Self Directed IRA Real Estate: How To Invest Tax-Free

Hey everybody, this is Toby with Global Integrity Finance. We're here in Houston at the Quest Expo 2019, and we're here with Haley Gantz. So Haley, welcome.

Thank you.

Finally got you behind the camera. So I want to talk to you today about who you are, what you do, and how Quest works with investors utilizing their money to make profits, tax breaks, all those things that Quest does. So Tell us about you, Kaylee.

Awesome. So hello everyone, my name is Kaylee Gant and I'm an IRA specialist at Quest Trust Company. So basically what that means is my role is to help educate investors or pretty much anyone how to use their old 401(k) and IRA funds to invest into real estate and other private assets instead of having all of your retirement funds invested into the stock market or publicly traded securities. At Quest, we basically teach you how to truly diversify your retirement portfolio by either holding rental properties in your IRA or using your IRA to be a private lender or invest in notes or invest passively into apartment complexes and commercial deals.

Whatever they want to do with their money into real estate.

Yes, and it's such a great tool because so many people have this money that's sitting in an old 401(k) or sitting in an IRA that they think they can't touch until they're retired. If they want to use it to invest in real estate, they think they're going to be taxed and penalized when really it's actually like the total opposite. At Quest, we teach you how to move your funds over to Quest. We hold the same types of IRAs you find anywhere else. The biggest difference is we allow you to hold different types of assets. So investors investments that you truly have control over. You go out, you find that investment, purchase it with your IRA. And the biggest benefit is that whenever those profits come back into your IRA, they go back in tax-deferred or tax-free. Yeah, exactly. You could potentially avoid all taxes on a real estate investment by, uh, holding title to it within your IRA. And as an IRA specialist, my role is to basically teach you how that entire process works A to Z and help the process of getting your funds moved over to Quest a smooth and easy process for you.

Nice. Yeah. So I'm a brand new guy. I've I've got some money, I've been working in corporate America for the last 20 years, and I want to now get into this arena of real estate investing. So I just call you and what happens?

Yeah, give us a call. We also host a ton of free classes. We've got a ton of webinars online. I love that you're doing these video series because at Quest, we truly believe that, you know, the more education that we can offer, the more well-rounded your whole investment experience is going to be. So give us a call, talk to an IRA specialist. We can answer all of your questions and walk you through the whole process pretty much A to Z of how does it work, what type of funds can I move over Do I have to move the whole thing? Which you definitely don't. You can just move over what you intend on self-directing.

What percentage of it?

Yeah, and then as far as your investment options, you have a ton of options. With your IRA, you do have a few limitations, like you can't use it to invest directly into your own business or loan yourself money, but our role at Quest is to basically help educate you about the entire process of how it works. And we also host a ton of free weekly classes, both in our offices in Houston, Austin, and Dallas, and online. So if you're not local, you can always watch them online on our Facebook page as well. But we teach these classes to provide a good atmosphere to teach you how to do it and then connect you with other real estate investors that you can ideally partner with and do deals together to create this kind of good atmosphere of, you know, overall wealth building, help each other out to build your retirement accounts. Because not only is it your own IRA that you're saving for retirement, but if you're looking for funding for your deals, I know like a hard money lender is a great way to go through, but ultimately too, you want to be able to have some private money resources and you can use other people's IRAs as private financing sources for your own deal. So maybe if you've got a lot of hard money loans out or something like that, you're looking for some private money sources, IRAs could be a really great source for that as well.

So I— so my company has my 401(k). Are they going to allow me to move that into a Quest IRA? So is there restrictions? How does that work?

Yeah, if you're still working there, more than likely you have to leave that 401(k) there while you're still working at that company. But if you have a 401(k) from a previous employer, you are definitely eligible to roll that over. Into an IRA?

Yeah.

Okay. So the way you would find out for sure is ask your plan provider if they allow for an in-service rollover, which is basically a fancy way of saying, I still work here. Am I eligible to roll out any of these funds to an IRA?

Is there a penalty in that?

You know, most times no. I mean, it just depends on how they have that plan set up. If you're still working there, you probably have to leave the funds there. But once you leave that job, quit your job, call me. Sometimes that joke either goes over really well or not well at all. It's a little painful.

Haley told me to quit my job so I can pull my money Yeah.

Yes. But once you leave that job and we talk to so many people that have maybe left a job within the last 5 or 10 years, but they probably just left that 401(k) there because they didn't know. Yeah, they didn't really know what else, what other options they had to do with it that would really be much better than leaving it there. But once you kind of open your eyes to this, all these whole other realms of opportunity with the different types of investments you can hold within an IRA, the opportunities, opportunities are almost endless. And so many ways you can like truly build a lot of wealth in your retirement account. My parents, as you know, are real estate investors. They've also been Crest clients since 2004. So as I get really passionate about IRAs, I firmly believe that you cannot grow an IRA through traditional investments the way you can with real estate and with self-directing. And so we're here to be a good resource to you guys as you're learning how to do it. You know, self-directed, it's really not that different than doing your normal real estate investments. It's just different the way that it's titled. It's titled in the name of your IRA instead of the name of your business. All the paperwork goes through Quest, all the funding goes through us, but you as the account holder ultimately still make all of the investment decisions for your IRA. So there's so many opportunities with it.

So now if I take my Quest IRA and I go buy a piece of real estate, my LLC doesn't own that, Quest owns that, right? Quest is the entity that owns that property, right?

Yes, Quest for the benefit of your name and your IRA account number. So basically request for the benefit of your IRA. I always tell people your LLC and your IRA can do similar types of investments, but they'll always kind of run parallel to each other. They won't directly be interconnected. Yeah, that would be considered a conflict of interest in the eyes of the IRS. So you definitely want to make sure you stay away from that. Yeah, but you know, if your LLC is doing rental properties or flips or things like that, you can do those same types of investments in your IRA. It'll just be titled in your IRA instead of your LLC.

Okay, so what else do I need to know about, um, I mean, are there any restrictions other than I can't use any of that money personally? It all has to come out and go back in the IRA, right?

And that's pretty much the, the simple way to put it, yes. Really important when you're using your IRA, there are certain people that are considered disqualified people.

What does that mean?

That basically means like I can't benefit personally from my own IRA investment.

So I —today. Correct. 10 years from now.

Exactly. So your benefit from that investment is when you ultimately take out your distributions later out in time.

And then pay my capital gains?

Yeah, basically you just pay income taxes as you take your distributions out later. Or if you do your investments in a Roth IRA, as long as you wait until you're 59 and a half and you've had a Roth IRA open for at least 5 tax years, you will never pay taxes on the distributions from a Roth IRA. No income tax, No capital gains tax. Yeah.

So what's the difference between a Roth and just a self-directed?

Um, so, and that's a great question. We honestly get that question all the time.

I didn't know there was a variation. Yeah, the tax liability is huge. That's right. Yeah, I'm always getting educated.

Awesome. So self-directed really is honestly just a marketing term. So the IRAs that we hold at Quest legally will still be a traditional IRA or a Roth IRA or maybe a SEP IRA if you're self-employed. But all of our accounts, since it's being called AtQuest, will be self-directed. Since we don't hold stocks, bonds, mutual funds, we only hold private assets such as real estate, promissory notes, or private entity investments. All of our accounts will be self-directed into whatever the account holder chooses to invest in.

So, so you said that if I open up a Roth, how is that different than just—

yeah, so really The biggest difference between a Roth and a traditional IRA, yes, is ultimately just when the money is taxed. So with a traditional IRA, which is what most 401(k)s will roll into, most of America's retirement money is growing in some sort of tax-deferred account, meaning you get a tax deduction now when you put the money in, none of it's going to be taxed while it's growing, but whenever you go to take out your distributions later at retirement, that's when you pay the taxes on the money from a traditional IRA or like your 401(k). But the Roth IRA is the exact opposite. The Roth IRA is your after-tax dollars that initially go into the Roth. So if you make a contribution, you don't get a tax deduction. Or you could actually— not to get too complicated, um, but you can actually take funds from a traditional IRA and move them into a Roth IRA, going from a pre-tax account to an after-tax account. You pay the taxes going into the Roth, but once you pay the taxes on that smaller amount up front Everything that grows from there is considered to have already been taxed. So if you take $10,000 in a Roth IRA and you grow it to $1 million by the time you're retired, as long as you leave it in there until you're 59 and a half, you'll never pay taxes on the money that grows in there.

But the issue is, is that I have to have, uh, after-tax going into it. It is, yeah. So you take a tax hit no matter when I start that account, that money has to be taxed.

Exactly, yeah.

I've already paid it once. So I don't have to pay it again.

Exactly. Correct. Yeah.

And it has to stay there until I'm 59 and a half. For a simple IRA or any other IRAs, I can pull those out when I want.

Well, so still 59 and a half. And there's a few different technicalities there. There are some different like exemptions. And the Roth IRA does have a few special rules where like anything that you've personally made a contribution into a Roth IRA. So say you made a contribution from your own like checking or savings account, you can actually take out contributions from a Roth IRA at any time without any taxes or any penalties because those are after-tax dollars that have been in there. The growth from your investments, that's what needs to stay in there until you're 59 and a half. But pretty much any IRA, they want you to leave that money in there until you're 59 and a half in order to not be penalized for it. Once you turn 59 and a half, technically retirement age, right? I know a lot of people aren't retiring at 59 and a half, which is why this is such a big issue that we love talking about. Once you turn 59 and a half, you no longer have that 10% penalty.

Gotcha, gotcha. Yeah. So what else does a new person need to know about Quest, um, this expo and everything? Tell me, you know, so let's talk about you guys.

Yeah, so right now we are here. Oh, that's exciting! I'm actually, I'm actually headed back to Houston to our corporate office next week, which I'm sorry, but I'm super excited about it. Um, I'll still be a great point of contact for you guys and anyone else out there. I've been in Dallas for about the last 2 and a half years, but in that time Quest as a company has grown almost tremendously. When I started at Quest about 3 years ago, we had about 65 employees total in the entire company. Today we have about 120. In 3 years, we've almost doubled in size. So I mean, we've always got great stuff going on. Um, I'm actually going to be a part of our new hire training cycle the next month, starting down in Houston. So our 10 new hires that are starting in September, um, I'm going to actually help be able to train them. So we've got a ton of stuff going on right now. We are here at our second annual Quest Expo, which is— what a turnout! Yes, which is the biggest biggest event we've ever hosted at Quest. At Quest, between our weekly classes, our monthly mixers, and other events that we attend, we do about 600 events a year. But this one is by far our biggest event that we've ever hosted. We've sold over 650 tickets to this event. We've got a room of about 600 people right now. Yes, over there. And we're on day 1. We've got 2 more days to go after this, and we're just super excited. We've got people here from all over the country, um, really kind of taking our education and our base to the next level. By doing these larger-scale national events. If you guys aren't local to our Texas offices, we've got offices in Houston, Austin, and Dallas. Dallas is our largest remote office. I am really sad to leave Dallas. I can't believe you're leaving. But Houston is our corporate office. Hey, I may be back eventually. I may get bored in a year or two and want to come back. You never know. But we're super excited. I can't wait to see where the company is going to be like 2 or 3 years from now. I mean, it's— there's no other self-directed IRA company out there that does as much education as we do. There's no one else that has the offices and the classrooms that we have. And our IRA specialists, myself and about 15 other IRA specialists on our staff, we truly care about you understanding how these principles work and how we can help you get there. So we can't give you tax or investment advice, but we're here to kind of help educate you and point you in the right direction. And that's our ultimate goal. The client's, you know, like, satisfaction and customer service at the end of the day is always our number one goals. So that, as a self-directed IRA custodian, really sets us apart. And, you know, we're always pushing that. So we're excited.

So let me ask the million-dollar question: with the State of the Union, our government president, all the changes in the parties, how is this, or could this affect tax laws and all that? With—

so, and, and I'm not an expert on this, but there is actually some proposed legislation right now. I mean, if you go out there and you talk to people Saving money for retirement is a big issue in America. And, you know, I know everyone thinks we're on the, you know, the edge of the next downturn, things like that. Saving for your retirement and having the knowledge to invest into these tangible assets with your IRA, if you think it's important now, it's going to be even more important 5 or 10 years from now as millennials and as people that are getting into their 40s, 50s, and 60s aren't saving enough for retirement Something's got to give. I mean, there's some proposed legislation right now that might change some laws as far as, you know, your contribution limits or how old— or your like beginning date for your required minimum distributions, things like that, to help Americans save a little bit more for retirement. But I mean, you know, kind of as I say, you can't grow your IRA with stocks, bonds, and mutual funds the way you can with real estate.

If you really want to get into saving, if you're behind the 8 in saving for your retirement, you really need to get into real estate.

Yes, bottom line. And especially too, and so many people, we hear this all the time, right? Come to a class first and then, and then maybe buy the lottery ticket. Yeah, but it's so true. And so we hear it all the time. So many people are like, well, I only have $10,000 in an IRA. I don't have an IRA. I only have $30,000. That's not enough to flip a property. And you know, you might be right. $10,000 is not enough to buy, hold, fix, and flip a property. But that's not your only option. We talk about real estate in IRA, but when we say that, there are so many investment options. I've had clients take a $5,000 or $10,000 IRA, buy a property for that amount, owner finance it out within a month, and over the course of the next 10 to 15 years, that IRA from a $5,000 initial investment is going to get back $46,000 from owner financing it out from one month of that client's time.

And this is what I think most most people don't recognize and don't realize, it doesn't matter how much you have or don't have, you've got to get in the game.

Yes, say it louder for the people in the back.

Like, yes, it doesn't matter what you have or what you don't have or how much you have or don't have, you have to get in the game.

It's true.

Yeah, and like you said earlier, you can partner up with other people in IRA with Quest. Hey, Joe over here has 30, you have 20, you guys can partner up and do a deal together. I mean, you're bringing clients together to grow their investments.

Exactly. And I always tell people about that too. Like, this is not just your retirement that you're thinking about. Everyone out there needs to retire. A lot of people out there have money sitting in an IRA or sitting in an old 401(k) that they think they can't touch until they're retired without being penalized. If you go out there and you talk to— maybe you have an IRA, your spouse has an IRA, your brother has an IRA, maybe your kids are now at the working age where they could start their own Roth IRA. You can partner all of these different types of accounts together. We actually have 7 different types of accounts at Quest that can be self-directed, um, and you as like individuals, between you and your immediate family, can qualify for multiple different types of accounts, make your contributions, partner them together. Yeah, partner them together, and then you're growing multiple buckets of money. Awesome. Yeah, it's, it's totally awesome.

It's, I, I think like with everything else, it's just a tremendous lack of education and knowledge. Yeah. And we can't get the message out there quick enough.

Yes, no, it's so true. I mean, I love doing stuff like this. I love doing like videos, speaking, webinars, and so many people that we talk to, they're like, wow, like, I'm kicking myself because I didn't know who you guys were years ago. Didn't know what my options are.

And that's what we see in our world, um, that people just don't know what's available to them, the resources and the tools. Um, and this is why we're doing this. Call Quest. So let's talk about how do they get a hold of you, Haley, or, or a hold of So, so give us a call, 855-FUN-IRAs, or you can go to our website, questtrustcompany.com.

If you go to our website, you can request a free appointment with one of our IRA specialists. Typically, we will call you in about 24 hours. Of course, we are at the Quest Expo today, so, you know, we're a little out of pocket just today. But by the time you guys are watching us, watching this, we will all be back in the office. Go to our website, questtrustcompany.com. You can see all of our classes, all of our webinars. You can request a free appointment with an IRA specialist. It is always free to talk to us. If you call us 10 times a week and you have the same questions over and over, it doesn't matter. Our role is to help you understand this and understand how it works so we can ultimately help you save more for retirement. Ideally, you would use a Quest account to do it, but we're here to be good resources for you. For sure. A couple more questions.

Um, number one, you are a custodial— yes. Company, meaning you are monitored, governed, and audited by the government, right? Yes. So my money's protected when it goes to you. It can't be used for a Madoff scheme or a Ponzi scheme or anything like that, right? You know, the new jet, all that.

Yeah, that's not my money, correct? Yeah. So Quest is— we're a self-directed IRA custodian. We are a licensed trust company within the state of Texas. So we are regulated by the Texas Banking Commission. So basically, whenever you move your funds over to Quest, when the cash is sitting at Quest, it is FDIC insured, just like it would be at any other IRA custodian. Now, granted, once you send your funds out for an investment, every investment comes with its own risk, right? Due diligence is so, so important. We literally cannot stress enough how important due diligence is at Quest. We cannot advise you on how to structure your investment, who to work with. What type of investment to do. It is truly 100% self-directed. We're here to educate you about what you can and can't do. Maybe some dos and don'ts. Yeah, things like that. But you want to make sure you always do your own due diligence on who you're doing investments with. You know, that way, once you send your funds out, you want to make sure things are structured properly where your investment is protected. And, you know, if something haywire happens, you know, things are structured where you can ultimately get your investment back.

So, yeah. And then the second Question, you guys changed it from Quest to Quest Trust about a year ago.

Yes. So previously we were Quest IRA, we were a third-party administrator. So technically we were regulated by a custodial bank out of Kansas. Somebody above you? Yeah. Okay. And essentially we have, as I kind of mentioned in the beginning, we've become so large over the past couple of years, um, essentially the Texas Banking Commission wanted to be able to regulate us within this, within the state of Texas as our own custodian. So we worked for about a year to get our trust charter. It officially went through last November. Actually, the Quest Expo last year was when we officially announced that we were becoming Quest Trust Company. So if you guys see Quest IRA versus Quest Trust, Quest IRA I think rolls off the tongue a little bit easier. So you'll still hear a lot of people call us— yeah, so many people still call us Quest IRA. We were Quest IRA for like over 10 years, but— and the logo changed, but we didn't sell out. We're The same homegrown Texas company, same owners, Quincy and Nathan Long, two really great guys, our founder and our president. None of this would be possible without Quincy and Nathan, so, you know, we're very happy to have them overseeing our company. They do a really great job of that. Great.

One more time, how do they get a hold of you?

Give us a call, 855-FUN-IRAs. That will connect you to our corporate Houston office where we can then connect you with one of our IRA specialists. We have IRA specialists in Houston, Austin, and Dallas, but we work with clients all over the country. You can do investments in the US, outside of the US. You don't have to be in Texas to use a Quest account. But if you give us a call at 855-FUN-IRAs or go to our website questtrustcompany.com, you can request a free appointment with one of our IRA specialists, or go to our Contact Us tab and you can see all of our direct contact information there as well.

Perfect, perfect. Where is the industry moving?

And hopefully towards more self-directed IRAs. I don't know. Um, you know, the industry— we hear always feedback from everybody, from Shinola, from all these. Yeah. And everyone's always, you know, afraid of the next downturn. I, I want to wait until the market's not so hot to get in. No, guys, get in now. There's always opportunities out there. And as the market shifts, you know, as one opportunity maybe isn't as hot as it used to be, another one just came up. There's always another book to go. Was always another bucket. And I would say, just if you're looking to get involved, surround yourself with other like-minded individuals that are doing this. Obviously, you guys sadly probably missed out on the Quest Expo. Hopefully you were here, but, you know, come to a big event, push yourself out of your comfort zone, come to one of these large events, maybe outside of your hometown. Um, the Quest Expo will be back next year, August 21st through the 23rd. Don't know where it's going to be yet. Might be Houston, might be Dallas, might be Austin. Nice. We'll have to stay tuned for that one, but But get yourself out of your comfort zone. Go find other people that are doing this. Don't feel like you have to go out there and pay a lot of money for education. There's a ton of great resources for you guys that are here to, you know, offer this, you know, idea of abundance. We're always here to help give you as much education as we can. And that's just who you've got to surround yourself with. There's always opportunities out there.

Perfect. Perfect. Ellie, thank you so much.

Thank you so much, Toby.

Yeah, awesome. Enjoy. Thank you, guys.