Self-Directed Retirement Investing: How It Works and Simple Ways to Get Started with Corey Daharsh

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Show, we have Corey Daharsch.

Since 2016, Corey has impacted hundreds of clients by providing diligent and thorough assistance with investment transactions ranging from small hard money lending to multimillion dollar real estate syndications. After moving to Western North Carolina in 2020 and transitioning roles to join Advanta Ira's business development team, he's been able to leverage everything learned from personal experiences, networking and continuing education to help capital raisers and investors confidently market and invest.

Using self directed IRA or 401s.

Welcome to the Next Level Income show where it's our goal to raise your income, investments and life to the next level with your host, Chris Larson. Get your free copy of his book@nextlevelincome.com book also, if you're an accredited investor, check out the Invest link to learn how to gain access to institutional quality real estate opportunities.

Corey, welcome to the show.

Hey, thanks Chris. Appreciate you for having me.

Absolutely.

Man, we should have done this live.

Like, I very rarely get to have guests that, you know, operate on a national basis but, but you're right down the road. I mean, I could, I could almost see you from over the mountain here, Corey. You're just right, right down in Hall Creek. So tell, tell the audience a little bit about how you got here, how.

You got to your position with Advanta.

Ira and we'll get into it.

Yeah, for sure. Well, I ended up in Asheville in the middle of COVID What happened really with that? My wife and I had met in Florida after college. We attended the same college, we didn't know each other there. Bought a house beachside in Pinellas county, owned it for about four years and decided before we settled up and had kids we really wanted to move out of state. So 2019, we checked out about seven different cities in the southeast and really loved Asheville. We had already visited a time too and just really felt that was the place we wanted to move before we started planting our roots. So we really told both of our employers in January of 2020, hey, going to sell our house by the end of this year and move up to this specific town if you want to keep us working with the company. We both loved our employers. Let's work something out. Definitely a long enough timeframe. About two months later, Covid happened and everyone started working remotely anyway. So it really played in our favor and gave us the opportunity to get up here a little bit sooner than we really anticipated and initially wanted and kind of just get that transition going as opposed to waiting any longer. I'm a big proponent of, you know, go out and get what you want, you know, set your goals, have a vision board if you need to, or any type of motivational slogans you tell yourself. So just getting it done was really impactful for us. Backtracking even further, how I got with Advanta. I have a degree in business management from University of South Florida. Right after college I took a job with a small tech startup and I worked that job for about two years and it just wasn't panning out the way I was expecting it to or wanted to. And I found the job with Advanta where I could stay relatively in the financial industry to utilize my business management degree, but not necessarily take on the role of a financial advisor or a fiduciary, which are some of the sides of things I didn't really want to pursue through college. I was pursuing an accounting degree as well. Decided my year. You know, accounting's not for me. I'm not going to use this for 30 years straight. I don't want to be that person. So really I lucked into finding the job with Advanta. At the time of about 20 or so employees were expanded from there. That was in 2016. And again, like I said, in 2020, I told them I wanted to move up to this area and it was a mutually agreed thing for me to expand and kind of build us a presence in this market. What I did from a career standpoint is I went from being a client account manager, processing day to day transactions for our clients and actually working through deals with our clients from a strategy standpoint to role where I educate, network, go out into the community and, you know, have joined the Chamber of Commerce and the Real Estate Investors Association. So I. That covers kind of where I started, how I'm here.

Yeah, no, that's fantastic, man. Question for you. So did you have the beard before.

COVID Yes, I have. I'VE had the beard honestly since I was 21. I'm 30 now. My wife's never seen me cleave clean shaven faces. It's. I've trimmed it short. We have a five month old right now. So he's really getting into it and pulling it sometimes. But no, it's, it's just part of, it's part of my profile.

I love it, man. No, I love it. Yeah, you so. Yeah, that's so you. Real quick.

You said you looked at seven different.

Cities in the Southeast. In addition Ashville. What were those, what were some of the other cities you looked at?

So we checked out Chattanooga.

Yep.

Johnson City, Knoxville, Gatlinburg. We really, when we got to Gatlinburg, we were like, oh, this is not even a city, but technically it counts. Charlotte, Greenville. And I forget one of the coastal cities in the Carolinas. I forget which one. We didn't even drive there. The whole goal, or at least what we did was we did a Thanksgiving road trip and we spent at least 24 to 36 hours in each of these different places. Now the metropolitan area, the residential side of areas. So just to see like, can we see ourselves building here and developing and is it what we want? Because we both had lived most of our life in Florida no more than 30 minutes from a beach. So seeing a full range of seasons and having a little bit different atmosphere than just coastal Florida was important to me for, you know, like I said, building. We have a child now and living my life with a little bit more diversity than what I had previously held.

Yeah, no, it's a fantastic place to raise a family. And We've been here 14 years. It's just been amazing. So look, Corey, I'm excited to talk to you because probably maybe 20 to 25% of our investors invest through self directed IRAs. And I know a lot of people listening today, it's going to be their first time hearing and saying, wait a minute, what is a self directed ira? And then like, what can I invest in? I think a lot of people are surprised that they can invest in things like real estate syndications through their ira. So let's start off by just defining for the audience what a self directed IRA is.

Yeah, that's a great point, Chris. A lot of people might have an IRA or a 401k with a larger wirehouse custodian they that they call a self direct product. But really in those cases they're just allowing you to invest into asset classes that they vetted out. Most cases the Open stock market of publicly traded assets. What a truly self directed account is and what a self direct administrator like Advanta brings to the table is the ability for you, the client to invest into anything you see fit as long as it falls within IRS regulations which are very sweet and simple. You can't invest your IRA into a life insurance policy or anything the IRS would deem to be a hard to value collectible. Antiques, fine wine, old vehicles. So as long as it's not of those two asset classes, you can hold it in your IRA or your 401k, you might have not known. So and it's very common for people to not know so. Only about 4% of the retirement account industry in the US is self directed accounts. 4% in the grand scheme of I think a $27 trillion industry. It's a lot of money and a lot of assets left on the table that people until have this conversation or hear this conversation, just don't even know physically exists.

Yeah, no, it's incredible. I mean I remember when we first heard about it and look, I've been involved in real estate like CREA here locally and different real estate associations since I was in college, so it was pretty common to hear about that. But people that are accustomed to just investing in their 401s or through, you know, brokerage account mostly don't know that. One of the statistics that I love to talk about, we just talked about this in episode 97 with DJ Van Curran is that really wealthy families, we're talking about like family offices, ultra high net worth families typically invest 20 to 30% of their assets in income producing real estate. And you almost can't get access to this type of asset class in with one of these brokerage accounts. So who do you typically see that are opening these accounts? Corey? Because I know I have investors that are on the younger end of the spectrum and are like hey, I want to start moving money into this asset class. I have other investors that have been investing their whole lives, have a substantial net worth that they've accumulated in their IRAs or 401s and want to diversify. What are you seeing?

Yeah, that's a great question as well. For the most part the investors we see don't necessarily fall into an age demographic more so a mindset where to do self direction. You really have to have an entrepreneurial thought process and a willingness to take control and have a little bit higher risk. As if you choose an investment and you've done all the due diligence and you fund it through a self direct account and something falls through with that deal, no one else is there to blame. Point the finger at as far as that deal not following through. So first and foremost it'd be someone with an entrepreneurial mindset. And then also additional factors. A lot of investors that are already doing real estate specifically which breaks up about half of our client base are real estate investors that are finding out they can tap into this capital resource for themselves or people that are trying to get their leg into real estate that may have been at the point changing careers. They've served a career for five, 10 years and then they're wanting to get full time into real estate. It might have been something they were doing as a weekend job or a side gig out there trying to go full steam with real estate. Well, if they just left an employer, they've got an old 401k or an old employer plan that they can roll into a self direct account. So again, first order is really entrepreneurial mindset individuals. Second order is real estate individuals or apply that principle to any type of investing that you might want to do and you're now finding out that you can do it with an additional capital source to that effect. It also, you know, we see more clients that are getting up there in age as opposed to younger. But that's part of why we're educating. I mean I, like I mentioned earlier, I'm 30 years old know that this was even a thing until I started with Advanta. And you know, part of my ambition here is to get other people in my age range and in younger demographic to understand that they can take more control instead of just having their money in the tumultuous stock market where they don't have control and to a certain and don't even understand what the market is doing or why it's doing it anyway. So it's definitely expanding demographic from an age standpoint. The more we can reach and touch younger individuals and explain to them how it could fit into their plans, the more the younger demographic is coming along.

I love it. No, I think it's, I mean that's why we found a next level income was to help educate everybody that's out there, not just the people that have a bunch of money and are already investing. Corey, you mentioned about 50%. I think you said we're kind of real estate people. What are some of the asset classes or the main asset classes that you see people using their self directed IRAs to invest in?

It's definitely a mix, I would say of that 50% of our client base there is a decent amount of single and multifamily homes held. So residential or commercial real estate that actually are deeded in the name of a retirement account, that is the physical owner on tax record, but also syndication investors as well make up a large portion. I tend to like syndication because they're simpler. As far as a processing standpoint, it's in self direction. All of the investments you're making should be passive income. So if you have the ability to put your money into an investment as a limited partner and really just sit back and wait for the proceeds to come back, it's much more efficient for you and hands off, if you will, then owning a piece of real estate where you may have to have a property manager on hand with a self directed account, you can't necessarily go over and do any sweat equity on real estate. So you can't go paint the walls or change the flooring or anything like that. You have to outsource to qualified professionals just due to the IRS regulations. So again, in that context, indication investors are a key part of our client base and definitely drive a lot of the different deals we see coming across for our clients.

That's interesting. So just to clarify, so I can, if I buy a property, can I manage the property? If I use my self directed IRA funds to purchase it, can I do anything with the property or how does that work?

Yeah. So the way the IRS rules are set, you can pretty much serve as the property manager or general contractor, but you're not allowed to conduct any sweat equity on that property. So you can basically be the main call center, which in some cases clients do to be so they know what's going on when toilet has a leak or anything like that. But you could also hire a property manager firm. The cost that firm would either paid out of the proceeds that they're collecting from your tenants and your rental income, or ultimately has to be paid directly out of the retirement account. So also that property manager is somewhat offset by the income being generated by the asset. Or you could serve as that property manager yourself. Again, so long as you're outsourced any specific labor or work that needs to be done and you're not doing that by yourself, which again, it's a sweat equity role from the IRS standpoint.

Yeah, that makes sense. What about financing? So let's say obviously if you're in a syndication, you're investing as a passive investor, an lp. You don't have to worry about the financing part. The general partners are going to go out there and do that. But let's say I have say $100,000 in my self directed IRA and I want to go buy a property that. But I don't. Maybe it's a $500,000 property or $400,000 property. Can I get financing? How would that work?

It's actually a very niche aspect of self directed investing. And the answer is yes you can. What you have to do when you're trying to utilize debt to purchase an asset within a retirement account is structure the loan so that it is a non recourse loan. So basically for those of you that are not familiar with non recourse, the only asset that is collateralized in that context is the asset that's being loaned against. So if you wanted to go out and purchase property, Chris said that's valued higher than the actual cash you have in your account, you can do so where your retirement account's buying the property and your retirement account is all borrowing a loan from a non recourse lender. Typically what we see in non recourse lenders is that they're going to require a lot of more on at the initial onset of the purchase because there's a higher liability for them. In most cases we see about a 50% point being put down on the property. So Your example of 100,000 for a $500,000 property may not work with all non recourse lenders. But you could also find one that might be willing to go to those terms. And also it's usually got to be immediately income producing. So you've got to show some sort of proof of income to be generated so that they can make the returns back. Because ultimately if they're lending on the property, they don't want to claim it back. They want to get the cash proceeds that would be due to them from that loan paying out in full. But it is something you can do. It's a topic we've covered on our educational channels before with different guest speakers. And like I said, it's very niche. Not a lot of people even know that exists, that know that self direction exists and then that actually physically want to pursue it. You've really got to be a hard nosed real estate investor to want to go into non recourse lending with an or 401k. And another thing I'd like to add to that effect real quick is there is a difference between an IRA making this type of investment and a solo 401k which we also offer at Advanta. And the difference is that that solo 401k account is not subject to a certain kind of tax called utfi or unrelated debt financed income where an IRA account is subject to it. So although either product is a tax tax sheltering product, IRA product does not have the tax shelter against udfi that the Solo 401K does. And I don't want to get too much more into the nitty gritty of that because some of it's over my head. Again, I walked away from an accounting degree, so.

Well, yeah, and listen, Advantage. Com, you guys have a terrific website, lots of resources up there and I'm going to make sure that everybody knows how to get ahold of you here. Corey, at the end, if they want to go through any of these specifics or have any questions about what type of vehicle, if they want to move forward would be the best thing for them. You know, you talked about, you know, kind of getting things set up and so let's say somebody wants to do this and I wants to set it up. What's the process like? What are the fees like? I'm sure people are wondering like, hey, am I going to get feed to death with something like this? Then you can walk us through those two things, the timeline and the fees, of course.

So the timeline is pretty quick as far as getting an account opened and turned around and invested. We can complete an application within about 15 minutes. You can do so with a DocuSign or a PDF, whatever you prefer. As long as we have the application and the client's photo id, we'll submit that to be open before we can fund your first investment. The IRS seven day right of rescission period. So in context, for us to fund a deal, it's got to be seven days from the day we open the account. The other side of that, which is really out of our hands as well, is getting the account fund. Most people can fund an account like I referenced earlier with a previous employer plan or even by transferring funds from an existing IRA they have at another custodian. And in doing so, the timeline is typically about a week to a week and a half's time, depending on the custodian you have and how quickly they're willing to execute the transfer. And if they are requiring to mail a check versus let's say send a wire, which obviously that creates it timeline gap. On average I see our clients set up an account and be ready to fund into a deal within about 10 to 14 days.

Yeah, that sounds, that sounds right in line with what I've seen the Other.

End of what you mentioned is the fees and the costs for setting up a self direct account. We are a feature, I'm not going to shy away from that. That is how we earn our money and keep our lights on. But we do price ourselves in the market very competitively. So there is rate application fee that's assessed when you open the account and then we allow our clients to choose whether you want to be billed per asset that you hold with us based on the total value of your portfolio, which is billed on a quarterly basis. So if you're going to just have one or two buy and holds like you're investing into a real syndication, it's likely better for you to be on that flat rate fee agreement. But if you're going to have a fluctuating account, maybe you're going to invest in something more volatile like cryptocurrency or something else that you know is going to fluctuate up and down, whether it be annually or even in a shorter timeframe than annually. You can sign up our value based agreement where we look at your total account value in a certain timeframe again at the end of each quarter and we bill you a fourth of whatever that bracket is for that quarter. And then the next quarter, if you're up or down, we bill you consistent with whatever you're in at that point in time to get into the specific numbers. Just because this is recorded, feel free to reach out to me directly. We can go over the fee agreement. I just don't want someone looking at this three years down the line when numbers have completely changed.

That's perfect. That's perfect. Corey, what's the best way for the audience to get a hold of you?

Yeah, the best way to get a hold of me is either via phone or email. I'm all on LinkedIn. C daharsh or Corey Daharsh. C O R E Y D A H A R S H My direct line is 727-223-3046 and my email address is just cdharshadvantaira.com Happy to connect. However, if you're in the Asheville area like Chris and I are, I'd love to meet you for coffee or for lunch. And if you're outside of that area, I travel a decent amount. Like I said, I do a lot of networking around to get over to different local communities to network. So reach out to me and we can set up a meeting or you know, some sort of in person if you are. If not, I'm happy to help over the phone as well.

Yeah, no, I love it.

I love the aspect of the education that you guys provide, which is a huge component of what we do here at Next Level Income. Corey, you do a great job helping to educate people. We have investors that work with you and are very happy as well. And if this is your first time hearing about this today and you're interested in learning more, please reach out to Advanta, reach out to Corey and learn more. Corey, it's been a pleasure talking to you today. Always great to see you and catch up.

Thank you so much Chris. I appreciate you for having me and look to catch up with you soon. Like you said, for some local maybe we'll get a beer or some coffee or something at one of these local shops in the mountains.

Let's make it happen.

Hey Chris, here again. I hope you found this episode valuable. Now I have one more thing to gift you. We have a page for my coaching clients where you can get a free copy of my book as well as much more from previous guests on the show. Just check out nextlevelincome.com SL coaching to get a free copy of my book, audiobook and much more. I'll send you a copy of my book and cover all the shipping costs as a thank you for listening to the podcast. Also, please like share and take just 90 seconds to give us a rating on Apple Podcasts.