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Why You Should Never Invest in Real Estate in Your Self-Directed IRA - YouTube
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so every single real estate conference I
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go to I know I'm gonna run into someone
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trying to get into me to start investing
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through a self-directed IRA and to lock
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up my money inside a government plan
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that an entrepreneur never created and
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then I am really no interested because I
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don't invest in things I don't have the
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core for the four pillars or were
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created by an entrepreneur but you me
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tell me how you really feel about this
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well and then I just gotta say the
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reason they had to be created by an
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entrepreneur because entrepreneur the
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market needs and qualified plans were
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created by bureaucrats who have never
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created anything also hears anything so
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why is it that a group of very smart
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very successful real estate investors
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are going to talk about ideas why is it
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that this topic comes up every single
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time there's as much people doing it
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there's a bunch of money locked away and
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self-directed iras yep so I think I
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think two reasons one is there's a bunch
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of educators and gurus and and people
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that want to get up and sling product
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that don't own real estate themselves
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that aren't actually involved in this
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game are doing it right they want to
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just attract easy money because it's a
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very easy target to go out and say hey
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we should take the money you are you
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having your IRA we're gonna play nice
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with everybody IRAs are still great
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we're not gonna rock the boat we're just
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gonna show you how to do this a little
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bit better right yeah right and the
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money is sitting there it's like a hole
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in somebody's file and it's an easy
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target okay yeah and so it's it's
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typically somebody who's running
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self-directed companies or somebody that
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has the real estate product that wants a
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but to create a bigger market yeah but
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are they really ever speaking to what
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the investor truly is trying to
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accomplish probably not there well the
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investor generally choosing trying to
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avoid taxation because well let me ask
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you this do you want real estate or do
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you want freedom do you want more money
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in your retirement account or do you
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want to quit your job and have financial
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security
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I want freedom I want freedom I want
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financial security I don't want a bigger
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retirement account but unfortunately
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they're connecting dots for us that says
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those two things are the same right when
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they're fundamentally
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not so they're missing the point when
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somebody comes in and says this is what
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you should do inside of an IRA account
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like I have no desire to be a really
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good real estate investor I have a
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desire to be free and I force myself to
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learn the principles required to be able
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to do that right but nothing more but
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unfortunately they're coming in and
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trying to add tactics for tactics sake
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now let me ask you this how many of the
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way they're heading tactics inside a
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game that we've decided not to play 100
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percent and they're and they're only
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doing it because it but it's back to our
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spreadsheet millionaire riots it makes
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really good sense on paper but
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unfortunately we're missing a couple
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huge elements - right well they're
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missing the huge element that there is
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this tax free space that nobody wants to
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talk about so we're gonna we're gonna
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hit on a couple very controversial
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points in here so we want your thoughts
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as we go through this to say what you've
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heard what's wrong about this and why
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this doesn't work because these are the
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conversations nobody at Jimmy even that
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at the highest level of real estate
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investing is really talking about okay
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the first one is there is a massive
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liability if you're if you touch that
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real estate in any way okay but I touch
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it you mean control the operations
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control add value in any way so and I
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even see people create LLC's and
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partnerships so that they control but
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they don't really control it because
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what the IRS says is you are a
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disallowed person from participating
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inside of your IRA now we're not gonna
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go into all of the detail about that but
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basically what that is a complete
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violation of one of our fundamental
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principles that you are your number one
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asset so you earn all the money you
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create the system processes and you have
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the talent to earn that money and the
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bureaucratic create a qualified plan is
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so intelligent that he wants to take
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that out of your locus of control yes
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and give it to somebody who may or may
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not be as it is because a self-directed
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IRA allows you to direct the investment
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but not participate in the investment
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those are two very different things
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so but it's it's swung to the point
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where we've created backdoors and
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loopholes and shenanigans to get to the
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point where people are flipping houses
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wholesaling houses trading notes
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all this all of this activity inside of
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their IRA that is strictly prohibited
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right and and we're talking about
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self-directed IRA so there's no company
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match on this money no it's not like
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these people are getting free money or
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that bit this is straight up this is
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straight your own funding it and trying
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to build these massive portfolios and
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the risk is is once this becomes a large
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enough phenomenon that it that it lands
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on the IRS s radar it is go they're
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gonna have a field day with this
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right and it's going to be a massive
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slaughter of people who have actively
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participated and violated that rule
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inside of their IRAs so if you're the
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one that's going to find the property or
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do the rehab on the property or me
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involved in renting it out or brokering
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the sale anyway involved in it you're
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violating it you have to be 100%
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hands-off right so if I gave my money to
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Jimmy and had zero participation from
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that point it would be totally fine but
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if I swung a hammer or signed a contract
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or negotiate anything I'm done right
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okay so that's the the first biggest
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reason why we don't want to follow this
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is the risk that's involved second is
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we're actually giving up benefits by
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doing this real estate if done properly
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is already tax-free buy and hold real
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estate buying less quipping let's come
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back to that in a second because most
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people that are getting into this or
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wanting to build passive income for
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themselves flipping the whole savings
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not passive income right so let's deal
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with that in just a second but for the
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passive income angle if you understand
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the core for in the four pillars you can
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already do it tax-free
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meaning the the cash flow that comes to
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your tax free all of your depreciation
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or all of your appreciation of the
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property can be handled in a way that is
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completely and totally tax free so
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there's no need to seek out a vehicle
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that locks you out of the transaction to
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then try to get some tax benefits for ya
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okay and then by deferring taxes we give
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up well we give up the best match ever
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possible so here's the deal if you put
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in $10,000 CRA and you're thirty five
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percent tax bracket you can say third
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save thirty five hundred dollars into
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first right you but unfortunately you're
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only deferring it and then you
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taking on all of the tax liability later
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on yeah you don't get capital gains and
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you have to pay ordinary income on the
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cash flow but what I would rather do is
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I would rather just take $7,500 and
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leverage that four to one because the
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bank is going to match every dollar that
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I put into a piece of real estate four
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to one right so I could take my $7,500
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and turn into $50,000 of real estate
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that make sense yeah but in my IRA I'm
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so limited on my accessibility to
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leverage that I'm I'm gonna give that
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possibility up so rather than having
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access to thirty five hundred dollars
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that have not yet been taxed on I'd
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rather have access four to one right
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okay
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now the last piece on the act of income
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side of things why don't we want to do
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the active income side inside of the the
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IRA account in addition to the liability
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part because all you're doing is
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deferring that capital gain you're
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deferring the capital ordinary income
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and and why do we work hard in ordinary
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income it's ultimately at some point to
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be financially free right right well
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here let me give you something else well
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I see this you're not doing it if you
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have it flipping or wholesaling business
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you have business expenses that can cut
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down on that tax liability and you have
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access to that capital right away yeah
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by it so you're paying ordinary income
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as what 30 35 35 percent there's
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business expenses and things you can do
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inside your business and I'll see
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that'll also drive down that tax
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liability come instead of difficult to
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bring it in in the 401 K exactly right
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so we can we can take some of those
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benefits but we're very limited right
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but here's what I would say is why would
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anybody with a job go to a conference
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and learn to wholesale and flip real
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estate it's to accelerate their plan for
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freedom right so even if you become a
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massively successful flipper or
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wholesaler inside of your IRA and build
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up seven figures at the age of 45
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congratulations you get to wait twenty
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more years before you can retire right
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that's not the point
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to have access to the wealth that you've
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just created so what we do is we follow
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the tax code the way it was designed
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tax code is literally a treasure map for
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investors and business owners to reduce
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or eliminate taxes so we invest and we
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operate businesses in such a way that we
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can significantly reduce that while
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retaining maximum control and access to
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our wealth
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Jimmy we do this for you just recently
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how much did we save in taxes as we put
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you through this like half it was easily
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six figures yeah
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simply because you were following
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goldfish tax advice that was aimed at at
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a tax advisor that's used to doing
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things with employees right he was
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trying to help you better fit in the box
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of how employees are doing their taxes
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right rather than us who take the
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investor business owner approach and say
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that I would rather live on the es side
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of the quadrant and and be taxed as it
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as an es yeah and and then what I'd
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rather do is pay the middle minimal
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amount that I have to pay get the IRS
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off my back for the rest of my life and
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actually become free while I have time
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to the drive so the only path the only
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path to financial freedom in ten years
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or less is by not trying to play the
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employee IRA game self-directed game
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better it's by eliminating false
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together.that let's do this whole thing
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all the qualified plans all that stuff
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was created for employees yes it was not
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created for business owners it was not
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created for entrepreneurs so you spent
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all this time and energy getting out of
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the rat race right only to then put your
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long term assets back with the rats back
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in the same but I've never understood
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them never understood it so if the only
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way to be financially free is to get out
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of that game entirely
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stop putting any of it with the rats and
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adopt a completely different paradigm
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and a cash flow tactics that's what we
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teach as we roll out the fundamentals of
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the financial freedom formula and the
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mastermind teaching and training and is
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your education that we have is we
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step-by-step lay out the path the
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regardless of your age your income or
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your experience you can be financially
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free in ten years or less so if that
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excites you if that intrigues you of
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what you're missing out on click the
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link below and get started with the free
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resources that we have to start you on
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that path
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