Using retirement plan funds for alternative investments

1. Self-Directed IRA and 401(K)
Tax Advantaged Funds for Real
Estate Investing
March 15, 2016

2. Presentation Agenda
 About IRAs
 Why people are using IRAs and 401(k) for real estate
 Understanding self-directed IRAs
• Basics & benefits
• IRA plan types
• Investment options
• Rules, regulations and prohibited transactions
 Borrowing and different ways you can partner an IRA
 Case Study: Partnering Self-Directed IRAs
 Logistics

3. What is a self-directed IRA?
 Self-directed is an industry term for an IRA that
invests in non-traditional assets such as Real Estate,
Private Stock, Precious Metals, Promissory Notes, etc.
 A self-directed IRA allows you to expand your
investment options beyond stocks and CDs,
providing a better opportunity to diversify your IRA
portfolio.
 You are not locked into the limited types of
investments offered by banks and brokerages.
 All IRAs, including self-directed, are regulated and
governed by the same rules found within various
sections of the Internal Revenue Code.

4. $-
$5
$10
$15
$20
$25
2000
2007
2008
2010
2012
2013…
2013…
2013…
2013…
2014…
Trillions
Annui
ty
Govt
Plans
DB
Plans
DC
Plans
IRAs

5. Alternative
Investment
s
Traditional
Investment
s

6. Growing Your Business
Enhance peoples’ ability to invest
in what you sell
 Introduce new ways to invest
 Show how to use alternative
funding resources

7. Current State of Retirement in the U.S
 1991:
 50% of workers expected to retire before age 65
 11% of workers expected to retire after age 65
 2013:
 23% of workers expected to retire before age 65
 36% of workers expected to retire after age 65
 Over 30% of households have less than $50,000 saved
for retirement
 Nearly 50% of U.S. workers are not confident that they
will retire comfortably
Sources: The 2013 Retirement Confidence Survey, Employee Benefit Research Institute and the Center for
Disease Control’s National Center for Health Statistics.

8.  Residential Real Estate
 Commercial Real Estate
 Precious Metals
 Limited Liability
Corporations
 Oil & Gas
 Secured and Unsecured
Loans
 Offshore Real Estate
 Trust Deeds
 Almost anything…
What Can I Invest In?

10. Investment Restrictions
 Collectibles
• any work of art
• any rug or antique
• any metal* or gem
• any stamp or coin*
• any alcoholic beverage
 Life Insurance
 S Corporations
* Exceptions: Gold, Silver, Platinum & Palladium bullion of certain purity

11.  Your Spouse
 Your Parents
 Your Grandparents
 Your Children
 Your Grandchildren
 Spouses of Lineal Descendants
 IRA Fiduciary
Disqualified Persons

12. Self-Directed IRAs: Learn to Leverage
IRA Funds
 Your IRA can partner with a third party or with yourself
at the time the asset is purchased
 Extend credit with non-secured & secured notes
 Invest in private equities, investment funds, and joint
ventures
 Form an entity with multiple members
 Self-directed IRAs can borrow e.g. non-recourse
mortgage

13. Trusts and LLCs (entities)
 Advantages:
 Affords “checkbook” control
 Immediate access to funds
 Ease of investing
 Savings on custodian transaction and other fees
 Limited liability protection from claims
 Disadvantages:
 Cost to create
 You maintain records
 Decisions on ownership interests made at inception

14. IRA Purchase of Vacation Property
 IRA purchases vacation (rental) property in Hawaii
• Purchase contract must be signed by your
administrator unless you have a trust
• Vesting must read “Your Admistrator. FBO J. Smith
IRA account 12345 or Your Entity Name”
• All rents/expenses flow into/out of the IRA or IRA
Trust
• Cannot stay there on holiday; cannot provide
sweat equity

15. How About a Youth Baseball Park
 IRA Purchased a Minority
Interest in Park Corporation
 The Business Owned a
Lease
 I Worked There For 2 Years
 I Earned a Salary
 Dividends Were Paid Into
My IRA

16.  Example:
• Nephew graduating from college with
$60,000 in student loan debt at 7.5%
interest rate
• Uncle’s IRA Trust issues $60,000
promissory note to nephew at 4.5%
interest rate.
• An attractive return for the lender and
a substantial diminishment in rate for
borrower
IRA invests in Promissory Note

17. Funds from a Qualified Plan, including 401(k), 403(b), 457
plans can be rolled into an IRA.
Plan Types
Traditional IRA
Roth IRA
Individual (k)
SEP & SIMPLE
Other Special Plans:
Coverdell (ESA)
Health Savings Accounts (HSA)

18. Thank You!
Joe DiDomenico| (425) 449-4554
joe@wealthflex.com

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