9/8/13: Ask The Guys – LLCs, IRAs and Contract Contingencies

Two months ago we CRUSHED our all time record for podcast downloads in a single month.

Than, last month we KILLED that new record by over 50%!!!

This month, we’re on our way to DESTROYING the August record, and we’re only 8 days into the month.


Because we have AWESOME LISTENERS.  So to celebrate, and because it’s that time again, we ran to the email room and reached into the mail grab bag and pulled out a big stack of questions from our Ask The Guys page.

Then we put on our eye black and game faces and huddled up.  So now,  in our studio locker room for this game of Ask The Guys:

  • Your quarterback of conversation, host Robert Helms
  • The half-wit halfback and little ball boy, co-host Russell Gray
  • Your gold jacketed,Hall of Fame pontificator, the Godfather of Real Estate, Bob Helms

When we put these questions up on the chalkboard, we knew this episode would be a home run….

Oops.  Wrong metaphor.  But you get the idea…

So kicking off the conversation, we tackle a question about the difference between measuring ROI in dollars versus percentages.

At first, it seems like a simply question.  Because if you invest $1 and double your money, you only make another dollar.  Big deal, right?  Even though you have 100% ROI, you really didn’t make any money.

Conversely, if you invest $10 MILLION dollars and only make 5%, you earn $500,000.  A lot less percentage, but which would you rather have?

But of course, there’ more to it than that.  What about factoring in your time?  If each investment required 1 hour, then you could earn either $1 per hour or $500,000 per hour.  Extreme examples, we know, but it makes the point.  And when you get to the point where you have a staff and fixed overhead, even small margins are better than hemorrhaging cash.

So we’ll always take absolute dollars over high percentages.

Next, we intercept a question about what to do with a dinky self-directed IRA.  Rather than punt, we suggest a flea flicker where you combine your cash with someone else’s credit to make a bigger play.

But what about loans to your IRA?  Isn’t that out of bounds?

Not necessarily.  For example, if you loan your IRA to a credit partner to use as a down payment, then your credit partner can get a conventional loan.  It’s only one of a couple of options you have in this situation.  So don’t be dismayed if you only have a little bit to work with.

Next, we get a great questions about cash flow versus capital gains.  That’s like looking at the cheerleaders.  Which is better?  Blonde or brunette?  They both look good to us!  (What can we say?  We’re The Real Estate GUYS).

The real questions is which one is faster.  Calm down.  We’re talking cash flow versus equity now.

Cash flow is great, but most rich people got rich on equity.  Bill Gates made a modest salary, but earned BILLIONS in stock equity.  Same with Steve Jobs.  Same with Donald Trump.  Equity is just cool.

Now with real estate, it’s VERY IMPORTANT to remember that cash flow is KING when it comes to controlling a property.  Otherwise the debt can sack you for a big loss.  Not good.

But when you can FORCE the equity (do something under your control to make it worth more, as opposed to waiting and hoping that a greater fool will come along and pay more for the property in exactly the same condition as you bought it), then you can compress time frames.  It’s like running a 2 minute drill against a prevent defense.  You can earn big chunks of cash in short periods of time.

So we like equity for getting rich.  It’s offense.

Cash flow is like defense.  It keeps you in the game until the offense can score points.  Just remember, DEFENSE wins championships. So don’t diss cash flow just because it’s not as fast as equity.  Just like fast cheerleaders, equity can be fickle.

Cash flow is faithful.  And if your ultimate dream is an annuity of passive income for the rest of your life, you’re going to be married to your real estate.  How we went from football to marriage, we’re not sure.  Maybe too many shots to the head.  Or maybe just too many shots.

We got several other great questions about asset protection and privacy.  But we’re getting carpal tunnel on this blog and we’re sure your eyes are getting tired.  So do us both a huge favor and grab a frosty brew, sit back and listen to this fabulous episode of Ask The Guys.  Then, if you want to hear YOUR questions answered on the air, send us a compliment-laced message with your question through our Ask The Guys page.

Until then, enjoy the show and then go make some equity happen to YOU!

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6/12/11: The Checkbook IRA – Real Estate Investing Using Your Retirement Account

Bargains, bargains everywhere, but it’s hard to get a loan. Even in the good old days of fast and easy Fannie and Freddie money, it’s always been hard to move quickly or get approved for distressed property.  Of course, you could never get conventional loans for foreclosures, tax liens or discount notes – let alone private placements, precious metals or private loans.  So with the stock market down (again) and conventional money still tight (low interest rates notwithstanding), investors are turning to their self-directed individual retirement accounts and rollover 401ks as a source for funding.

However, if you’ve used your self-directed IRA to invest, you know the process can sometimes be a little clunky.  Your well meaning custodian often has an approval process that can take more time and money than you’re willing to invest.  Sometimes the delays can cost you the deal.

Fortunately, there’s an exciting alternative called a Checkbook IRA.  To learn more, we invited our favorite attorney to grab a microphone and tell us all about it.

In the studio for this compelling foray into the concept of Checkbook IRAs:

  • Host and Senior Vice-President of the First National Bank of Broadcasting, Robert Helms
  • Co-host and Third Fifth Assistant to the Junior Teller’s Assistant, Russell Gray
  • Special Guest, Attorney and Investor Summit at Sea™ Faculty Member, Mauricio Rauld

The Checkbook IRA allows you to act quickly when you see a great deal.  No more paperwork and waiting while your custodian reviews and approves your transaction.  The Checkbook IRA takes a lot of the hassle out of the whole process.

How does it work?  Glad you asked!  That’s the topic of this episode.  The Cliff’s Notes version is that your IRA purchases an LLC that you manage.  Once that’s approved, every subsequent deal is just a matter of writing a check, hence the extremely clever name “Checkbook IRA”.

However, without your friendly neighborhood custodian looking over your shoulder, it’s now your job to know what you can and can’t do.  But not to worry!  If you set it up properly, once you master a few essential concepts (and have your trusty advisory team on speed dial), you can whip out your new tool and stroke a check to jump on that hot deal.

Tune in as attorney Mauricio Rauld explains the ins and outs of the Checkbook IRA!

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The Real Estate Guys™ Radio Show provides real estate investing news, education, training and resources to helps real estate investors succeed.