-IRA investors.  For example, one recent hard money loan we funded had 10 different accounts participating.  The smallest account to participate was for only $1,827.00!

5)     Caution:  There Are Restrictions on What You Can Do With Your IRA.  Although as noted above in paragraph 1 the Internal Revenue Code lists very few investment restrictions, certain transactions (as opposed to investments) are considered to be prohibited.  If your IRA enters into a prohibited transaction, there are severe consequences, so it is important to understand what constitutes a prohibited transaction.  Essentially, the prohibited transaction rules were made to discourage certain persons, called disqualified persons, from dealing with the income and assets of the plan in a self-dealing manner.  As a result, disqualified persons are prohibited from directly or indirectly entering into or benefitting from your IRA’s investments. The assets of a plan are to be invested in a manner which benefits the plan itself and not the IRA owner (other than as a beneficiary of the IRA) or any other disqualified person.  Investment transactions are supposed to be on an arms-length basis.  Disqualified persons to your IRA include, among others, yourself, your spouse, your parents and other lineal ascendants, your kids and other lineal descendants and their spouses, and any corporation, partnership trust or estate which is owned or controlled by any combination of these persons.  It is essential when choosing a custodian or administrator that the company you choose is very knowledgeable in this area.  Even though no self-directed IRA custodian or administrator will give you tax, legal or investment advice, the education they provide will be critical to your success as a self-directed IRA investor.

6)     Some IRA Investments May Cause Your IRA to Owe Taxes – But That May Be Okay.  Normally an IRA’s income and profits are exempt from taxation until a distribution is taken (or not at all, if it is a qualified distribution from a Roth IRA).  However, there are three circumstances when an IRA may owe tax on its profits.  First, if the IRA is engaged in an unrelated trade or business, either directly or indirectly through a non-taxable entity such as an LLC or a limited partnership, the IRA will owe tax on its share of Unrelated Business Income (UBI).  Second, the IRA will owe taxes if it has rental income from personal property, such as a mobile home not treated as real estate under state law (but rents from real property are exempt from tax if the property is debt-free).  Finally, if the IRA owns, either directly or indirectly, property subject to debt, it will owe tax only on the portion of its income derived from the debt, which is sometimes referred to as Unrelated Debt Financed Income (UDFI).  This may sound like something you never would want to do, but a more careful analysis may lead you to the conclusion that paying tax now in your IRA may be the way to financial freedom in your retirement.  For example, one client made a net gain of over 1,000% in less than four months after her IRA paid this tax.  This is definitely a topic you will want to learn more about, but it is not something you should shut your mind to before investigating whether the after tax returns on your investment would exceed the return you might otherwise be able to achieve in your IRA.

7)     An Inherited Roth IRA Can Give You Tax Free Income Now No Matter What Your Age.  Many people know that a qualified distribution from a Roth IRA is tax free.  To make the distribution qualify as tax free, it must be distributed after the IRA owner has had a Roth IRA for at least 5 tax years and after one of four events occurs – 1) the IRA owner is over age 59 ½, 2) the IRA owner becomes disabled, 3) the IRA owner dies and the distribution is to his or her beneficiary, or 4) the distribution is for a first-time home purchase, either for the IRA owner or certain close family members.  Although the neither the original Roth IRA owner nor his or her spouse has to take a distribution (assuming the spouse elects to treat the IRA as their own), non-spouse beneficiaries of a Roth IRA do have to take distributions, normally over their expected lifetimes.  However, once the five year test is met, those distributions are tax free, regardless of the age of the IRA beneficiary!  Even a $100,000 Roth IRA left to a 6 year old beneficiary may generate as much as $80,496,367 in lifetime tax free distributions if the IRA can sustain a yield of 12%, which is very possible with a self-directed IRA.

 8)     Tax Avoidance With Permission of the U.S. Government.  Most people who understand the benefits of a Roth IRA really want one, but many people have not been able to qualify for this incredible wealth building tool because of income limitations which restrict the eligibility of a person to contribute to a Roth IRA or to convert pre-tax accounts like Traditional IRAs into a Roth IRA.  In 2010 the rules for conversions changed so that anyone, regardless of income level, is now eligible to do a Roth conversion.  Beginning in 2010 anyone who has a Traditional IRA (including a SEP IRA), a SIMPLE IRA which has been in existence for at least two years, or a former employer retirement plan such as a 401(k) or a 403(b) can convert those into a Roth IRA and can then begin to create tax free wealth for their retirement.  In certain situations you can even do a Roth conversion within the 401(k) plan itself.  Even if you do not currently have an IRA but are eligible to contribute to a Traditional IRA, the contribution can be made and immediately converted into a Roth IRA.  This truly is one of the most exciting tax planning opportunities to come along in a very long time!

9)     There Are Millions of Dollars Available to Finance Your Real Estate Deals Right Now.  We are in a very exciting time for wise real estate investors.  There are a lot of super real estate bargains out there right now, but it can be very difficult for investors to get financing – unless they know the secret of private financing.  There are billions of dollars of lazy IRA money sitting on the sidelines waiting for the right investment, because many people are very afraid of the stock market.  Included among the many things people can invest in with a self-directed IRA are real estate secured loans or even unsecured loans.  Shakespeare wrote in his play Hamlet, “Neither a lender nor a borrower be, for a loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.”  I believe Shakespeare was wrong, but he might be forgiven since he did not have the advantage of knowing about self-directed IRAs.  You can benefit from your knowledge of self-directed IRAs either by having your IRA be a private lender or by borrowing OPI – Other People’s IRAs – for your real estate transactions.  Networking is the key to success in the area of private lending or borrowing, but there are things you must know to do it properly.

10)   Use Options to Dramatically Boost Your Small IRA.  Options are one of the most powerful and under-utilized tools in real estate investing today, and they work beautifully within a self-directed IRA.  The consideration for the option and the property being optioned can be almost anything, not just real estate.  Once an IRA owns an option, it can 1) let the option lapse (which at times is the right answer), 2) exercise the option and acquire the property, 3) assign the option for a fee (assuming the option agreement allows for assignment) or 4) agree to cancel the option for a fee with the property owner, thereby getting paid not to buy the property!  Options are very flexible and can be designed to fit almost any situation.  One client paid $5,000 from his Roth IRA for an option which he later canceled for a fee of over $35,000.   Then he took that money, bought a property at a foreclosure auction for cash, and later sold the property for $70,000 with $5,000 down and a $65,000 seller-financed note.  By using the option he was able to take his $5,000 Roth IRA and turn it into a $70,000 Roth in less than a year!

Truthfully there are many more things that you should know about self-directed IRAs.  To learn more, attend one or more of Quest IRA’s many free networking and educational events.  You can get the entire schedule of events by going to our new website at www.QuestIRA.com.  Happy investing!

Quincy Long is an attorney who holds the designation of Certified IRA Services Professional (CISP) and is President of Quest IRA, Inc., a third party administrator of self-directed IRAs serving clients throughout the nation with offices in Houston, Dallas, and Austin, Texas. He may be reached by email at Quincy.Long@QuestIRA.com.  Nothing in this article is intended as tax, legal or investment advice.

 

Posted in Uncategorized Tagged with: