Nathan Long 3 Brian: So tell us a little bit about how people
fund their real estate transactions with your company.
Nathan: People often will use retirement accounts.
It’s not much different than how you fund normally.
You go to a title company or attorney of your choice, who will draw up the note or the deed
of trust.
And you pick an interest rate that’s both good for the person that’s loaning money
and borrowing the money.
Often the interest rate’s a little higher.
Brian: Right.
Of course.
Nathan: Right.
But it’s got to be affordable for both parties.
It’s not like we’re telling you what that interest rate is.
So it’s different.
Real estate deals happen differently.
And at that time when we close, the IRA is the lender, as an institute.
The loan to that individual and they provide a note or deed of trust.
If anything happens to that individual, it’s very easy in Texas to foreclose on an investor.
So they’re very secure with their money.
Brian: Uh-hmm.
As long as the deal makes sense and there’s enough equity to begin with, then that’s
a great way.
Nathan: I mean, it’s a great way to do it.
I’ve been doing it myself for years.
And I like it, because I’m a really bad real estate investor.
Brian: Okay.
Nathan: I’m really smart about a lot of things, but I’m a bad real estate investor.
I believe contractors.
I’m horrible with toilets and tenants.
You know, I do much better to loan it to someone else that knows what they’re doing and participate
in the deal in a hands off way.
(0:01:58.7 - Relationship between assets and Self-Directed IRA)
Brian: So I want to know how far removed you have to be.
So let’s say I have an LLC that does, that acquires the properties and I have a Self-Directed
IRA.
Can I lend my money from the IRA to the LLC that I own?
Nathan: That’s a great question.
The answer is no.
They call me Dr. No, sometimes, not because I know a lot, but because I say “no” a
lot.
But the reason is there are people that are called “disqualified persons” by the IRA.
That includes yourself, your spouse, your lineal ascendants, basically, your children
or parents.
Their spouses.
Here’s the kicker.
Companies those people own, control or manage or are highly compensated by.
Those people can’t buy, sell, trade or extend services to or from your IRA.
When your IRA’s buying property, it’s strictly for the benefit of what that account
was designed for.
If it’s an IRA, it’s designed for your retirement.
It’s a covered education account, it’s designed to educate your children.
And if it’s a health savings account, it’s designed for that.
For healthcare.
And as long as you can identify those needs and you put money in those buckets and use
them according to the needs, that’s one of the ways that you live well.
But your benefit is when you remove that money.
So you can’t buy a house from yourself or sell a house to yourself.
You can’t loan money to yourself.
It must be a third party.
That’s why I always say, real estate’s a contact sport.
You have to know other people and know what their needs are and you fulfill each other’s
needs.
I might buy real estate outside by myself and own real estate properties and still loan
my money to another real estate investor.
And that same real estate investor might loan his money to me.
Brian: Right.
I’ve heard that.
So people who know each other, loan money back and forth.
And that’s one of the ways that they build wealth for themselves.
Nathan: That’s correct.
(0:03:45.3 - Can IRA own rental property?)
Brian: Very interesting.
Can your IRA own rental property?
Nathan: Yes.
Very simple.
A lot of people do it.
Own direct purchase of rental property.
The only thing you have to understand is all the expenses for purchasing that house must
come from the IRA.
And all the rent and everything else goes back to the IRA.
(0:04:02.8 - Does IRA earn interest on cash?)
Brian: And does the IRA earn any kind of interest or anything sitting there?
Nathan: Whenever there’s cash sitting there with me, absolutely not.
It sits like a rock.
Brian: So you’re got to do something with it.
Nathan: You’ve got to do something with it.
There is an important point to understand.
It’s safe.
It’s FDIC insured and stuff.
But most of my clients don’t keep very much cash in it.
They might have an account with someone like Charles Schwab.
And they buy stocks, bonds, mutual funds, CDs.
With us, they buy real estate or notes, types of placements.
And they move money back and forth.
So they keep their cash balances with Charles Schwab.
And as they need it, they move it over, buy a house.
They sell a house and they get some rent.
They’ll move that back over to Charles Schwab so they can keep the money moving.
Brian: Oh, very interesting.
Well, for more information, I’d visit QuestIRA.com.
Like I said, the website is incredibly informative.
Great resource.
And you can visit us at BigStateHomeBuyers.com.
And you can check out our investment properties at BigStateHouseDeals.com.
Thanks very much.
Nathan: Thanks, Brian.