How to Put Real Estate in Your ROTH IRA with Mark J. Kohler

You. Welcome everybody to another week of tax and legal. On fire, on the edge, whatever. Don't go anywhere yet. Let me tell you what the topic is today. How about putting real estate in your Roth IRA, your traditional IRA, your health savings account, your 401k. Yes, you can do it. Now I know some people say that's too exotic, that's too risky. No, we're going to talk about that. And I want to talk about the why. So we're going to hit why should I put real estate in my retirement account? And then we're going to talk about how to finance it. How do I come up with enough money and a little measly IRA to buy a piece of real estate? I got all sorts of ideas and finally I want to cover the procedure. So if you're wanting greater returns in your Roth retirement account, why not put something you know is going to get a better return than an ETF for 6 or 7%? I, I cannot believe how many haters or commenters I've gotten on YouTube over the last month saying that I'm psychotic, I'm crazy. It's terrible advice to think you could not average 15% or more in your Roth IRA. I'm shocked by this because I meet with clients every day that are doing it, that are actually very conservative, careful investor investing people. So I want to break it down for you. I think you're going to love it. We're going to go through these three topics. Why, how to finance it, and the procedure. I'm a cpa. I'm an attorney, senior partner in a law firm and accounting firm, principal and a trust company, helping people self direct their retirement accounts every day. So if you have questions down below, throw them. Put out any question you got. I'm going to try to hit it. And also I'm going to give away three different books. My amazing publisher, Entrepreneur magazine, want to give a shout out to Ryan Shea, the CEO, highly supportive of the topic of tax and legal because it's normally boring. No one wants to talk about this. But guys, saving money is as important as making money. And that's what I'm all about. So I'm going to give away some books today, Business Owners guide to financial Freedom, the tax and legal Playbook, and my eight steps to build and grow your business. You're going to love this, it's a lot of fun. And I'm going to give these away to raffle winners. And also I've got a special email, has some spreadsheets that could be helpful for you investing in real estate and I'm going to give that away free here as well. I'll tell you how to email me and what to put in the subject line and I'll send it for free. And you're not automatically enrolled in some email list by just asking for that spreadsheet. If you want to enroll in my weekly newsletter, it's free. I've been doing it for 10 plus years. I have a weekly podcast YouTube channel packed with info. I give away so much because I love this topic. I love small Business owners in the American Dream. And if I can give you a incredible information, you might just reach out to us once in a while as a law firm and accounting firm. I hope you do. Now I want to tell you last week's winners of the tax and legal playbook was Adrian Lopez from Entrepreneur magazine Facebook. On the Financial Freedom book we had Carrie Flower Costa Bil. I get it right there. I'm sorry Kerry if I messed that up. That was on the Martin J. Kohler Facebook Live. And then I gave away the 8 Steps Workbook 99 doll value at Amazon right now. That's where it's selling. That's it. 99 bucks. Gave that to Quentin Mason on my MJK YouTube live. So I will be giving those away today. Again, you can't win twice people. But still make a comment. I'd love to have you here. Alright now let's jump into the why now? This is so powerful. I think many of you that maybe don't even want to put real estate in your IRA or your 401k or your health savings account. You may be thinking Mark, why real estate? So let me answer that. And by the way, I'm not a real estate broker. I'm not here to sell you a bunch of real estate. I'm a cpa. I'm an attorney. I help thousands of clients. And over the last 20 years what we consistently see our successful clients doing is having some form of real estate in their portfolio. Now sure you can still have a Wall street brokerage account, throw some stocks, bonds, mutual funds, some no load ETFs in there. I get it. But guys, is that going to make you rich? Are you going to get consistent double digit returns in a mutual fund? No, you're not. And I had someone on YouTube this week say, well Mark, self directing exotic investments. Real estate is not exotic. I can buy a little rental property down the street that I know is going to cash flow and grow in value and I can do it in my retirement account And I'm going to show you right now how your rate of return can be huge. Now I know Robert Kiyosaki and others will say, don't put real estate in your retirement account because you don't get the tax benefits. I'm not putting real estate in my retirement account to get tax benefits. I'm putting it in my retirement account because it freaking does three times better than a stupid mutual fund. That's why I'm doing it. That's it. Worry about the rate of return, don't worry about the write off. Sure, buy some real estate in your own name. I have real estate in my own name. I also have it in my health savings account. I do both. So if you have a question about this, you want to fight about it, you want to throw down a comment, please drop it down below. Rosalie, Marilee, Jason, they're right here in the studio. They're going to throw down those questions for me and I'm going to answer them as truthfully and as honestly and as quickly as I can. Now the why. Guys, you're going to love this. Now if you've seen me present before, maybe at a live workshop or something, I love my four little quadrants. Some of you may have seen it before. I'm going to do it quick. But you should be able to knock this out on the hood of your car because I want you to find other people to partner with to do your real estate. You're going to see why here in a minute. Okay, four benefits to rental real estate. This is it. You can, you can watch this video over and over again. You're going to love it and it's going to knock your socks off. There's four main benefits. There's a lot more than four. But I'm going to hit the four main ones. First one is appreciation. The second one is mortgage reduction. Mortgage reduction. The second is tax benefits. I mean, did I say second? Third is tax benefits and then the fourth is cash flow. Alright, now let me just break down, let's break it down into a simple example. Let's say you buy a hundred thousand dollar property. Now I've got clients buying mobile homes for 30 grand. I've got CL buying rental properties for 400 grand. So don't get pissed off here. Just chill out and let me do a basic example. So let's say I buy a property for 100 grand. Now I'm going to put down 10% and I'm going to get a mortgage for 90 grand. Now again, some of you are Freaking out going this guy's a scam artist. Because you cannot get a 10% down, $90,000 loan at the local credit union. You're right, because they've got Freddie Mac and Fannie Mae up their butt and that's what banks worry about. 20%, 30%. No, guys, you're going to learn how to get creative acquisition strategies using seller financing, using hard. I don't want to use hard money to buy real estate. You're going to learn how to use institutional money. You're going to use other people's credit. I've got a school teacher in Chicago. A school teacher, great friend. Chris Albin with 300 plus rental properties. A school teacher, he's rolling in it, right guys, you can buy rental properties with 10% down. Chris Albin it tell me I'm too aggressive or too stupid to put down 10%. So again, chill out. You're not going to go down to Wells Fargo, a B of A to get a loan for 10% down. I know that. We're going to work outside the box and thousands of real estate investors around America do this every freaking day. Alright now see, I've got to give all these disclaimers because I want to break through some of these preconceived notions. I've got to do it just the way my Realtor told me. No. Start learning something new and I'm glad you're watching this video. So I put down 10%. I'm into it 10 grand. I got a mortgage for 90. Do you know what real estate has averaged for appreciation over the last 50 years? It has outperformed the S&P 500 at 6.74%. Go to the national associations of Realtor website and they'll show you 6.74%. But I'll be conservative. I'll throw down 5%. If I buy a property down the street for 100 grand, 10 years from now it'll be worth 150. Sound crazy? No. Now there's going to be ups and downs, there's going to be bubbles, but you're going to hold on to this property for seven to ten years or more. And you're not going to sell when the market crashes. You're going to hold on to it. This is a long term investment. So I'm into it five grand. I'm sorry? I'm into it 10,000. I'm getting a 5% appreciation on 100 grand. That means I'm making $5,000 this year and the next year I'm getting 5% appreciation on my money every year. Now is it my money or the piece of real estate? See here's the first benefit of rental real estate. I'm using leverage. I put down 10,000, I made 5,000, tax deferred. I'm not paying tax on that yet. I'm just building equity in my property. Then do the ROI on this. I invest 10, I make 5. That's a 50% ROI in the first year. Alright now let's move to mortgage reduction. Now I invest in real estate just like the next guy. I am not out there teaching classes on how to buy rental real estate. I go to them, I love it. And I invest in real estate myself. And I have learned that you want to cover your. Let's see right here. I want to cover my, my cash flow is here and I'm just going to, and I want to go in more depth and I'm not going to go too far here because our time is limited. But I'm just going to hit the highlights. You're going to try to cover your piti, right? That's what I'm trying to do quickly here. Principal interest, taxes, that's property taxes and insurance, that's what you're going to try to cover. A break even property means the tenant is making your mortgage payment. Your property taxes, a little bit of reserve and covering your property insurance and property taxes, that is a break even property. Now look what's happening. If you're making 5% appreciation on the property, how's it, what's happening to your mortgage? It's going down. The tenant is paying the mortgage for you. You didn't put any more money in the property and the tenant paid the mortgage for you. That means I just made. Well I don't know. What do you think the mortgage is going to go down every month? 150 bucks. I could say 100. 150 bucks. That means the mortgage is going to go down $2,000 a year because a lot of the payments going to be interest. I get it. So the property went up in value five. The mortgage went down in two. That's a $7,000 increase here. I invested 10, I made two. What's my ROI in this quadrant? 20%. See if we just take it baby steps. 50% rate of return. 20% rate of return. My mortgage went down and I didn't put any more money in. Alright now tax benefits. Oh sexy. Now if you're buying rental properties for yourself we're going to get flow through losses from the big D and I don't mean Dallas. I'm talking depreciation and I love it. But guess what? With your rental property, do you get that benefit? No, you don't get that benefit inside your IRA because your IRA doesn't pay taxes. It doesn't get tax deduction and it doesn't pay taxes. So when you buy real estate Inside your Roth IRA or your 401k, you're going to be getting appreciation of mortgage reduction, but the tax benefits are gone. But when you sell it, you don't pay taxes. That's the beauty here. So I'm going to ignore this quadrant. Now we get over to cash flow. Could I cash flow, 100 bucks a month? Sure. I can go out and buy a little rental property down the street for 100 grand. I can put down 10%. I can get seller financing, some creative acquisition and then get the mortgage paid by my tenant. And maybe cash flow, another hundred bucks a month. I know you're out there. Many of you have little rental properties. I do. I've got the cutest little meth lab. It is adorable. The guys pay in cash every week. Some people call them drug dealers, I call them entrepreneurs. And I think they're great. They're great tenants. That was a joke. Okay, now here's the point. But it is a pretty bad area that I own my little rental anyway. But here's the point. Cash flow. If you can make 100 bucks a month, 100 bucks a month of cash flow that you weren't making before, does it go to you? No, it goes to your IRA and it goes inside your IRA tax free. So if I can make another thousand dollars cash flow a year, I'll round it down to 90 bucks. Whatever. $1,000 a year. In my IRA that only invested $10,000, I made another 10%. Look at this. I made 50, 60, 70, 80%. 80% rate of return on a $10,000 investment with my IRA. Now I know some of you are like Mark, you can't buy a rental property for 10 grand. I'm coming to that part, so chill out. But look at this 80% return. Oh yeah, you've got a mutual fund that's paying 81%. Oh, you've got an ETF that pays 92%. You know you don't. This is too aggressive, Mark. That's way too aggressive. Alright, cut it in half. I'll do 40%. 40%. Mark, that's off the chart. You can't get a 40% rate of return. I argue that this is a basic, simple Conservative example. But again, just to not piss off everybody there, I'll cut it in half again. 20% rate of return. This is a simple rental property, people. I own rental properties in my health savings account. That cash flow and I have never put another dollar in that property. This is doable. It happens every freaking day. And so for some of you out there that are naysayers, that this is too aggressive, this is conservative, people. And I'm getting a 20% return putting rental property in my IRA, my 401k, my health savings account, my Coverdell, my Roth. You can do it. Wall street can't do it for you, but you can do it. And it's been around for 40 freaking years. But I don't have enough money to do a Super bowl commercial to tell you this, so you have to find out on YouTube. And I'm so glad you're here. That, my friends, wraps up the why. The why is because you can get a better rate of return. And I just proved 20%. Cut it in half. Cut it in half. Conservative example of why you should buy real estate in your IRA rather than an etf. Okay, now I know we got questions. They're coming in. I know, I know. Hey, should I do a couple questions? I want to get you guys engaged. All right, Sorarian, why put already tax

advantaged instruments into a Roth ira?

Okay, you're killing me, Sararian. He says, why already put tax advantaged assets into an ira? Sararian, you're missing the point. Okay, now I'm going to go with you. Look at my trifecta. Now back up everybody. This is my trifecta. I teach it all the time. I want your family trust down here at the bottom. You've got to have a small business, maybe a sole proprietor or an S corp, or you've got a W2 day job and then you're going to buy rental property inside an llc. I own rental property. This tax advantaged in my name, Sararian. I love it. Go buy a rental property every day. I teach it in every one of my books. They are tax advantaged. You should do it. Buy another rental in your own name. But what, Sorarian, are you going to put in your ira? That's the question. Don't worry about it being tax preferred. What rate of return are you getting in your Roth IRA? Tell me seriously. Mutual fund. An ETF at best. You're getting 10% and you know it. Well, why not go buy something like a piece of real estate that's going to make you 20, 30% or more. I don't care if it's tax preferred. I care that you're making 20 to 30%. See the point? It doesn't matter that it's tax preferred. Put what the hell makes sense in your ira. Look at the last example. I did it. I went right through it. This is, this is a basic example of $100,000 freaking property. You got appreciation, mortgage reduction and cash flow. Forget the tax benefits, Sorarian. It's about what is going to build your IRA faster. Listening to your damn stockbroker or buying what the hell you know best. I got to drop my pen on that one. Boom. Guys, I love this topic. I'm passionate about it. And I'm trying to get this information out there because I'm sick and tired of Wall street stockbroker financial advisors that are scared to death of self direct. They don't want you to buy real estate because they know you can get better rates of returns. And that's the gosh awful truth. Heck, I ought to even write a book called what Wall street isn't telling you and put my money where my mouth is. Oh yeah, I did. And I'm going to give it away to anybody. We're going to do a drawing at the end of this. Anybody that shares this video, that you catch the vision, you're passionate about this and you want to tell your brother, your sister, your business partner, share this video. Rosalie will do a drawing and I'm going to give this away autographed and mail it to you for free tomorrow. Bamboo. Okay, Rosalie, next question.

Justin, Justin, from your Facebook. Mark, my 10 year old son wants to know if it's a good idea to invest his Roth IRA in a partnership with me to purchase a rental property. Okay, help me pitch him, Mark.

Oh my gosh. Justin says his 10 year old wants to invest his Roth IRA with his dad. I love it. And Justin, I'm swearing way too much in this video. I got too upset. I hope your 10 year old's not watching. This is PG 13. Okay, but we won't go R. I mean, I'm just a farmer. These are farmer swear words. Okay, Now Justin, I'm coming to yours right now. Justin says, how are you going to finance that? Okay, guys, I get it. You may only have five or ten grand in your Roth. Mark, that's a great idea. But I only have five or ten grand. I want to give you three ways you can do this. Three ways. Number one. Okay, number one is you take your Iraq. Maybe you only have $10,000 in there and you want to go out and buy that little property for 100 grand. One of the first ways to do this is through a seller financing strategy. Go out and find someone desperate that'll carry the paper for you. Sometimes it's called a subject to where you buy it. Subject to the mortgage they already have there. You use a land trust to do it. Other times you might just use seller financing. You're going to go out and get a loan for 90 grand. Now are you going to go down to B of a Wells Fargo Chase and get a loan like this? No, I know that. But a creative real estate investor looks for opportunities, looks for people that are desperate. Looks for a rental property where the seller is willing to take $10,000 down and let you assume their mortgage and move the hell out. That, my friends, could work. Okay, now I know that's a push. Let me give you number two. Number two is, and I want, I made my list here of the next two or three. Number two is pool your IRAs. If you need more money, let's get multiple IRAs involved. So I want to use maybe three or four IRAs. You could use an old 401K. You could use your kids. Roth, Justin, you could use your own Iraq. You could use your family's health savings account. I could take $10,000 from each one. And let's throw in one more. I'm going to throw in your mom's SEP IRA. See guys, you can use multiple IRAs to do this. Now I've got 50 grand. Do you know there's banks out there that don't care what your credit score is? That don't care if you've got a bankruptcy. They don't even want a credit application. It's called non recourse financing. So I can go out and buy a property for 100 grand. I'm going to put down 40% which is 40,000 and I've got an extra 10 in reserve. Now let me do that slowly. 10, 10, 10, 10, 10. You've got $50,000 invested in an LLC. The LLC uses 40,000 to go put down on a payment with the bank and get a 60% mortgage or $60,000. 40% down, 60% financed. 40, 60. And then you've got a $10,000 reserve. If you want to email me, say mark, I need your lenders for non recourse loans. Put that in the subject line and let me give you my email. I mean guys, this is legit. I just, I'll give it to you right now, let me give you my email. Ah. Oh, my gosh, I'm struggling today. Can't even pull my paper here apart. Okay, so my email is mark@markjcohler.com markjkohler.com put in the subject line non recourse lenders, and I'll send you a couple that will loan to an LLC that you don't even have ownership in your IRAs, own the LLC, your 401k owns it. So you can take 50 grand, put it in an LLC, get a loan, and buy a property. It's that easy. Okay, now, number three strategy, let me throw out number three is I can take an llc, and I'll use Mallory here in my studio as an example. I've got, say, 10 grand in my IRA, and we talked about that. It's in a Roth, and I want to go get. Well, you know, let's use a 20. I'm going to use a 20. I got a 20 grand, my Roth, and maybe it's me and my spouse's Roth or whoever, and I want to go get a regular loan. I want to walk into B of a chaser, Wells Fargo, and get a regular Fannie Mae Freddie Mac loan. And I go to Mallory and I say, hey, Mallory, do you have any cash? He goes, no, I got no cash, but I got great credit. I go, oh, cool, that's good. Because my Roth has no credit. It's just an account. So I'll partner with Mallory. Mallory's over here, and she will put in her credit, and I'll say, hey, Mallory, I'll put in the cash, you put in the credit, and I'll go 50, 50 with you. Or 60, 40, maybe 80, 20. No. She says no to 80, 20. Okay, so we'll go 50, 50. I'll put in the 20 grand, she signs on the loan, and I may say, you got to put in maybe five grand to refurbish the place. And so it's pretty fair. 50, 50. Cash is king. It's usually worth a little bit more, but she's got good credit. She goes to the bank, gets a loan, the bank and the bank gives us the financing with $20,000 down to go get a regular, maybe typical mortgage to go buy the rental property. Now, your IRA owns 50% of an LLC that owns a property. And you go, I want my IRA to own all of it. Well, make some more damn money. I don't care. Just partner with someone. That's the beauty of this. This is the partnering strategy with a partner that has credit so you can get maybe a better loan. This one you partner and you use a non recourse loan. So this is a partner, partner, partner. Come on Mark, partner with a non recourse loan. And this one is you use creative financing. Now if you're a real estate investor, you know there's more options in this and there are, but this is three that gets your juices flowing. Alright now let's take a couple more questions and then I'll go through procedure. I hope you're loving. This is good Samuel.

Samuel asked a question. He said if you had 20,000 in cash, would it be better to put it through the IRA than buy the real estate or just buy real estate with regular dollars?

Okay, so Samuel says, mark buying rentals, I've got 20 grand. Should I do it in my own name or should I do it in my Iraq? Samuel, I hate to say this, you're not going to like the answer. You do both. And this is Soraria was Sorarian. What was that? Was their name? Sararian. This is the same answer for Sararian. Real estate is an amazing investment. Use it for both. That's my answer. Go out and buy rental property in your own name and then when you can save up another 20 grand, buy some real estate in your IRA accounts or go out and buy the first one through your IRA accounts and buy the next one in your own name. But do both, maybe rotate. One year you buy a rental in your ira. The next year you buy it in your name. The next year after this I'd love you to have 10 rentals cash flowing in the next 10 years. How crazy an idea is that? Oh that's right, I'm a Salem witch. Put me up on the stake, burn me at the stake because I'm recommending real estate and not Wall Street. Alright, next question.

Norman, what's your take on BRR strategy?

BRR strategies? Norman, I'm sorry, there's so many acronyms in my head. BRR, UBIT, UB, UDFI, IRA, 401k. I don't know what BRR strategies are and you may be testing me to see how good I am. I don't know, there's a lot of people that have kind of little own industry standards or acronyms. So please type below what BRR means and we'll talk about it.

Sebastian says if your mortgage is let's say $700 and you rent for 1200, should you pay more on your mortgage to pay, pay it down quicker.

Okay, so Samuel. No, Sebastian says He's got a $700, $700 mortgage payment and the rent is 1200. So this is cool. So he's got a $500 a month cash flow. Now I'm going to assume maybe the mortgage is bundled with the property taxes and insurance. Right. And a lot of mortgages do that. So let's just assume for a minute. The 700 covers property tax and insurance. He's got 1200 in rent and 500amonth in cash flow. First of all, Sebastian, I love it. That makes my last example look a little too conservative. Right. So he's got 500amonth in cash flow. He says, how should I double down on my payments to pay off the mortgage more quickly? And there's a lot of mortgage pay down strategies that I really like. I think it's a great way to, to move forward. There's some acronyms out there like accelerator banking, bank on yourself. There's all these different little sweep strategies, different ways again, kind of like the BRR thing. I'm sure it's just an acronym that a lot of people use for different things. What I would first do with your $500 a month in cash flow, I would create in a reserve I had immediately create a reserve of probably three to four months, just in case you have a vacancy or repairs. That's going to give you 2,000 to $2,500 in reserve for a rainy day fund. And I think that's important. Real estate investors should do that. Once you get your reserve and you have that extra 500amonth, I'd probably, yeah, I'm good with that. Pay down the mortgage faster and maybe even suck that 500 out and try to use it in another real estate deal. Maybe you pay down the mortgage quick enough and then you do a HELOC and strip out the equity and buy another rental. But I do like real, I like mortgage pay down strategies. Once you have a reserve, I think that's a great idea. Okay, I'm going to do procedure after two more questions. Anon,

Arian.

Arian. Sorry, I can't see it. I don't have my glasses on.

Arian, what about the maximum annual contribution of $5,500? Would there be a penalty for over contributing?

Okay, so, Arian, this is good. And a lot of people out there. I got some hate mail on this too. They go, mark, you can only put 5,500 into a Roth. Oh, we've got lots of ideas here, people. I'm going to use a little pyramid. It's kind of what I do to show you going up the mountain of different strategies. So number one, you could do a traditional IRA. Now, actually, this year the rule is $6,000. Last year was 5,500. You can put $6,000 in there, and if you're 58 years old or over, you can put an extra thousand. So I can put in $7,000. Now, that's the same amount for a Roth. Now, if you're married, you might double down. So you could put in 12 grand or 12 grand in a Roth because you're married and you both contribute to your Roths. Also, if you have kids and you have kids that have earned income, maybe you pay them in your business. A whole other video I love to talk about, you might be able to do a couple extra Roths with your kids, which could be another five grand, four grand, six grand, whatever. So there could be another ten in the mix. So all of a sudden what you're doing, Sebastian, is you're taking your Roth contribution, your spouse's Roth contribution, your kids Roth contribution, and combining them. Oh, but it gets better. If you have a small business, I don't even suggest an ira. I don't even suggest a Roth. We're going to go 401k. The Solo 401k is freaking amazing this year. Yeah, that's right. You can do $19,000 in a Roth. What? I can do 19,000 in a Roth. Yes. You have to have a small business, and I have a lot of clients that fund the small business from other real estate income, or maybe a stay at home business, an Internet based business, a service business, and you can fund up to 19 grand per person, 50 and over, pop in another five grand or six grand. Oh, I forgot. All of a sudden it's five or six grand. I think it's six for a total of 25. So this is just unbelievable. I apologize. Remembering every number in the book, then you've got the Roth 401K. You've got DB plans. Oh, I've got clients that put away 200 grand a year. So if you've got the money, I will talk to you. And that wasn't Sebastian, that was Arian. Arian, there's ways to put in a lot more than a Roth of six grand. Okay, Norman, bbb.

BBB says buy, rehab, rent, refinance, repeat. What are your thoughts?

BBB is an acronym he learned probably in an education workshop that says Buy, rehab, refinance it. Suck out the equity. Buy again and repeat. I love it. In fact, my son and I are working on a project like that right now, in fact, this weekend we might be putting in a basement bathroom. Pretty exciting. So we're in the middle of the rehab and my son's going to decide with his investor who happens to be an ira. They're going to decide should we rent it, refi, or should we just sell it and take the cash and go do it again? I love it. Rental properties are like rabbits, Norman, aren't they? So you want to be conservative and take a cautious, regular approach. And I teach it in my book. One rental a year. Just go for it. Okay, now I want to get into the procedure and I'll say it now. If anybody shares this video, Rosalie will get a note of that. She'll see all the shares and she randomly chooses three winners. I'll announce them next week. My first one is my tax and legal playbook 28 game changing strategies. You can read each chapter with its own answers or questions. The Business Owner's Guide to Financial Freedom talks about a business owner's guide to Financial freedom. What Wall street isn't going to tell you, how does a business owner take their profits and grow them? You would love this. And then finally, eight steps to grow and start a business. So these have like 60 videos in it, webinars, podcasts, and it's awesome. And you, you can just wave your phone over any of these QR codes and watch a video as you fill out a workbook. You get a business plan, a strap plan, and a marketing plan. All with that. Okay, Rosalie, let me hit procedure real quick before we do it. Now here's procedure. If some of you are saying, well, this is expensive and I'm going to pay tax to use my Roth to buy a rental, no you're not. Here's how it works. Maybe I'll do step one. Step two. Step one is you take your regular IRA, your regular Roth, and your regular 401k or whatever and you have to transfer. It's not a rollover, it's a transfer. So you do a transfer to a trust company and you set up a new account that allows for being self directed. Now the company I love for this is directed ira.com directed ira.com youm can go there right now and open an account and move your IRA Roth over there. Now a 401k, if you have a solo 401k or an then it's a different procedure. If you have a 401k from an old job, you'd roll it to an IRA. But you could even set up A Coverdell, an education IRA or a health savings account. So step one is you got to transfer the money to a stockbroker is lack of a better word, a trust company. I'm going to put trust company or custodian that can then allow you to self direct. Now once the money is at there, in fact I'm going to do another step in here. Step two is if you don't have money to roll over, open an account and start contributing. So open and contribute. And if you haven't watched my video on building a million dollars in your Roth ira, I go through how much you have to put away to start Snowballing that Roth IRA. Just type in Kohler Million Dollars on YouTube and you'll love it. Now once the money is at the custodian, and by the way, there's no tax, there's no penalty and you just have the cost of opening up the new account, a directed IRA. Most places are going to be around 300 bucks. Now once the money's there, step three, you call them up and you say, hey, I want to invest my retirement account. And you can do it directly out of the custodian or trust account. But most people, and this is what my law firm's been doing for years, is you open an LLC. You open an LLC that's owned by the IRAs. So this LLC will have multiple IRAs or just one IRA that's owned the LLC is owned by the IRAs. Then in step four, you open a bank account and the LLC, you get to be the manager. Don't believe anybody when they say you can't. We give you a comfort letter from our law firm that stands behind the whole procedure and how you do it. People have been doing this for years. Mitt Romney, when he's running for President has 20 million in his IRA. And they asked him how he did it and I said I self direct doesn't everybody else? And Wall street was like shh, don't tell everybody. Now anyway, you can be the manager of your llc. You open a bank account and then you move this money down into the llc. So you open the llc, you open a bank account and then you move the money. There's no tax, you're not pulling the money out of your retirement account. The LLC is still owned by the IRA and you just control the checkbook. Now step five, I'll say step is you take the LLC and you go make an offer on a property. And on this note, I wanted to give you one last freebie if I could. If you want to email me and you put non recourse loan in the subject line. Another thing you can do is email me and just put real estate spreadsheet, real estate spreadsheet. And I've got a couple spreadsheets and some resources that can help you analyze properties from a CPA point of view. And I know some of you have been through a tons of real estate education and no rental properties better than me. I get it. But this might be an interesting resource for many of you that are just getting started and it's free and I don't sign you up for anything. Just email me. Real estate spreadsheet and just email me and I'll send that over to you. And if you want to sign up for my newsletter, you can do that at any time. Alright, I'm going to spend the rest of time answering your questions. Let's get rocking.

Praveen, can you do a Roth and a Traditional at the same time? If the income is above the range, are you not ineligible for that Roth?

Okay, Praveen says if my income is too high, can I do a Traditional and a Roth? Well, if your income's too high you have to pick or choose. You know, are you going to do a Traditional or Roth? And if your income's too high you can't do a Roth. And so you get frustrated and you might do a traditional but then you don't get a deduction. So it's really cumbersome. Right? My answer to all this, Praveen called the backdoor Roth IRA. Now you can type in YouTube Mark Kohler, BackDoor Roth and what that entails. And Praveen, you're going to love this. I do the same thing and so does my partner. You can have a 401k at work, but what you do is you open a regular ira. So you put in your IRA and if you make too much money, it's a non deductible contribution. So you open your IRA non deductible contribution into this IRA and then what you do is wait one day and then you convert it to a Roth. You can convert to a Roth at any income level. So if you have traditional IRAs now Praveen, what we would do is start chunking and converting to a Roth. Now when you convert you pay taxes, but if you make too much money, you can't put money into a Roth anyway. So you do a non deductible IRA and then convert to a Roth. It's called the backdoor Roth. You'll see other articles by Professionals around the country. But a couple good YouTube videos by me and my partner called the Backdoor Roth ira. That's your answer, that's what you want to look for, John.

Okay, John, he said that I have a 3,000 sq ft house with a 2,000 sq ft garage in the rural area. I don't currently live there. I own $75,000. I am on the fence between selling and keeping the profit or renting it out. My work just dropped out, pension and I have $100,000 plus coming. Would I be better off selling, paying off my pension and renting or using my 401k if it can be self directed and then renting.

Okay. John basically says, Mark, I've got a great little rental out in a rural area. I don't live there. It's bacon. I'm either going to sell it or rent it. And then he said, or ooh, ooh, let me put it in my pension or ira. Here's the drawback. Your IRA cannot buy any property you own, your spouse owns, your parents own or your kids own because the IRS feels you'll cook the books. So that's called a prohibited transaction. So you cannot put that property in your retirement account because you already own it. So I'm going to recommend what I was saying to Sararian or Sebastian or a few of the other people with questions. John, what I would do, look at the numbers. You owe 75 grand. It's already a good rental property. It sounds like. Run the numbers. What could you rent it for? Would it cash flow? If it's going to cash flow and you can rent it, do it. And then take your retirement account, roll it out to an IRA and go buy a different rental property. Now you have two rental properties, one in your name, one in your ira. That is the magic, my friend. And then just like Norman was saying, you rehab them, fix them up, strip out the equity, go do it again, do it again, do it again. Ten years from now, they're like rabbits. You'll have five to 10 rentals and there are prohibited transaction to this. I want to give this out there just so that some of you that are like Mark makes it sound so easy and this is a really risk, self directing is the worst. This is like Jim Cramer on Mad Money on cnn. He's like, oh, never self direct. You're going to screw it up. No, the rules are simple. We've written a book on this. It's chapters in my book. When we set up your llc, I give you the rules on what to do and we have client after client do it with no problems. And if you get audited for us telling you how to do it, we'll pay the bill if we're wrong. That's what our law firm does. So it's not the end of the world. It's not like you're out on the fringes. You're not going to get frickin audited. Now of course that's what your broker is going to tell you, but it's not true. All right, Jay, he says, what kind

of bank lends you your third strategy where I have an IRA and another person with good credit.

Okay, Jay Patero says, Mark, what are you crazy? What kind of bank would ever loan me money or loan my IRA money with someone that's got decent credit? First of all, okay, there's two strategies here, Jay. Okay, I'm going to do we got two houses. Jay, under both of these examples, you're going to go to get a loan. Okay, the first one is you're going to do an LLC. You're going to have 50 grand through one IRA or multiple IRAs. You're going to keep a $10,000 reserve. You're going to put down 40,000 and you're going to get 60,000 as a loan. There are lenders called non recourse lenders that will loan 60 cents on the dollar as long as you have a 10% reserve and you put down 40%. Email me and I'll send you a couple banks. Now that's bank number one. Now in the third example, he said, well, who's. If I've got someone with good credit and I've got $20,000 in my IRA, who's going to loan to this person? Your credit union, Wells Fargo. You can go out and get a normal residential loan to buy this property with 20% down. I mean, you might even get an FHA loan for 5 or 10% down. Oh, but Mark, this person's got to live there. Yeah, they're going to live there for the first little bit as you paint it and fix it up. And then they're going to move out and you're going to rent it. But this person is your credit partner. They're going to be the one to walk into the bank and get the loan. This is going to provide the down payment. We do it all the time. I mean, this is not illegal and it's not. You just got to think outside the box. So I hope that's helpful. Jay. Herb. Oh, and this is I get in the Word from Rosalie. This is my last question and remember to share this video and I'll give away these books. And I got a few other things to tell you you're going to love. Go ahead, Rosalie.

Herb, can you go over the additional tax consequences when using the Solo 401k combined with a non recourse loan to purchase a passive property? Isn't there another tax associated with the leverage portion?

Okay, Herb is on to something. This is good. He wants to get deep. All right, Herb, I'm with you. Herb says we're just going to do two examples. Let's do one in a 401k and do one in an IRA. You're going to like this, Herb. Herb says we're going to use Jay Botero's example. We're going to go buy a rental, we're going to have an llc, we're going to get a bank and we're going to go put down 40% and 40 grand and get a loan for 60 grand. And there's going to be an IRA. Or in this example, sorry, it's going to be a 401 and I've got a person. Is that okay? So we're going to get a loan. That's what, that's what the example he wants. Now in this example, the 401k provides the 50,000. We have 10k in reserve and 40,000 for the down payment and a bank providing a $60,000 loan. Okay, now let's do apples to apples. Same house, same llc. Oh, but this time the IRA owns it. And I've still got Mallory in here, she's going to sign on the credit. I've got a bank and the bank's going to loan 60 grand. I'm going to put down 40 and have a reserve of 10. Okay, so I've got two houses, one with an IRA and one with a 401K. Now what J says is, well, Mark, since you got debt, isn't there an extra tax because you've used leverage with an ira? What he's talking about is called udfi, a form of UBIT tax Unrelated Business Income tax, and it's a variation called udfi Unrelated Debt Finance Income. You're going to make income from debt financed property and there's a tax on that. It's around 30%. It's no fun. And in this example, if an IRA buys a property with debt and you go sell it, whatever the debt ratio is, at the end of the day when you sell the property, you've got to pay tax on that portion because the IRA portion is tax free, but the debt finance portion is debt financed income that you got to pay tax on. But guess what, Herb, you're going to love this. It does not apply to a 401k. So whenever I have a client doing borrowing inside their IRA, we convert it to a solo 401k. And we just got rid of UDFI. Because UDFI does not apply in a 401k, it only applies in an IRA. So Herb, we have an answer for that. We get around it by using a Solo 401k rather than an IRA in that example. Everybody, I hope this has been helpful. I know I got a little over the top and dramatic at the beginning, but I'm so passionate about trying to break down the preconceived notions about how real estate is not thought of as a legitimate, conservative, healthy approach to your retirement accounts. So please subscribe to this YouTube channel. If you're on Facebook, get over to YouTube and type Mark Kohler. I've got 6070 PL videos over there. If you subscribe, hit the bell. Every time I shoot a video or go live, you get a ping. You can get to my website, marcjkoler.com, sign up for my newsletter. I'm going to give away these books. We've got a summit coming up, a self directed IRA summit for an entire day in Chicago next month. It's 200 bucks, 300 bucks and it includes lunch. I'm going to go to Portello's for you on that one. Then we're doing it in Hawaii. That's right. Come to Hawaii in August, August 10th I believe. And we're going to do a self directed IRA summit for an entire day and do a luau at lunch. It is ocean view, people. You got to come. And that's just 2 or 300 bucks. Get a flight over there. It's on the North Shore. Let me see. An estate planning special coming up next month. We're doing estate planning specials for huge discount. The best way to get notices on all this is to sign up for the newsletter which we've been doing for 12 years now. And it's free. And you can get over to markjkohler.com Instagram, Facebook, all that stuff. I'm doing regular posts as well. Thanks everybody. Keep living the dream. I'll be here next week, probably on Wednesday because I got to be on the road heading to Fort Lauderdale for a conference next week. You can attend down there. If you're in Miami or Fort Lauderdale, get to my website and you'll hear about that as well. Thanks, everybody.