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SDIRA Real Estate Investing Part 1: The Basics You Need to Know from Morris Invest - YouTube
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I are a real-estate investing what is it
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how do you set it up and how do you
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invest in the things that you want
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that's today's show let's dive into it
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hey everyone welcome to the show at the
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end of today's episode you can
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understand the ins and outs of setting
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up a self-directed IRA and the power
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that that holds something Wall Street
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really doesn't even want you to know
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about I'm Clayton Morris I'm Natali
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Morris and this is the show where we try
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to teach you about financial freedom
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passive income our whole goal is for you
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to go out there and take action and
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create more freedom in your life so that
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you have positive passive income coming
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in every single month indeed that's true
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so we're gonna teach you how to take the
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IRA that you already have and consider
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using it to buy other types of
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performing assets other than the stock
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market
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perhaps real estate and we're going to
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show you how that's done now this is a
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concept that kind of spun my head around
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when Clayton started bringing it up and
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I'm gonna be honest with you I didn't
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like it because the marketing around the
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IRA is that you know if you buy one
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early you contribute to it every year
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and you just let it grow the interest
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over time is gonna give you this nice
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nest egg so I felt very comfortable that
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we were regularly contributing to our
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IRA and then just kind of letting it sit
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there and grow what I didn't know is
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that it wasn't just sitting there and
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growing it was sitting there in the
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stock market in funds that either grow
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or don't and they're also very expensive
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funds so once I started to understand
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that I was more open to the idea of a
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self-directed IRA now what is a
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self-directed IRA great question that's
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the question I was just about to ask so
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if you are totally new to this concept
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right and you just googled this and
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you're trying to figure out what is a
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self-directed IRA or how do I even
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invest with an IRA we need to be very
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clear about the differences here okay
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most people have no idea what a
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self-directed IRA even is right so if
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you just came upon this video because
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you were looking for IRA investing if
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this is a totally different concept I'm
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going to teach you the differences
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between
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the two of them are going to tell you
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why one of the two of them is way way
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better okay okay so an IRA is a tax
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protected savings account so the
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government allows you to open up this
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type of savings account and it says if
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you leave it there until full retirement
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59 and a half then we won't tax it then
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it's a tax friendly account right unless
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it's a Roth we're gonna get to that
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distinction later okay but for the most
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part it's a tax safe savings account
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that you are supposed to leave alone
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until you're in your late 50s and if you
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don't you will be taxed as a penalty on
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it okay
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most people say okay great and they just
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go to any old bank that's down the
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street and they open one and then they
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think oh good then it's going to be
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growing right and they don't really
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elect where that money go some people do
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some people go in and say I want this
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fund or that fund right but for the most
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part you have a Wall Street based bank
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holding your retirement and putting it
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in either aggressive or not aggressive
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type mutual funds or exchange-traded
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funds right so for instance you might
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work with a company like fidelity or
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trade right and what those companies
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will say to you is that you're setting
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up an IRA and you might say to them well
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I've heard about this thing called a
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self-directed IRA and they might lie to
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you
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quite honestly they might say we are we
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are IRAs or self-directed but what
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they're let with what they're telling
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you is that you can direct within those
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funds you can pick and choose kind of
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different stock based funds so you can
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self-direct you can kind of pick and
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choose but that's not what we're talking
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about at all right right yes so they
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have a finite amount of pre approved
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funds you can elect so you do you can
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choose where your money is going in
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those types of traditional accounts but
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you have a finite amount of choices in
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fact I've noticed that when you do a
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Google search for self-directed IRAs the
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big banks buy ads against that search
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term they don't want you you'll see like
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e Trade and Scottrade popping up because
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they do make the case well yeah we are
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self-directed they're actually a couple
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years ago was a court case where someone
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wanted to use their traditional bank to
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invest in I think it was real estate and
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they went all the way to the court
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system and the court said it is that
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person's retirement money they can
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invested in real estate the problem with
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doing that with a traditional IRA
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custodian is that it's going to be
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really expensive because fidelity or
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something that's going to say to you we
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don't even really have people to help
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you with that kind of investment so
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they're gonna charge you up the yin-yang
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for that kind of thing so if you are
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interested in not letting your money
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just chill out in the stock market which
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after I had sort of done that analysis
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of how does it grow and what are the
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fees I didn't like it once I could
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really looked hard and cold at the
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number then you're gonna have to find a
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company that does really truly let
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youself direct your money so we decided
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to do that once we understood what
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self-direction was and again we're gonna
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get more into this in a second but once
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we understood what self-direction was
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which would allow us to take my
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retirement money and fully invest in
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real estate actually buy houses with it
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okay not stock based real estate like a
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REIT or something like that which is
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what those other companies will tell you
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they do so if you go to them you go to
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your Scot trader you go to these places
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and say I want to invest in real estate
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they'll say well you can write and what
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they'll say is that these conversation
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right but they'll say actually they're
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having you invest in like a stock based
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version of real estate which is not
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really real estate investing okay let's
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be very very clear about that and also
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you don't get the half the benefits of
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actually owning actual real estate it's
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no tax benefit to that right so we buy
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so we set up our self-directed IRA and
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we'll get to this in a second and we buy
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real estate not but we've bought a bunch
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of real estate inside of our
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self-directed accounts now we at Morris
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invest our company we make it very very
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easy to do that we actually have a team
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of specialists who work on this exactly
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and so if you come to our website just
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click on the book a call tab and if
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you're ready to buy real estate you can
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do that and go through the questions
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it'll ask your first name last name how
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do
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get in contact with you and then once
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you get down Hank it's question seven or
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eight on the list it'll ask you how do
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you plan to purchase real estate and
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click the box where it says unlock
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retirement funds from a 401k or IRA and
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then you'll connect directly with one of
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our specialists who is totally focused
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on helping set up your self-directed
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account and walking you through that
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process I just want to explain that
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first we can handle all of that
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so now let's dive into some of the
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mechanics of what this self-directed is
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and how it's different than your normal
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normal IRA
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okay so once you have your funds in a
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self-directed IRA then you now are in
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charge of where they go so I can take my
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retirement so I took my fluoro unque
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from when I worked at CBS and I rolled
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it into an IRA and I put it into a
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traditional custodian and then I decided
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okay I'm gonna be brave I'm gonna put it
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into a company where now I can
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self-directed so I did that and then you
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log in and you're like oh there's on my
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money and I get to decide where it goes
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so I can I know you use this analogy a
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lot I can invest in a friend's bakery I
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can invest in I can lend somebody money
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that I know is starting up some kind of
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new business I can invest in real estate
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right I can invest in a firm I can do
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whatever the rules are that whatever the
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terms of that investment are all the
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returns go right back into that fund so
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let's say you buy a house for $100 and
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the rent is $1 a month right you spend
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that $100 and then every month that $1
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rent goes right back into your Roth IRA
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now or I'm sorry we're gonna get to this
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distinction of Roth later I don't want
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to confuse you I just want you to
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understand that the Roth is a savings
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account now that you're in charge of the
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fees now are kind of preset fees because
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the custodian is going to say once you
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make an investment I'm gonna charge you
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maybe $100 for that transaction right
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it's not a percentage of your returns
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which is awesome then you've just paid
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for one transaction and then your
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making money you can invest in a lot of
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things with a self-directed IRA but
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there are just a few minor things you
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can't invest in right there are a few
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rules restrictions that you need to
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follow so the first one is you can't
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lend to anyone in your immediate family
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or an descendant or an ancestor so that
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means your parents your grandparents or
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your children or even your brother or
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sister like Clayton can't lend to his
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sister even though we don't live with
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her it's just too close inside of his
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immediate family because the government
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is going to say well you're using that
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money for your benefit right now and
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then they'll tax you they're saying
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that's that's not a retirement account
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if you're using it right now for the
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same reason you can't use it to buy or
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invest in anything that you personally
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use right now like a car or your primary
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home you absolutely cannot even a
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secondary home you you couldn't do that
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unless you're renting it out right
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there's a couple of other things you
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can't invest and you can't buy
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collectibles this is according to the
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tent according to the tax code
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you cannot buy comic books baseball
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cards or art using a self-directed
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account right but beyond that I mean
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really the sky is the limit right so
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just wrap your head around this for a
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second right on the one hand you had
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this old IRA sitting over here with you
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know with a financial institution then
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you say you got smart because you watch
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this show and you said I'm gonna take
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that money that's $50,000 bye-bye to
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that financial institution and I'm gonna
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put it into a self-directed account by
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the waiting like I said our team can
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help you with that very very simple and
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so now you have full control over it
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without all of the fees that you were
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paying and it was just sitting there
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stagnant now you could take that fifty
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thousand you could buy real estate okay
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or you could take that 50 thousand and
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loan it out to somebody at 5% to 6%
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return maybe a local flipper in your
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neighborhood right we actually we've had
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people here on the channel who have
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written to us and said we've started not
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only buying real estate with our
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self-directed account we've lent out in
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small batches like they lent out 5,000
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to somebody down the street that was
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doing a flipping project 5,000 without a
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5% return or 12% return imagine sky is a
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limit
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when you start thinking about the ways
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in which you can use your money and not
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the financial institution telling you
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how to do it yeah it's amazing
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so shall we talk about the distinction
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between Roth and regular IRA before we
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move on to the next video yeah so we're
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gonna have a whole series of great
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videos here around the self-directed IRA
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but it's worth just talking about some
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of those distinctions because I made the
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mistake so there you have the
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traditional IRA and a Roth IRA when I
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was starting out in my career I made the
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stupid move which was investing in a
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traditional IRA right Natalie we didn't
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know each other at the time when she
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started out in her career invested her
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money in a Roth IRA so there you go now
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what's the difference traditional was me
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Roth was her well you can tell who was
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the better student because I did my
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homework and I'm gonna teach you the
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difference so that you have this in your
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head when you make these choices now a
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traditional IRA is the government saying
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we will not tax the money that you put
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in every year so you get $5,500 limit
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that you can put in every year now in
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2018 and the government is gonna say I'm
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gonna pretend you never made that $5,500
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I won't ask you for taxes on it this
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year on this year's tax return but at
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the end of that retirement account when
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you decide to withdraw it say you're 60
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years old and you want it you will pay
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taxes on what's in that account and what
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you take out not just what you
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contributed but also what it grew so you
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have to think about this you're paying
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tax not on the seed you're paying tax on
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the crop right so imagine you bought
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real estate and it was paying you for
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years and years and years you've made
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all this money back but you're gonna pay
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taxes on that now I don't want that so
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what I'm going to do instead is buy a
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Roth IRA that means that the $5,500 that
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I put in every year I've already paid
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taxes on it I pay taxes on it this year
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then I grow it into a huge crop when I
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take it out it's tax-free now there are
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two reasons I like this number one I
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believe I can grow this big-time
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right number two I want to pay tax
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year-over-year and instead of this big
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lump sum now this is something Clinton
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hates is when people say well what about
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when I'm in my 60s I'll be at a lower
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tax bracket right right but that makes
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no sense
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so if you're in a lower tax bracket when
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you're in your 60s then that means you
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are retiring poorer than you are now
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right so my goal is to I want to retire
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wealthier than I am now
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so meaning I want to be in the highest
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tax bracket when I retire yes I'm gonna
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pay a lot in taxes when I retire that's
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fine but that also means I'm in the
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wealthiest of tax brackets but we also
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have so many tricks to mitigate our
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taxation because we're active investors
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that like I'm fine with being in that
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tax bracket but I also have all these
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kind of ways to lower my tax actual
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payment so that I'm fine with that right
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so this idea that you're gonna be in a
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lower tax bracket because you're retired
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is I think very myopic and just thinking
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of yourself as you know I remember I'd
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like checking that box and I looked at
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the two I'm like oh I don't know do I
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want Roth or do I want traditional and I
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thought of myself like 60 years old and
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fabulous and I was like no I'm gonna be
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in a high tax bracket I'm gonna marry
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someone wealthy we're gonna create
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amazing wealth well see most people
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don't think of it and most people just
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don't think of it that way because it's
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sort of that immediate thought well this
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is tax free right now right so the
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government's not gonna tax me but
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they're like they're gonna tax me when I
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retire fine but we're gonna talk to you
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about having a real estate property
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inside of your IRA but you have to think
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about this right this monthly rent that
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you're getting let's say you get a
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thousand dollars in rent from an
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investment that rent will never be taxed
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right if you're in a Roth IRA which is
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crazytown
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right like it's kind of crazy to think
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that they won't tax the crop because
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you're electing to pay taxes this year
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on your contribution it is amazing so
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there are multiple ways to make money
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with a self-directed account this is
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just really an introductory video I want
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you to check
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the other videos in this playlist that
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are gonna walk you through exactly how
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to use self-direction some of the tricks
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of the trade all the tax benefits of it
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it's one of our favorite ways to invest
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so yeah check it out also subscribe
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thank you so much for checking out this
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video we wanted to cut right to the
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point and help you build wealth and
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financial freedom my goal in starting
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this channel is for you to take action
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go out there and take action to become a
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real estate investor because we believe
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it's the number one way to build wealth
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we'll see you next time everyone
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