Be Your Own Bank: Leveraging Your Retirement Funds in Real Estate

I. Opportunity Real Estate Agents Utilize SDRA’s to expand the value you bring your clients Provide your clients an alternative to the volatility of Wall Street Investments Tap into the $20+ Trillion Dollars of Retirement Assets Bottom line use these accounts to: SELL MORE REAL ESTATE

I. Opportunity Real Estate Investors/Landlords Diversify your retirement portfolio by investing in something you are familiar with Grow your real estate portfolio in a tax deferred or tax free account Have the advantage of closing quickly as a cash-buyer when purchasing with a SDRA Ability to invest in other real estate investments such as REITS, private mortgage notes, private real estate funds, etc.

II. Definition A. With a self-directed retirement account The beneficiary of the account is responsible to make investment decisions into alternative investments. This differs from traditional account investments such as stocks, bonds, and mutual funds. What makes a self-directed retirement account unique is the variety of alternative investment options available to the account holder.  

II. Definition a traditional retirement account to be B. The Internal Revenue Service (IRS) permits a traditional retirement account to be converted to a self-directed retirement account. The only potential restriction would be if an employer retirement plan didn’t allow this type of structure. IRA’s are eligible or if the beneficiary of the employer plan is also the owner of the business, they can elect to alter the company’s retirement plan to allow this type of account.  

II. Definition C. Account types Traditional IRAs and 401(k)s, Roth IRAs and Roth 401(k)s, Simplified Employee Pension plan (SEP) Savings incentive match plan for employees (SIMPLE) IRAs.

III. History Self-directed retirement accounts have been permitted since 1975 as part of the Employee Retirement Income Security Act of 1974 (ERISA) and the creation of IRAs. At that time, qualified plans, such as defined benefit, profit-sharing, and money purchase pension plans, were considered self-directed IRAs. Initially, the investments of choice were most commonly real estate and notes.

IV. Points of Interest There are approximately one million self-directed retirement accounts nationwide. This represents a little less than 2% of the $20+ trillion dollar retirement account market, which is approximately $400 billion. Of the self-directed retirement accounts in existence today, roughly half invest in some form of real estate. Real estate is a tangible asset class that many people have previous experience investing in.

IV. Points of Interest each month through various self- C. Thousands of new accounts are opened each month through various self- directed custodians and facilitators. D. Typically, self-directed retirement account holders are entrepreneurially minded, own a small business, have a background in real estate, or are hands-on investors looking to place their retirement dollars outside the confines of Wall Street.

V. Types of Alternative Investments Allowed Real estate investment Notes–both secured and unsecured Private company stock Precious metals, such as gold or silver bullion Tax lien certificates

V. Types of Alternative Investments Allowed F. Oil and gas G. Commodities H. Foreign Exchange (ForEx) currencies trading I. Other investments not specifically disallowed by the IRS

VI. Traditional IRA’s and 401K’s Traditional IRAs or 401(k) accounts are made with pretax dollars that generally allow a deduction on the tax return or W-2 statement for account contributions made each year. Account distributions, upon reaching retirement age, are then taxable within the tax year they are withdrawn.

VII. Roth IRA’s and Roth 401K’s Roth IRAs or Roth 401(k) accounts are made with post-tax dollars that do not allow a deduction on the tax return for account contributions made each year. Account distributions, upon reaching retirement age, are then tax free when withdrawn.

VIII. SDRA IRS LIMITATIONS AND PERMITTED USES (IRS CODE 4975) Disqualified persons The account participant (holder/beneficiary of the account) The account participant’s spouse The account participants’ ancestors nd lineal descendants (son’s or daughter’s spouse) Fiduciaries of the plan (custodian, trustee, or administrator)

VIII. SDRA IRS LIMITATIONS AND PERMITTED USES (IRS CODE 4975) Investment managers and advisors Any corporation, partnership, trust, or estate in which the account holder owns a 50% or greater interest According to IRS Code Section 4975, siblings, aunts, uncles, cousins, and friends are not included in the definition of disqualified persons. ©2015 Kaplan, Inc.

VIII. SDRA IRS LIMITATIONS AND PERMITTED USES (IRS CODE 4975) B. Prohibited transactions Types of alternative investments not allowed Life insurance Collectibles such as coins, stamps, art, antiques, alcoholic beverages, cars, and so forth Private stock in an S corporation

IX. SDRA for Real Estate Investing – RE Agents An SDRA may be used as a means to buy an investment property where buyer and seller have already agreed on a price. Working with just a handful of SDRA investor clients may result in multiple transactions: buying, reselling, buying additional properties, property management, etc.

X. SDRA for Real Estate Investing – Investors/Landlords SDRA’s provide a means to free up additional real estate investment capital for yourself and other investors/partners you work with to build up a rental portfolio As Baby Boomers near retirement, they are moving from an asset accumulation phase to a fixed income allocation phase for their retirement. Investment Real Estate may be an easy alternative investment to low interest rate bonds worth considering

XI. Course Overview: Investing in Real Estate Using Self-Directed Retirement Accounts Various Accounts Types How to set-up a SDRA How to buy property within a SDRA from start to finish Tax and IRS considerations PLUS… ©2015 Kaplan, Inc.

XI. Course Overview: Investing in Real Estate Using Self-Directed Retirement Accounts 5. How to obtain non-recourse mortgage financing on properties owned within the accounts. 6. Various real estate investment strategies within the accounts. 7. Marketing strategies for Real Estate Agents to promote SDRA’s ©2015 Kaplan, Inc.