How to Put Real Estate in Your ROTH IRA with Mark J. Kohler | 2019


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 gonna talk about that and I want to talk about the why so we’re gonna hit why should I put real estate in? My retirement account and then we’re gonna 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 gonna get a better return than an ETF for six or seven percent I cannot believe how many haters were commoners 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 a verse nth 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 Investing investing people, so I want to break it down for you. I think you’re gonna love we’re gonna 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 an accounting firm principle and a Trust Company Helping people self-directed retirement accounts every day. So if you have questions down below throwing Put out any question you got I’m gonna try to hit it and also I’m gonna give away Three different books my amazing publisher Entrepreneur Magazine. I want to give a shout out to Ryan Shay the CEO highly supportive of the topic of tax illegal 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 gonna 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 gonna love this. It’s a lot of fun and I’m gonna give these away to raffle winners and Also, I’ve got a special email that has Some spreadsheets that could be helpful for you investing in real estate and I’m gonna 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’ve 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 House to us. Once in a while is a lot from an accounting firm I hope you do now. I want to tell you last week’s winners of a copy I get it right there I’m sorry Kerry if I messed that up that was on the Martin J Kohler Facebook life and then I gave away the eight steps workbook $99 value at Amazon right now. That’s where it’s so on. That’s it 19 bucks Give that to Quintin Mason on my MGK 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 of 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 in 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 and no load ETFs in there I get it but guys is that gonna make you rich are you gonna get consistent double-digit returns in a mutual fund? No You’re not and I have someone on YouTube this week say will mark self-directing exotic investments Real estate is not exotic I can buy a little rental property down the street that I know is gonna cash flow and grow in value and I can do It in my retirement account and I’m gonna 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 to get tax benefits I’m putting in my retirement account cuz that frickin does three times better than a stupid mutual fund That’s why I’m doing it. That’s it worried 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 merrily Jason. They’re right here in the studio They’re gonna throw down those questions for me and I’m gonna answer them as truthfully and as honestly and as quickly as I can Now the why guys you’re gonna 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 gonna 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 gonna 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 gonna 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 I say second third is tax benefits and Then the fourth is cash flow All right. 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 clients buying rental properties for four hundred 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 a hundred grand now I’m gonna put down 10% and I’m gonna 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 And back in Fannie Mae up there, but and that’s what banks worry about 20% 30% down and and but no guys You’re gonna learn how to get creative Acquisition strategies using seller financing using hardened. No, I don’t want to use hard money to buy real estate You’re gonna learn how to use Institutional money you’re gonna 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 Alban and tell me I’m too aggressive or too stupid to put down 10% So again, chill out. You’re not gonna go down to Wells Fargo of B of a to get a loan for 10% down I know that We’re gonna work outside the box and thousands of real estate investors around America do this every freakin day All right Now see I’ve got to give all these disclaimers because I want to break through some of these Preconceived notions that I’ve got to do it just this way My realtor told me know 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 six point seven four percent go to the National associations a realtor website and they’ll show you six point seven four percent, but it all be conservative I’ll throw down 5% if I buy a property down the street for a hundred grand ten years from now. It’ll be worth 150 Sound crazy. No. No, there’s gonna be ups and downs There’s gonna be bubbles But you’re gonna hold onto this property for seven to ten years or more and you’re not gonna sell when the market Trashes you’re gonna hold on to it. This is a long term investment. So I’m into it five grand. I’m sorry I’m into it ten thousand. I’m getting a five percent appreciation on a hundred grand That means I’m making five thousand dollars this year and the next year. I’m getting five percent 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 ten thousand. I made five thousand tax-deferred I’m not paying tax on that yet. I’m just building equity in my property. I’m do the ROI on this I invest ten I make five that’s a 50% ROI in the first year All right. 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 him. 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 gonna and I want to go in more depth and I’m not gonna Go too far here because our time is limited, but I’m just gonna hit the highlights. You’re gonna 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 gonna 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 in Property insurance and property taxes that is a break-even property now Look what’s happening if you’re making five percent appreciation on the property. How is 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 paint the mortgage for you That means I just made I don’t know. What do you think the mortgage is gonna go down every month 150 bucks I could say a hundred hundred fifty bucks That means the mortgage is gonna go down Two thousand dollars a year because a lot of the payments gonna 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 ten. I made – what’s my ROI in this quadrant? 20 percent see if we just take it baby steps fifty percent ready to return 20 percent rate of return My mortgage went down and I didn’t put any more money in. All right now tax benefits Oh Sexy now if you’re buying rental properties for yourself, we’re gonna get flow-through losses from the Big D And I don’t mean Dallas I’m talking to 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 deductions and it doesn’t pay taxes So when you buy real estate inside your Roth IRA or your 401k, you’re gonna be getting appreciation a mortgage reduction But tax benefits are gone But when you sell it you don’t pay taxes. That’s the beauty here So I’m gonna ignore this quadrant now we get over to cash flow. Can I cash flow a hundred bucks a month? Sure, I can go out and buy a little rental property down the street for a hundred 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 cashflow another 100 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 tenant. That was a joke, okay now here’s the point, but it is a pretty Sebat area that I own my little rental in anyway Look, here’s the point cash flow If you can make a hundred bucks a month 100 bucks a month the cash flow that you weren’t making before Is 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 of cash flow a year, I’ll round it down to 90 bucks Whatever a thousand dollars a year in my IRA that only invested $10,000. I made another 10% Look at this. I made 50 60 70 80 percent 80% Read a return on to $10,000 investment with my IRA now I know some of you’re like, well 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 might 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 four 1/k my health savings account my Coverdale 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 or return and I just prove 20% cut it in half cut it in half Conservative example of why you should buy real estate in your IRA Rather than in ETF. Okay. Now, I know we got questions they’re coming in You know, I don’t hate so I do a couple questions. I want to get you guys engaged. All right, sir, Arian Already Instruments into a Roth IRA. Okay, you’re killing me sir, Arian. He says why already put tax advantaged assets into an IRA Sir, Arian you’re missing the point. Okay now I’m gonna 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 an escort or you’ve got a w-2 day job and then you’re gonna buy Rental property inside an LLC I own rental property There’s tax advantaged in my own name sir, Aryan. 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 sir Aryan are you going to put in your IRA? That’s the question. Don’t worry about it being tax preferred What retreat or return are you getting in your Roth IRA tell me seriously a mutual fund in 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 gonna make you 20 30 percent or more. I Don’t care if it’s tax preferred. I care that you’re making twenty to thirty percent see the point It doesn’t matter that it’s tax preferred put the what the hell makes sense in your IRA Look at the last example I went right through it. This is this is a basic example of a hundred thousand dollar freaking property You’ve got appreciation mortgage reduction and cash flow forgive. 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-directing because 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 already 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 gonna give it away to anybody We’re gonna 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 You’ll do a drawing and I’m gonna give this away autograph to mail it to you for free tomorrow BAM Okay, Rosalie the next question Justin In the partnership with me to purchase a rental property, okay. Help me pitch in mark. Oh my gosh Justin says his ten-year-old wants to invest his I 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 ten-year-old is not watching this is pg-13 Okay, but we won’t go our I mean, I’m just a farmer. These are farmers swearwords. Okay now Justin I’m coming to yours right now Justin says, how are you gonna 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 IRA and maybe you only have $10,000 in there and you want to go out and buy that little property for a hundred grand One of the first ways to do this is through a seller financing strategy go out and find someone’s 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 and you’re gonna 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 purple that are desperate looks for a rental property where the sellers willing to take $10,000 down and let you assume their mortgage and move the hell out That my friends could work. Okay. No, I know. That’s a push Let me give you number two number two is and I made my list tariffs that 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 raw Justin you could use your own IRA and You could use your family’s health savings account. I could take ten thousand dollars from each one and let’s throw in one more I’m gonna 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 a hundred grand I’m gonna put down forty percent which is forty thousand and I’ve got an extra ten in reserve now Let me do that slowly ten ten ten ten ten you’ve got $50,000 invested in an LLC the LLC Uses forty thousand to go put down on a payment with with a bank and get a sixty percent mortgage or sixty thousand dollars forty percent down 60% Financed forty sixty and then you’ve got a ten thousand dollar reserve I can if you want to email me say mark I need your foot lenders for non-recourse loans put that in the subject line and let me give you my email I mean I guys this is 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. I can’t even pull my paper here apart. Okay, so my email is Mark at Mark J Kohler Calm mark at mark J Kohler comm 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 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 Malory here in my studio as an example I’ve got say ten grand in my IRA and we talked about that It’s Ana Roth and I want to go get well, you know, let’s use her 20, I’m gonna use a 20 I’ve got a 20 grand and my Roth and maybe it’s me and my spouse is Roth or whoever and I Want to go get regular loan I want to walk into B of a chase or Wells Fargo and get a regular Fannie Mae Freddie Mac loan And I go to Mallory and I say hey Mallory Javi cashed because no I got no cash, but I got great credit I go. Oh cool. That’s good Cuz my Roth has no credit. It’s just an account so all 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. I don’t go 5050 with you or 6040 maybe 8020 I know she says no to 8020. Okay, so we’ll go 50/50 alpha 10 to 20 grand She signs on the loan and I may say you gotta put in maybe five grand to refurbish the place and so we’re pretty fair 5050 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 from 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 you go. I want my Irey 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 a 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 He said if you had 20,000 in cash Would it be better to put it through the IRA then buy the real estate or just buy real estate with regular dollars? Okay. So Samuel says mark buy in rentals. I’ve got 20 grand Should I do it in my own name or should I do it in? my IRA Samuel I hate to say this you’re not gonna like the answer You do both and this is Sir area was Ferrer Ian. What was that was their name, sir, Arian? This is the same answer for sir. Aryan 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 and your IRA accounts or go out and buy the first going 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 loved 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 not Wall Street All right. Next question Norman. What’s your take on brr? Strategy B are our strategies? I’m Norman, I’m sorry. There’s so many acronyms in my head BRR you vit you bet you d fi IRA 401k I don’t know what B are our 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 little own industry standards or acronyms So please type below what BRR means and we’ll talk about it. Sebastian says if your and let’s say $700 and you rent for 1200 sure you pay more on your mortgage to pay it down speaker Okay. So, um Samuel no Sebastian says he’s got a $700 $700 mortgage payment and the rent is twelve hundred So, this is cool. So he’s got a $500 a month cash flow now I’m gonna 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 500 a month 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 five hundred month 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 move forward. There’s a lot 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 to 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’d immediately create a reserve of probably three to four months Just in case you have a vacancy or repairs that’s gonna give you 2,000 to 2,500 dollars in reserve if 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 500 a month, I’d probably um 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 real estate deal Maybe you pay down the mortgage quick enough and then you do a HELOC and strip out the equity buy another rental But I do like real I like mortgage pay down strategies once you have a reserve. I think it’s a great idea Okay, I’m going to do procedure after two more questions and on Air sorry, I can’t see I don’t my glasses on Aryan Okay, so Aryan 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 fifty five hundred into a Roth. Oh, we’ve got lots of ideas here people I’m gonna 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 six thousand dollars last year was fifty five hundred You can put six thousand dollars in there And if you’re 58 years old or over you can put an extra thousand in so I can put in seven thousand dollars now That’s the same amount for a Roth now if you’re married you might double down so you could put in twelve grand or 12 grand in a Roth because you’re married and you both contribute to your odds 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’d love to talk about You might be able to do a couple extra Roth’s with your kids Which could be another 5 grand 4 grand 6 grand whatever so there could be another 10 in the mix So all of a sudden what you’re doing Sebastien is you’re taking your Roth contribution your spouse’s Roth contribution to 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 gonna 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 an ant based business a service business and you can fund up to 19 ball 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 Aryan Aryan. There’s ways to put in a lot more than a Roth of six grand. Okay, Norman BBB I rehab rent refinance repeat Oh Baby B is an acronym he learned probably in an education workshop that says buy reef 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 gonna decide with his investor who happens to be an IRA They’re gonna 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 to 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 owners guide to financial freedom talks about a business owners 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 Ok, Rosalia men. We have 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. All right, maybe I’ll do step one step two Step one is you Take your regular IRA your regular Roth and your regular 401k and 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 calm you can go there right now and open an account and move your IRA Roth or Over there now a 401k if you have a solo 401k urn 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 Coverdale and education IRA or a health savings account So step one is you’ve got to transfer the money to a stockbroker is lack of a better word a Trust Company I’m gonna put Trust Company or custodian that can then allow you to self-direct now once the money is at there and in fact I’m gonna 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 choler million dollars on on YouTube and you’ll love it now once you around 300 bucks now once the money’s there step 3 You call him 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 has 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 4 you open a bank account and LLC, you get to be the manager don’t believe anybody when they say you can we give you a comfort letter from our law firm? That stands behind the whole procedure and how you do it. This has been people I’m doing this for years Mitt Romney when he was 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 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 No X 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 5 Is you take the LLC and you go make an offer on a property and I on this note I wanted to give you one last freebie if I could If you want to email me and you put a non-recourse loan in the subject line Another thing you can do is email me and but 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 know 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. All right, I’m gonna spend the rest of time answering your questions. Let’s get rockin Praveen The range are you not eligible for that? Okay Praveen says if my income is too high can I do a traditional and a Roth? Well if your incomes too high You have to pick or choose, you know, are you gonna do a traditional or Roth? And if your incomes 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 It’s called the backdoor Roth IRA now you can type in YouTube mark Kohler backdoor Roth and What that entails in praveen you’re gonna 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 an L 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 Iraq 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 it’s 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 three thousand square feet house with a 2,000 square feet 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 drop our pension and I have $100,000 plus coming would it be better off selling paying off my pension and renting or using my 401k? if it can be self-directed and then grunting 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 gonna sell it or rent it and then he said or boo-boo. 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 a call to prohibited transaction So you cannot put that property in your retirement account because you already own it so I’m gonna recommend what I was saying – sir Aryan 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 a cash flow if it’s gonna 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 I loud 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 ten 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 sounds so easy And this is a really risky thing self-directing is two words. This is like Jim Cramer on Mad Money on CNN He’s like, oh never self direct you’re gonna 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 gonna get freakin audited now, of course, that’s what your broker is gonna 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 Botero says mark what 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 gonna do we got two houses Jay under both of these examples You’re gonna go to get a loan. Okay. The first one is you’re going to do an LLC You’re gonna have 50 grand through one IRA or multiple IRAs, you’re gonna keep a $10,000 reserve. You’re gonna put down 40,000 and you’re gonna get 60,000 as a loan They’re our 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 gonna loan to this person? Your credit union Wells Fargo and you can go out and get a normal Resident loan to buy this property with 20% down I mean you might even get an FHA loan for five or ten percent down. Oh, but mark this person’s got to live there Yeah They’re gonna live there for the first little bit As you paint it and fix it up and then they’re gonna move out and you’re gonna rent it But this person is your credit partner. They’re gonna be the one to walk into the bank and get the loan This is going to provide the downpayment We do it all the time. I mean, this is not Illegal and start you you just got to think outside the box. So I hope that is 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 gonna love go ahead Rosalie herb When using two solo 401k combined with a non-recourse loan to purchase a passive property Then there another tax associated with the leverage portion. Okay Herb is on to something. This is good. He wants to get deep when I herb I’m with you herb says what’s gonna do two examples, let’s do one in a 401k and Do one in an IRA you’re gonna like this herb Herb says we’re gonna use. Jaybo Tarot’s example. We’re gonna go buy a rental we’re gonna have an LLC we’re gonna get a bank and we’re gonna go put down 40 percent and sixty forty grand and get a loan for 60 grand and there’s gonna be an IRA or In this example. Sorry, it’s gonna be a 401k and I’ve got a person is that okay? So we’re gonna get a loan That’s what that it’s what the example he wants now in this example the 401k Provides the 50 thousand we have 10k in reserve and forty thousand for the downpayment in a bank providing a sixty thousand dollar 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 gonna sign on the credit. I’ve got a bank and the bank’s gonna loan 60 grand I’m gonna put down 40 and have a reserve of 10 Okay, so I’ve got two houses one with an IRA and one with the 401 K Now what Jay says is well mark Since you got dead isn’t there an extra tax? Because related debt finance income you’re gonna 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 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 gonna 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 you dfi Because you dfi 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 sixty seventy plus 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 Marge a Kohler com sign up for my newsletter. I’m gonna 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 gonna go to protest or 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 gonna 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 two or three hundred bucks. Get a flight over there It’s on the North Shore. Let me see as a state planning special coming up next month. We’re doing estate planning specialist for A huge discount the best way to get notices on all this is to sign up for the newsletter Which we were doing for 12 years now and it’s free and you can get over to mark j cole or 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 couldn’t attend down there if you’re in Miami or Fort Lauderdale get to my website and you’ll hear about that as well. Thanks I ready

25 thoughts on “How to Put Real Estate in Your ROTH IRA with Mark J. Kohler | 2019

  • I’ve trained BJJ for 13 years… leverage is awesome… but God help you if you get on the wrong side of it.

    I would not want to be too highly leveraged in real estate investments… mortgage companies arent stupid… if they require PMI insurance THERE IS A REASON!!!… cause they know it’s risky to be under 20% equity

  • Good stuff, Mark. You should really do a piece on Mega Backdoor Roth (it’s different from Backdoor Roth) as a turbo funding method. Through 401(k), you can pipe up to the full $56k limit per person into a Roth IRA; you’re not limited to the $19k cap.

  • Can you use $’s held in a self directed Ira to hold debt (an interest bearing note) on income producing investment real estate rather than the IRA (or LLC within the IRA) actually owning the physical real estate? The physical real estate would be held outside the IRA.

  • Mark I don't get why "they" don't get it!?!?! Guys change your mind set. I'm 55 and have $30 in my accounts right now……total. I just started 2 new jobs which brings my income to approx. $6k a moth. My expenses are $1,600 a month. PERFECT. Save/invest 2k into my IRA….real estate. Buy rental property , deposit rental income directly to the IRA. Retire millionaire at 67.(watch Marks video on that) Makes sense. I'm going to add to my income by turning my hobby into a side hustle home-based business, deduct my apt. space for business expense and invest that income as well into my HSA. C'mon guys. Mark is laying it out plain and simple. Open your minds.

  • I'm 30 years old, it's been my dream to start owning real estate. I just started about 3 months ago investing in my work 401k and my Roth ira. My ten year plan is to own at least one rental property. How can I get your guidance? I live in PA

  • Hi Mark,
    Can I form a LLC with trusted friends with our Roth IRAs and split the ownership of that LLC based on value? If this is possible, I’ll talk to my friends and then give you guys a call!

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