#20: Real Estate Investing 101 - How to use a self-directed IRA to invest in real estate (w/ Derreck Long of Quest Trust Company)

So if you don't know who Peter Thiel is, he was the original guy who started and founded PayPal. PayPal, yeah, he started that with a Roth IRA. And all of that money that he made from PayPal was 100% tax free. The IRS has zero claim to it. Billions. I want to say it's $5 billion by the time he's over with 100% tax free. And here's the even bigger kicker. It's not tax free just for him. It's tax free even for his heirs, the people that inherit the account. And the Roth IRA avoids the death difference.

On today's episode we discuss how to use a self directed IRA to invest in real estate with our special guest, Derek Long. Just reading that. That topic sounds so complicated and confusing and it can be if you just quick ancillary Google search. But over these 30 minutes with our with Derek, he simplified it so well. It was incredibly clear how to use a self directed ira. What the benefits are. I'm going to re watch this as soon as we're done editing.

Jake, I learned so much and if you try to learn on the Internet and get information on self directed IRAs, your head's going to spin.

Yeah, Ed.

Derek on this episode broke it down in basic terms and gave us the steps and roadmap for anybody who wants to use their IRA to invest in real estate.

Yep.

I mean most of those online topics videos are written by tax experts and it can be a little dry, it could be a little mechanical. Derek man brought his personality, he brought his knowledge and he really spoke about it as simply as possible and it was so clear. We know a lot about self directed IRAs already. To begin with, we both walked away saying, wow, I didn't know that this thing could do that. And the level of benefits that can come from a self directed ira. So this is going to be an episode that people are really going to find interesting and super helpful. Especially if they think, oh, I don't have any cash on the sideline, I need to wait to invest in real estate. No you don't. So stay tuned for this episode because it will be incredibly impactful for you. But again, stay tuned. We're going to discuss how to use a self directed IRA to invest in real estate with our special guest, Derek Long. This episode is brought to you by Skyline Point Capital. If you're anything like me, you're always considering where to invest your money. Stocks, bonds, crypto and rental home. The list is literally endless. As we've all seen over the past year, the stock market is unstable, the housing market is just weird, and inflation is on the rise. In times like these, the clear place to invest my money is in multifamily real estate, AKA apartment complexes. Here's why. Returns on real estate investments have little to no correlation with the stock market. There's lower volatility, stable income streams, and the tax benefits are insane. And let's not forget that the apartments will typically appreciate in value over time, which means you can walk away with a pretty nice return when the complex is sold in three to five years. Best of all, multifamily investing is passive, so you get all the benefits without the hassle and headache of your typical rental home investment. Getting started has never been easier. Head to skylinepointcapital.com to learn how you can start investing today. Welcome back to Heading West. On today's episode, we're going to talk about how to use a self directed IRA to invest in real estate. Now you might be wondering why we tackle such a niche sounding topic like this, but I'll tell you exactly why. There's a really good reason. Self directed IRAs, or SDRAs as they're commonly called, are lesser known avenues for funding a real estate investment deal. Most people think like I used to think in the past, that I can't invest in real estate because I don't have cash just sitting on the sideline. I don't have fifty thousand, a hundred thousand buried in my backyard to invest in real estate. So I can't invest in real estate. And that is not true whatsoever. So with that lead up, I'd like to welcome our special guest, Derek Long. Derek is a senior IRA specialist from Quest Trust Company and he's going to help us understand what opportunities exist in using SDRAs to invest in real estate. So with that, welcome to the show.

Derek, Jake, thanks for having me. Steve, thanks for having me. I'm super excited to be on, so I appreciate it.

I love it. And Derek just told us this is his third engagement today. So he's warmed up, he's ready for our questions. And so I'll kick us off with the first one in. Just can you explain to us what an SDA IRA is in general?

Yeah, they're fake, they're made up, they don't exist.

That's a great start.

So it's really funny I say that. I always tell people, a self directed ira, they do not exist. Now what it comes down to though is the custodian or banking institution that actually holds that retirement account. So if I set up a IRA, a Roth IRA, a 401k, something like that at a Fidelity. But Dellity will only let me invest in stocks, bonds, CDs, mutual funds, because that's what they're experts in. If you set up one of a company like Quest Trust Company, we will only let you invest in real estate. There's not one that's better than the other. It's just different. If I want to buy Apple stock, I go here. If I want to buy real estate, I go there. So on the real estate side of things, we call it self directed because notice if I go to Fidelity, they can invest the money right away. You can buy stocks, you click a button. But when you come to the real estate side, I don't have a property for you, I don't have a multifamily, I don't have a note, I don't have something. You need to go find it. So that's the self directed purpose. If we actually read the IRS publications and revenue codes of it, you'll never see that term. IRS and Congress do not recognize the term self direct. They just call it an Iraq. So I always say, yeah, they're fake. They're made up, right? Because that's what they are. You know, it's just marketing. That's all it is. It's a cool way to market stuff.

That's a great lead in. So did I hear you correctly that if I invest, if I create a SDR IRA with Quest, it is specifically for real estate, but if I go to Fidelity or somebody else, I can use it for real estate, but I can use it for other things as well? Is that, is that a delineation?

So I break it down to public and private companies. Public companies are what you're really familiar with. Public companies are the Fidelities and Charles Schwab's and Vanguards and Merrill Lynch's or Wells Fargo, wherever, right? They only let you invest in public assets. Stocks, bonds, CDs, mutual funds, quest, we're private. Private means we're gonna specialize in a private asset. Think of me like Chick Fil A. If you go to Chick Fil A, you're gonna get chicken, you know? So when you come over here to Quest, we're only going to let you do real estate. There's some companies out there, they will only let you do cryptocurrency. Some companies will only let you do gold and silver. Your retirement account can invest into anything. Literally. The IRS is like, you can't invest in life insurance policies and collectibles collectibles mainly being alcohol. And I always joke, I say, man, if you're using your retirement account to try to buy alcohol, the wrong podcast you're listening to. So like besides that, man, your retirement account can really do it. We've seen people invest in video game companies, soy sauce bottles, I mean real estate, yes. But like small companies, and you name it, we've seen it happen.

Yeah.

Hey Derek, this is a typical thing that we hear from our investors. They have their IRA with their company or some other place and they're invested in stocks and bonds. Can you lead us through how someone takes their existing IRA account? Let's say they, they're using Quest. Do they, do they have to move all the funds? Can they move part of the funds to a self directed ira? Can you elaborate on that?

Yeah, well, so first off, we were going to separate the two types of retirement accounts. We have an employer, one that's tied to a company you work for. Right. And when I say work for, I mean currently working for, not an old employer. Right. But when you currently work for. And then you have everything else. All right, so the one I currently work for, most likely we cannot move that one until we're quit, fired, lost our job or you're old, old man. Typically it's going to be probably in your 70s. You know, every company can put their own age in there, but like if it's for a company you currently work for, you can't move that. So just ignore it for now. But all of those other ones, those IRAs, Roth IRAs, that old 401k, maybe an old pension plan or a 403b or whatever it is that you have, if you're listening to this, we can take whatever that plan is and we move it to the self directed side of the ira. Now what I do is everyone's at a different point in their life. So let's just say you out of a 401k, I say, great, send me a statement. We're going to look at it and say, hey, that statement is all pre taxed. So we're going to set you up a pre taxed ira. This way the funds move in there, no taxes, no penalties. If you say it's post tax, great, we're going to set you up a Roth ira. That way when we move it, there's no taxes, no penalties. So first off, like we only move over usually what you need for an investment, a B, you're moving over the same tax style account. And the reason we do this is it's not even reported typically to the irs. It's just a lateral move. All you did was change the bank. And I like to think that bank A lets me invest here, bank B lets me invest there. Which one's better or worse? Neither. So it makes it pretty simple from that standpoint of.

So if you have an IRA like for example at Schwab, and let's just say you got a couple hundred thousand in there and you want to invest 50k in a syndication, you would you, you could just move 50k over into the self directed IRA and invest in that syndication. Correct.

Not only could you, but you should. If someone's telling you to move over the full balance, then they probably have some sort of alternative motive. Right. Most of the time a self directed company, like they're not making money off of your investments, they're making money by charging you a transaction fee. And they're very, all the companies are open about it. Like they just give you, it doesn't matter which one you go with. We're going to charge you X amount of money to do this investment. You know. Well, if that's the case, then they don't care if you're investing $1 or a million dollars. So they only, you only have to move over what you need, maybe a couple extra hundred bucks to cover some fees, but that's it, you know, so you don't need to move over that full balance. In your example from Charles Schwab, we're only going to move over the 50,000 because that's what we wanted to self direct.

Let's say I have question, let's say I have 100,000 in an IRA that I, you know, I've since rolled over from a previous job and I have access to it now, but I also have 100,000 in cash buried in my backyard. Is there an advantage to using one or the other or is it just, you know, now I have more opportunities to leverage my cash so I can do cash, I can do my self directed ira.

You definitely have just more opportunities. There isn't necessarily one that's better than the other. They're just different. And I tell people that the IRS puts all of us into two categories, is either a taxable category or a non taxable category. You are the taxable category. So when you work your job, you make money, you have to pay your taxes. This holds true if you start an LLC or a business or whatever you want to call it. So if you do investments with that a hundred grand you had buried in your backyard, all the money you make off that a hundred thousand dollars is a hundred percent taxable. Now that's not bad because the IRS is. Look, the reason we're taxing you is we're going to let you spend that money today for personal use. They don't care what you do with it. Switch gears to a non taxable entity. And if we actually read what the IRS calls your IRA, your IRA or 401k, they call it a tax exempt trust. That is actually the legal definition under IRS Revenue Code 408 Little A, not big A the argument. Okay, but so you now have this tax exempt entity. Any investments we do with 100 grand in the IRA will avoid all of the taxes today. That sounds awesome. I could do the same fix and flip here or the same fix and flip there. Both of them. One, I'm taxed when I'm not. But the reason the IRA is not taxed is the. You're telling the IRS you will not spend that money until you're older. Right. For retirement. When you retire. So when you ask that question, you gotta think, really I think what is the investment and what is the exit. Exit strategy, I say like fix and flips, man. If we're doing fix and flips, we want that money today. We're looking to live off that money. That's going to keep our lights on. Well, what about that multifamily deal you just mentioned a minute ago? Right. If we invest in that syndication, a lot of us don't pay out for five or six years. Yeah, well, I'm not living off that money. Let's use the IRA for that. That's better because that's a long term.

Yeah, that's a good, I think it's a good distinction because it could, you could easily fall into the trap of saying, oh wow, I sdra, I have now I have access to this cash that was previously t up and until I'm 65 or you know, however old I am now, I can take the benefit today. And that's sort of true. You can, you can use it to invest, but it's still, it's still in a retirement fund. Right? Like it's still, you're still keeping in mind that this is for your long term wealth and not for cash today. That you can then when you sell your real estate property, you don't just get that cash after you sold it.

That's correct. So the. I always try to explain it that when I'm using the ira, I don't care where we are. The IRS Says the IRA is buying an asset. So that asset stock, great. If you look at your IRA or your 401k right now, when the stock goes up in value, did you pay any taxes on that?

No.

When it went down in value, did you take any tax deductions? No. Right. It's just, it fluctuates. So the IRA's asset in that example is the stock. On the case of the word talking about, well, the IRA's asset is the property. So when you sell the property, it goes up in value. Great. You made a bunch of money, but and you're not being taxed today, it's still staying within that retirement account. And sometimes that's, that's hard for people to see because they're thinking they're taking a distribution, they're thinking they're pulling out the money or something. It's like, no, no, no, no. Who's ever told you that? They're, they just didn't understand how it worked.

And it seems analogous to what you say about stocks. If you get a distribution, that's equivalent to getting a dividend in a stock on a traditional ira, but it stays in the account. And I'm assuming and understand that any depreciation losses, those all stay in the self directed ira, in the IRA for that real estate, it that the IRA takes the loss or the gain.

So on that note, why as an individual, if I took 100 grand I had in my backyard and I bought a rental property, right. And I fix it up, I put some tenants in there, I claim, and we say we rent it out for a thousand bucks a month. So if I'm running out $1,000 a month, make $12,000 a year, I have to pay taxes on $12,000. So what do I do? I take deductions, I claim depreciation, I claim HOA fees, I claim any expenses with the house because I don't want to pay all my taxes. Well, remember in the IRA The IRA made $12,000. Is any of that $12,000 taxable? No. So there is no need to claim depreciation. There's no need to claim, to claim any of those deductions you just mentioned. So I wouldn't say you lose it. It just doesn't mean anything. It's a mute point.

So that to some people that would be a con. If for example, if they, they wanted to offset some existing passive income.

Absolutely. So I think this is where we once again have to get back to looking at what is the investment. As a matter of fact, we have Some clients that will invest in opportunity zones. Now, if you're not familiar with what an opportunity zone is, it's where the government, if you buy and make this property in this specific zone of rental, right, they'll give you double depreciation or they'll give you extra tax deductions, you know, as an incentive. Don't do that in your ira. You know, that doesn't make sense. That's not why you did that investment. Go ahead. What was that, Jay?

It's essentially wasted, right?

Exactly. At the same time, if I think of that multifamily deal where you're claiming cost segregation as you're going along, right? You took all these deductions on the front end. When you get your big payout on the back end, you still owe all those taxes, you know, so in the ira, I can just avoid all of that. I'm not claiming any deductions, I'm not paying any taxes. It doesn't mean anything. I don't have to file anything. Like, man, that's a big pro. Now, where does the shift really start to happen is when we're old, right? Imagine me being Steve. You're laughing.

Be careful what you say.

Old.

So I'm there.

So imagine right now you're 65 years old.

That's really.

They start benefiting from the IRA as early as 59. But we're just going to throw some ages out there. We're going to say that you're 65 years old. You, as an individual have option one, you do a fix and flip. You make $50,000, and you do it outside of an IRA, that $50,000 is fully taxable. You take your deductions and all that stuff because you thought you're gonna get a bunch of deductions from this one. Option two, you do the same fix and flip. In the ira, we know there's no taxation. And when can you spend the money? Right away. Oh, that's a big advantage. Now, you're not worried about taking your tax deductions. You're not worried about things like cost segregation. You're not worried about those things. Because as we get older, what's really unique is we can use the ira, we can do our same investments, we can avoid the taxation, and we can still spend it immediately. This is actually how the real wealthy get wealthy. Wealthy.

Okay, can you repeat that again? So above 65?

Yeah, it's really above 59. I was just throwing out a random.

Age, but yeah, let's. Okay, above. Above 59. And let me repeat I think I heard you correctly that if you're in that age category, because that's really old.

He's not there yet.

That's not true.

I was trying to.

So thanks, Jake. I need all the help I can get. So if. If I put money into an ira, self directed ira, that. That doesn't exist. And from that side, and I buy real estate, get returned, flip it, and et cetera, I'm taxed or not taxed on that.

Today, you're not taxed.

Hmm.

I see Steve's wheels turning. So for all of you out there listening, literally, he's going, holy crap.

Right?

Why didn't anyone tell me this? Why hasn't this always been a thing? Because.

Why was this an earlier episode?

Right. So this is now where, though, Whoa. There has to be a catch, right? There has to be something.

Okay, my. Hold on, let me click my seatbelt. It just clicked. I'm ready for the catch.

Grab your notepad.

I know we're talking about being old, too. Like, I just started getting the air. The hair in the ears. My wife's been playing.

Oh, my gosh.

Oh, it's pretty.

Where'd that come from?

I just.

It just showed up one day. Hey, hey, we're doing life.

We're heading west.

My bad, my bad. All right, so ultimately, what is the catch? Right? Where is the catch coming from in these things? It comes to the type of retirement account that you're utilizing. So if I have a tax deferred retirement account, let's call it a traditional ira. As an example, the reason the IRS let you avoid all your taxes today, no capital gains, no income tax, nothing like that, when you do an investment, they're letting you defer it, and they let you defer it all the way as of right now, to age 73. That's pretty cool, right? So I can do as many investments as I want. I can avoid all the taxes on these earnings. Da, da, da, da. And I'm deferring it. But at 73, what happens? IRS comes in and say, hey, you're getting old. Yeah, you're going to kick the bucket soon. And here's what's really sad, is they give you a life expectancy chart. If you didn't know what, the IRS gives you a chart of when you're going to die. That is so scary to think about, but it's the truth. So when they give you this chart, what they do is they make you take out that money that you saved up to the age of 73, and now they have you disperse it and pay your taxes at your income level. Interesting. Now notice I call this a tax deferred account because we have another option. And the other option is that Roth ira. And you hear a lot of people are very pro Roth and this includes Congress. We. Look, the Congress just passed a bunch of bills that are very, very pro Roth, trying to help save for the next generation. In that same example, the Roth IRA is all post tax money. So it really, truly does grow a hundred percent tax free. So if you don't know who Peter Thiel is, he was the original guy who started and founded PayPal.

PayPal. Yeah.

He started out with a Roth IRA and all of that money that he made from PayPal was a hundred percent tax free. The IRS has zero claim to it. Billions. I want to say it's $5 billion by the time he's over with it. A hundred percent tax free. And here's the even bigger kicker. It's not tax free just for him. It's tax free even for his heirs, the people that inherit the account. And the Roth IRA avoids the death tax.

That's post. That's just to make sure I'm understanding correctly, that's post tax or excuse me, that's.

You said tax free. Right.

So he'll.

I say, because I'm always very specific with my verbiage, so I always call it post tax because it's not really tax free until we're over the age of 59.

Yeah, yeah.

And we had it for five tax years. So if you're, if you're listening to this for the first time and you're 60 years old and you set up a Roth today, you've got to wait five more years before it's really tax free. You know, so ultimately if, if I'm 35. Right. Well, I can't touch storm 59 anyways, so I always say post tax because it's only tax free once you meet two requirements. Yeah.

Explain a little more about the capital gains impact on this. And the reason I ask is I just had a conversation yesterday with hysterically, my dentist and. Cause she owns a number of dental practices and physicians tend to be people who are really attracted to passive real estate investments because they have all this, this income and they, they want to offset it with your depreciation through real estate. And her big question and her big. It seemed like her big hang up was, yeah, but when I sell it, I've got this big capital gain tax that I've got to pay. And yeah, you can Defer it with 1031 exchanges. But that's. That can get a little tricky because the timing. Can you kind of. Can you explain a little bit more about how that works in a self directed IRA?

It doesn't exist. IRAs are exempt from it. Everything you just mentioned the IRA could bribe. I like to think of it as a long term 1031 exchange. If I bought a rental house today, right. I sold it a couple years from now, I get those big old payout. There is no capital gains tax on it. Zero. That means I can take this exact amount that I just sold it for and reinvest it. Now when we think of a 1031 exchange, right. That's kind of what we're doing. Right. We sold the same house but like, hey, I don't want to pay taxes on all this money I just made, so I quickly buy another property. Now I love this method, but it's very difficult and I think it's a lot more difficult than people make it out to be because you already have to have another investment lined up. So what ends up happening more often than not is someone makes a bad decision because they didn't want to pay taxes and they're trying to hurry up and purchase something that maybe they weren't.

Yeah.

Do enough due diligence on. Maybe they just weren't fully educated in these areas. Now that's not always the case. But with the ira, let's pretend for a moment. Same example I had. The house grew in value, I sold it. I got all this money now sitting here and I choose to do nothing. No big deal. Remember, the IRA is labeled as a tax exempt entity. So it's huge in these examples. This is why we like to see people use their IRA for this.

So. So with the 1031 exchange, we talked about that there. It's a little tricky because you have to have a. Get the timing right in order to roll from a sale proceeds from a sale to a. To invest in a new one in the.

Yeah. And what that like it kind of depends on a. The title company, right. That you're utilizing. It could also depend on the asset you're moving it into. I've seen people like sell houses and go to like an oil and gas investment or another multifamily deal or something. So there's of factors in play. Like I'm seeing you had as low as two weeks. I've seen you had as high as like 60 days to move the money. But in these examples you gotta realize that we could be talking about Hundreds of thousands of dollars. If you're telling me I have 30 days as an example to quickly make a decision on what to do with it. Come on, man.

Or even more when the snow, it's a snowball. You know, if you keep rolling into the next one, it could be millions.

It could be so.

So if I'm hearing you correctly, in a self directed IRA, you don't have that timeframe of. I've got 45 days to. To roll from one to the next. I sell. I can take my time on what my next investment is. Granted, if the longer time you take that cash just sitting there idly. Cause it's not invested in anything. Right. So it's not earning any, any income.

That's correct. So anytime you have just cash sitting at a self directed custodian, it's sitting like a rock. It's not invested, it's not doing anything. This is okay because remember, all we have to do is take that same cash. We can move it back to Charles Schwab or Fidelity or Vanguard. Right. It's a very easy move to move it back there. Let them put it in those mutual funds for you. Let them put it in stocks, remember? Right. So it's okay to do this movement. All you did was change the bank. It's not even reported to the irs. Does it create any tax forms? Remember, one person lets you invest in stocks and mutual funds. One person lets you invest in real estate. Well, if I don't have a real estate deal, let's put it back to the mutual funds. Let it earn the 1 or 2% a year or whatever it is. Hey, I found another deal. Great. Let's move it back over here. Not a big deal. Very easy moves. Very easy.

That leads me into Derek. Can you walk through the typical step by step? A new person who's got $100,000 wants to invest in a real estate syndication. Never set up a self directed ira. Can you simplify the steps that this person must do? Because here's why. We have people that have invested in our syndications and they want to use their self directed ira and it's way too late. And they people think they can just do that overnight. I know that's not true. So can just simplify it for us?

Sure. So step one, you have to actually set up a self directed IRA and you can choose any custodian that you'd like. So someone that you work well with, a vibe with. You know, obviously I'm biased to quest I work there. Okay. But really can go with Anybody, right? When that custodian sets you up, that self directed ira, that IRA is its own entity, that IRA will have its own name, its own address, its own tax ID number, even its own level of asset protection. So if I'm going to invest in your guys, syndication, you guys give me a full ppm, right? Or a private placement memorandum. It has the operating agreement, the subscription agreement and all that stuff. Well, on there I don't put my name as the investor, I put my IRA's name, I don't put my address, I put my IRA's address, I don't put my social for the K1s, I put my IRA's tax ID number. So as an investor, I'm not doing anything different. Instead of just putting my name, I put the IRA's name. Here's the problem is if you did already set up that ira, you don't have that name, right? So what happens? Oh, I want to use my ira. Well, quickly, you call Quest. Great. It's going to take us 24 hours to create it. Okay, that's fine, that's fine. They don't need the money yet, right? It's coming.

Great.

So we set up the account in 24 hours. But you didn't move the money from Charles Schwab. Charles Schwab's could take two weeks to send us the cash. Well now your closings right around the corner. And, and this holds true. No matter which custodian you go to, the person waited to move the money from whatever that Fidelity is Vanguard, you think they're excited to send another banking institution $100,000? No. So they're not excited to do that. Right. They have no incentive to lose money, so they take their time. Some custodians, it's the big ones, the like Wells Fargo, bank of America, Chase, they're the worst, right? They will only mail a check. I was like, and dude, we've received checks sometimes for several million dollars. And I'm like, you can't wire this. You put a check in the US Postal Service for a million bucks, they.

Take it by horse and carriage as well.

Like bro, oh, it's insane. To me, it really is. But so first off, if you want to use an IRA for any syndication out there or any real estate investment, just set up the account. Remember, you can set them up without any cash already in it. That way you at least have the name and try to give yourself at least two weeks for the money to come over. Everything else is easy, right? It really, really is. I mean, notice if If I want to invest in you guys, right, you guys raise capital. I can invest one of your funds, I can put my name, I can put my LLC's name, I can put my IRA's name. You don't care. It's the same process for me, it's the same process for you. So ultimately you just gotta get the account established with whoever you like to work with.

And what happens now that the person has the account set up and there's an real estate investment they wanna get into, and they transfer their money over and they've got $100,000 in there and they made the investment. What can this person expect for year end? Paperwork? Or what happens between the, the self directed IRA and the investment at year end? Is there more paperwork or less paperwork or what happens?

This actually really depends on the investment. All right, now first off, there isn't any initial tax form, no 1099s, 5498s. And when your syndicator, the people you invest in, give you a K1, the K1 just goes to the IRA. Remember, you don't have to claim any deductions, so you don't have to worry about your personal taxes. So this is really, really nice to know. However, in 2018, the IRS released some new rules for self directed IRAs. And you now have to do what they call a fair market value, or an FMB for short. Hear that term a lot in this world. What this means is the IRS wants to know what is the value of your investment. Now, the reason you've never heard of this if you've only been at Charles Schwab or something is, well, what's the value of your Apple stock? Oh, it's float and it's right there. Well, you can't do that when we talk about something like a apartment complex. So what they want is literally you just to fill out a form and say, hey, it is worth this. And you just physically have to tell them. Now who do you, you're not really telling the irs, you're telling your IRA custodian and the custodian is telling the irs. So ultimately, this, the problem is people put too much thought into it. They're like, well, what do I put on there? I don't know, I invested a hundred thousand dollars. Great, tell them it's worth a hundred thousand dollars. Then most likely it hasn't changed. It doesn't change until five years, until the deal's done. You know, sure, you might have received some dividends along the way, but that's I mean, they're so small compared to what you invested, it doesn't really change anything. All they want to know is what is the value. So make sure you're doing these fair market values. If you don't, it can increase your audit risk. And the custodian may charge you a fee because they'll do it themselves. So if you don't want to do it, tell your custodian to do it for you. Like I, I can tell you, we'll do it for people. I think we charge 50 bucks. But 50 bucks seems cheap. You literally fill out a one page form saying, hey, my investment is worth a hundred grand. And you sign it, I'll charge you 50 bucks and I'll do it for you.

I'm afraid to ask how many people do that.

So you're about 20% of our 20,000 clients.

Wow.

Even after I tell them that. All right, man, I'll do it.

That's awesome.

Well, Derek, that this has been incredibly informative. I knew a lot about sdiras coming into this. I was gonna play dumb just to ask some questions. I learned more than I expected to. So thank you so much for walking us through it. It's been super helpful. But if people want to get in contact with you, if they want to reach out to Quest, where can they find you? Where can they find Quest?

I mean, you can just go to questtrustcompany.com my you can email any one of our IRA specialists, including myself@infoestrust.com but I always tell people, do due diligence on the custodians, be due diligence on who you want to work with. Make sure you're not being sold on something. And if you're new to a real estate, do your best on just getting started. It is so scary sometimes to just take the leap of faith into your first investment. So find someone you want. Find something that you can work well with, you know, and that's usually going to be the best point of action, whether you're using your personal cash or IRA cash. That's. That's fine. Just take a chance, get started. And I think once you bite the bullet of that very first investment, it's a drug.

Yep, it hurts.

You start that passive income. You see, you have real money and it's the only way to build real wealth. It is.

Amen to that.

Couldn't say it any better.

If you want to learn more about self directed IRAs, questrust.com you want to learn more about private real estate Investing Go to skylinepointcapital.com and stick with us for the next few weeks. We're going to continue on this Real Estate Investing 101 podcast series. But until next time, thanks for joining us and we'll see you again on Heading West.