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hey everyone how you doing today this is the episode that i highlighted in this morning's daily financial news we're bringing on an expert in ira we're going to talk about using your ira to buy real estate we're going to talk about using your ira uh to make investing or be a private money source we're going to talk about how you can open your own self-directed ira we're going to talk about a book we're going to talk about courses i told you we're going to find somebody you've been asking here we are let's welcome dennis blitz to the show how you doing dennis very good thank you very much mike for having me oh yeah this is this is the number one topic i'm asked about that i have yet to serve so i want to thank you for being an expert in coming on and kind of giving us at least the initial blocking and tackling and then we may need you to have your back to go deeper but uh let's let's get the first couple of topics out of the way uh if you don't mind terrific awesome so why don't you just first tell us who is dennis blitz tell us about ira club ira club and just you know give us a kind of bio of you in in your business well the bio of me is is is very dull so i'll do it quickly [Laughter] i spent uh my whole career actually about 30 years i wrote textbooks for uh exam preparation for people in the securities industry uh if anybody around here is familiar with what used to be called nasd now it's called finra there are lots of regulations for security brokers and and those regulations have exams and uh i wrote test prep books my whole career so anybody you know who is a stock broker uh whether they sell mutual funds or you know listed securities or even variable annuities they somewhere had a an exam uh issued by the government that they had to take and and i wrote those books and lectured all over the country so really have sold over hundreds of thousands of books but they were never on a new york times bestseller list because they were you know it was it was bought by prudential or was bought by merrill lynch or was bought by somebody like that so that was my career when i left that job or that that career i had a 401k uh and i had been doing the same thing for 30 years and a 401k after 30 years does build up and and even if you you know even if the damn thing is mismanaged it's going to build up and uh here i had this 401k that needed to you know you know you get the letter and i got the same letter that everybody else gets and i'm a securities guy uh i know the securities rigs so maybe i was in a little better condition than most people who get the letter and say well i don't know what to do yeah and you know what that letter says that letter says hey look you've got to decide what you want to do with this 401k you could and then they give you choices leave it here and it just stays here well you know you think about that for a minute and you realize very quickly what's going to happen is i can't make any more contributions my employer is not going to make any more contributions but all those high fees that are associated with foreign case they still stay i would be lucky if the money stays stagnant for the next 10 years so maybe just leaving it there is not a good idea the next choice they're going to give you is you can transfer it to a a brokerage firm and they'll list a brokerage firm and lo and behold that brokerage firm is going to be the same firm that's managing the 401k it always is it's going to be fidelity it's going to be charles schwab fidelity firing away the most common but one of those firms and then what they're going to do is just drop it into a fairly conservative mutual fund because remember those firms all make money on the same thing they don't make money when you make money they make money when they hold money and so the idea that they all have is the same thing just keep it alive just keep it alive now how important is that to those firms well i can tell you how important it is there's 11 trillion dollars in iras there's another 9 trillion in 401ks all together it's about 26 trillion and those companies just like to hold that money and get that little percentage every month so if the market goes up they get their say they get a percentage if the market stays the same they get a percentage if the market goes down they take a percentage and they're taking it always from your account so i think well that wasn't a very good idea the third idea that they always give you is you can buy an annuity an annuity is a very interesting idea because i wrote for insurance companies so i know what an annuity is an annuity is you give the insurance company all your money and then they give it back to you very slowly a piece at a time right that's what it is and so that's not a very good idea and that's about where the letter ends check one of these boxes what those letters don't say is there's other choices that you can do oh one is the i'm sorry there was there's another choice you just take the money yeah and just pay the taxes and pay the taxes and go you know go away goodbye uh but the tax hit is a big hit you know undo that the choice they don't tell you is you can transfer to any ira or 401k that you like and one of those iras is what's called a self-directed ira which is kind of what we're going to talk about now the self-directed ira interestingly enough is the original ira you know the original ira says you can invest for your future on a tax preferred basis that's simple you can invest for your future on a tax preferred basis so let's nowhere nowhere in the ira regs and believe me i read them nowhere in the ira regs does it say you have to invest in stocks you have to invest in mutual funds you have to have a stock an account at fidelity or you have to have an account merrill lynch it doesn't say that at all it says you can invest for your future so that brings us to where we're at today is a uh can is an investment in real estate an investment for my future well of course it is that means it's eligible for an ira so let's say you call up fidelity and you say you know what i've got this ira and i want to buy a house the house at 123 green street well what's fidel going to tell you first of all fidelity can't make a profit on you they can't get a a management fee on that house they don't get a commission when you buy it a commission when you sell it and money flow when you hold it they say can't do it what they should be saying is he can't do it here right what they don't say is they just say you can't do it and most people and i can tell you the number is 97 and a half percent of the people just say oh well they said i can't do it and they don't wow only two and a half percent of the people push further and realize well if i go to a company that will accept that transaction fine and so self-directed ira companies like like ira club will accept any transaction that's allowable in the irs code which is pretty much any investment for your future okay so that is the ira club that's what we do with thousands of clients we've done tens of thousands of transactions uh we hold over 10 000 individual houses uh for people in their iras and it you know it's a it's good for the client uh it's way less you know it's way more attractive we think than having uh you know some mutual funds in your your ira so let's just hit this right now and hit it again into that and i know a lot of my followers are already going to go okay i want to know more so dennis how can they reach out to you or your firm what website do you want them to go to to to poke around maybe talk about the ebook that you've just released sure they're probably already excited the the uh very quickly uh let me give you we'll talk about a lot of things but i'll give you i'll give you the website first website is ira club.org o-r-g because we started as a club and so we're an organization uh and uh uh we got that you know tag when we became a commercial company we just never changed the tag uh and the reason i never changed the tag was i already had my letterhead printed and i didn't want to buy more letterhead so so so letterhead uh you know that was expensive so ira club.org very very simple and you'll see what you can do and by the way if you go to ira club.org uh there's there's a thing on there called uh investors row uh and investors row you can click on it and you'll see other investments that people are offering so i'm i'm not here to sell any of those investments i don't endorse in those investments but those are those are companies that that you know have sent us clients and we'll put their name on our on our on our page uh but that'll give you an idea of some of the things and so maybe you're interested in you know single family homes and you can click on that key or maybe you're interested in gold and silver and maybe you're interested in in uh life settlements or maybe you're interested in lending money or maybe etc etc so all those things would be there i think there's about 40 or 50 different investment options which is just this much of the universe very cool so we'll hit two of those topics i'm sure we'll have you back and hit more of them later but let's talk about real estate investing that's what this channel is and let's start first from hey i have an ira uh i would like to buy an investment property and we'll actually answer we'll do an a and b we'll we'll do one for cash right i'll just use my ira funds and pay a hundred percent and then maybe the second one will do hey i need a loan i'll put fifty percent down so we'll let we'll address both but my ira my investment property first so and that's that's very good so let's that's a good place to start so let's and by the way we do that transaction probably a few dozen times a week so you know we have a lot of experience with that uh there'll be no you know fairly nothing new about that when the guy says i've got 100 of the cash and is that is that you that just popped up mike on i got a i don't know no nothing on mine you look good on mine keep going okay whoops i just lost you mike you're here i can still see you you can still see me okay and i can hear you so you can just keep okay i'll just believe i i'll just believe because i i am now looking at uh the front page of the wall street i journal you okay good so so here we go so what we want to do is is talk about exactly how to uh buy a house with your ira and and the layout that mike gave us is the most straightforward layout uh i i've got this property i want to buy this property uh and it's oh it's eighty thousand dollars and i say eighty thousand dollars we're in the midwest i know you're in california and and you know i know a garage is eighty thousand dollars in california but but a house would be a you know is is whatever we i'll use eighty thousand dollars sure and it needs maybe a hundred and uh maybe probably another forty thousand of rehab to get the way i want to so really and people will always call us and say that i i've got this 80 000 house and i want to put in 40 000 of rehab etc and and believe me we aren't listening to you at that point because we know there's no such thing we follow the irs thought process the irs says there's no such thing as an eighty thousand dollar house that needs forty thousand dollars worth of rehab what there is is a hundred and twenty thousand dollar project and that makes sense because when you're gonna sell it you're not gonna sell the house to one person and the rehab to another person you're gonna sell the whole thing yep so we're gonna call it what it is it's a hundred and twenty thousand dollar project and we don't care what is house what is rehab what is curb appeal et cetera we you know what is what's this project gonna come out to okay and the person says and i have that much money in my ira and i want to use it to invest it with my ira and and we'll talk we'll talk more about why you want to do that a lot in a few minutes you simply have opened a self-directed ira account you can do that on the phone with us it takes about uh 15 minutes to do it 10 minutes to do maybe uh if you talk slow we can do it faster if you're in a hurry uh but call it 10 minutes we will send you something for you to sign you'll sign it and send it back but pretty much the next morning your account is open step one uh actually that's step one step two is we need to fund the account we need to put money in the account because the account is going to be the buyer and so or say where's your money right now and you'll tell us it's a fidelity it's a swab it's it maryland should sit wherever it's at and we'll fill out the their form you know they'll supply us them with their form and we'll fill out their form and you know we'll send that to you sometimes if you know at the beginning we'll send it along with the application and you'll sign it and basically what you're signing there is you're saying we give the ira club the right to move this money and so we'll contact them we'll say uh we take responsibility for the ira account of mr so-and-so and here's his account number and we take responsibility for it and most people don't know that one ira company will take direction from another ira company and so fidelity will say fine send us a piece of paper and it says that and we'd send it off to them and then they will send us what's in that account now generally we do want you to liquidate what's in that account because we don't want you to send us your 200 shares of you know uh general motor stock uh there's we you you can't take that to the closing you can only take cash to a closing and so you know liquidate what you have we'll bring the money over we call you up the next day or you actually get an automatic email and say the the funds are here they're available for investing tell us what you want to do if you've already got the house picked out you're probably ready to go now or if you're still looking so you're still looking and you would call us up and say okay here's the property i want to buy it's 123 green street it's going to cost 80 000 the closing is on this date it's at this title company we like closing the title companies and so uh it's this close title company and then we have all that data you'll again sign a form for us to say yeah please send the money because we don't just send money out without your signature but we'll call the title company and we'll say to the company you do know that this guy is not buying that house his ira is buying that house yeah and so here's how to title it and that's really what title companies want they want to hear who's the buyer you know they they want they want the proper titling which we which we'll give them and then the procedure takes place the the closing takes place the ira now owns the property you've got some rehab to do maybe you're using a contractor maybe doing the rehab yourself and and uh you will let us know where to send money when when it comes in i will tell you if you have a contractor we get you know we get an invoice from the contractor and you know you authorize it and we will pay that uh if you do the rehab yourself uh there is a rule on iras and that is you have to you can manage the ira matter of fact you can do everything that's important you can pick the property you can just negotiate the price you can decide how much rehab you want to do you'll decide what color you want to paint it you'll decide you want to put shrubs in the front of the house to improve curb appeal you're going to make all the decisions the one thing you can't do is you can't do physical labor yep so you cannot go in and say uh you know i'll paint the you know the front of the house because i like painting the house you know i'm i i like climbing a cup on the roof and tacking down shingles you know don't do that just leave a nice trail that there was somebody who did that for you and you know we'll send the checks out of your ira because your ira is the owner the ira is going to pay all the costs and then you will say okay i'm going to either rent it or resell it and if you rent it terrific and just know that the ira will receive the rent income yep if you sell it that's fine too uh we'll provide all the documents that the title company will need so they can for their closing but the proceeds will come and and if title company does it it's very simple because title company will know the proceeds will come to the ira because the title companies will always send proceeds to the owner and it'll be very clear the ira is the owner not you now if it came to the ira what was the tax implication to you none because iras don't even fill out a 1040 form and so there is no concern about is this a long-term capital gain is this a short-term capital gain there is no concern about how our capital gains going to be changed under the biden administration there's no concern about any of that because you the tax relient weren't the seller your ira was a seller iras are not a taxable vehicle and so uh you you you had 120 into this project you sold it for 180 or whatever the number might be congratulations you now have 180 to move forward with for your next project and we have seen people do very nicely with this all inside the ira where there is no uh uh taxes uh you know make that same transaction on your own there's a lot of taxable events and and you know it just eats into your ability to compound and and to grow and so that is the most straightforward transaction we see a lot of those transactions actually in the midwest and again you're we're in california and it's a more aggressive market and the midwest we have a lot of people who buy and hold those properties and will rent those properties for years and years and years and you know that's just fine yeah that's i know several people that do that in their i were both both i know several people that are flipping you know one or two houses a year in their ira i know others that hold title there the one thing i want to talk about this scenario just so people realize is you've got to make sure you have a margin of safety that's left over in your ira because if there's any surprise costs or anything your ira is the owner right yeah in the example that you you propose right the ira is the owner so the ira is going to pay all the costs the ira is going to get all the benefits so you do need that margin safety as you say you know if you pencil this out and it's going to be 120 000 and you've got 120 000 dollars and four cents you know i would kind of discourage you to do that right you want you do want you know some some extra how much extra is always the question i get and and people are looking for a hard number which we don't have i mean you know some some properties you say this is a rough property there may be stuff i don't know about and other properties you say hey this is a pretty clean property and again the reason you want the margin of safety is because there's rules around how much you contribute when you contribute you you can't just be your cash again it's it's a whole thing so again definitely do yourself a favor reach out to our ri r i r a club darn oh sorry i'm getting distracted uh the other thing i want to highlight here is you actually have a series of videos because there's a lot of detail and things to think about why don't you talk about that series of videos what it is and then we'll go to the next step let's let's you know what let's put the videos at the end because i want to go to the next step right now while it's let's do it okay so the next step is is wait a second i want to go to a step that's a little further down the line there are people that there are people uh here that are listening who say i want to buy that property over there uh i've got it penciled out uh this is how much i need uh and and uh i'm having a difficult time with the bank because banks just don't seem to be very cooperative with with newbie uh uh company guys who are doing their first second or third project um and where the hell do i find money right and and the through where the hell do i find money let me tell you i'm gonna go back to what i said at the beginning there's 11 trillion dollars in iras and if we stood up all the people have iras in line and said to him how many people here are thrilled with the results of their ira not a lot of people raise their hand a lot of people are very disappointed in the results of their ira you know and and for all sorts of reasons one is they don't really watch it it's being managed by a company whose only goal is to just keep it alive so they get their fees and so they're saying gee i would like to do something different with this ira so i strongly encourage people to whenever and and you've probably said this on pre-preceding casts and that i haven't heard but you know there are a lot of investors who are especially the rookies who will come up with this project and it's at you know this address and they don't tell anybody about it because god forbid somebody's going to know what i do and they're going to swoop in and they're going to buy this you know project out from under me or they're going to do what i'm doing don't worry it's not going to happen if you're doing a project tell everybody tell everybody and then you're once you do that you're going to find an awful lot of people say hey i'd like to invest in that project yep if you've got an ira they can invest so can your ira lend to somebody else is a loan an investment for your future yes it is absolutely yeah and so i will tell you we see almost as many loans out of iras as we see people who are buying real estate out of iras and other things too lending is a very common thing now how much you're going to pay well maybe you're going to pay a percentage or maybe you're going to say wait a second we're going to actually partner on this deal and you'll get so much of the profit uh and and i'll get so much profit from my intelligence and labor and et cetera and so lending is very very common out of an ira uh we do want you to of course have a promissory note where you are going where you uh the contractor or the builder or the developer are going to pay back that ira and and you know and and and we do read those we do read those notes uh so we we make sure it's it's signed uh we also like i will tell you uh we like to see a uh end date yep and and we it's amazing the amount of rookies that will come in and send us a note that has no end date no it's astonishing don't laugh don't have i'm sorry okay cut that out now no it's astonishing because what what they'll do is they'll send in something with no end date at all and so you know we call the you know borrower the lender the guy who owns the ira back we say when is this loan due and they say oh he'll buy me back and we just say i know he'll pay you back when you know just when we're trying to figure it out and and so there'll be a do on sales clause would be the next common one and they said well we'll pay you back when we sell and and that's nice pardon me we'll pay back when we sell but but the problem with payback when we sell is and we've had this a couple of times and i'm i'm really talking to the lenders here more than to the to the borrowers the we've seen this a few times that the developer gets that property up and he says wait a second i can rent this at a substantial you know rental rate i'm not going to sell it and at that point the loan is never due ouch and we've seen it and so now what we say is we like to see and and you know you know you know how long this is going to take or it's supposed to take and gee i think this i can do this whole project in in 90 days i can do this whole project in 120 days i can do the small project 150 days whatever your time frame is i would encourage you if you're the lender your ira is the lender to say look at this guy says he can do this in 120 days right in there a due on sale clause or 200 days further out whichever is sooner so it's january 1 right now he says he's going to get this done you know probably in 120 days that's what is that it's uh uh may 1. so i'll say okay it's due on sale or by august 15 whichever comes first you put you gave yourself a backstop so that that developer has to figure out hey i've either got to sell it i've got to refinance it i've got to do something because there is a real due date coming up so you you you you you do want to see uh we do want to see a real due date uh and then yeah you're on you're on people paying we're seeing people pay lower interest today than we did before of course uh and we're seeing a lot of interest you know i've seen interest go all over the map uh and you know name a rate uh to the point that we've sent it back and said no this is usury yeah uh really we do and and uh but but uh we're seeing some you know pretty good stuff at uh 10 11 12 percent uh right now uh you know we're seeing some stuff at nine uh every now and then we get one that comes in by the way uh with a zero rate of interest rate on it and you know what we have to reject that and we have to reject it because there's a rule that says iras are here to make a profit right and if you are lending for zero percent we know you're lending it to a family member you're lending it to a buddy you're lending it to whatever you're lending it to uh and and it's really it's it's you can really make it a gift and i already are pretty awful at making gifts there you go this is this is exactly what i was hoping we would cover i want to do one more topic uh because i think people are going to ask and then we'll have you back to do some other topics and that is hey if can i get a loan inside my ira and if i can what's it look like hey i'm used to getting a 97 percent loan can i do that in ira what what do loans look like and again we'll assume this is buy and hold okay this is buy and hold okay very very quick i'm glad you did this because i had so many other things i want to talk about i want to talk about partnering with your ira i want to talk about a bunch of other things with your area but but but borrowing uh if you are going to borrow iras can borrow however uh we're going to talk to you for a few minutes about your business structure and maybe you want to open a solo 401k for you because the regs on solo4 and case borrowing are actually better than iras so we'll do the worst one which is iras if an ira borrows and let's say it's a hundred thousand dollar project and you're going to put in 60 000 because they have that's what you have in your ira and your iras and your is going to borrow the other 40. okay the internal revenue service says okay that's just great fine uh uh just you know and it's our job to you know keep track of those those amounts and and split them up and say wait a second this guy is going to get all this free earnings into his ira for the amount that his ira invested however he's not investing his ira money on that other 40 that's borrowed money so that is taxable income interesting i did not know that right so so what happens is and we do this accounting for you this booking before you but what happens is let's say you make you know a thousand dollars just sure keep the numbers simple and well six hundred dollars of it goes to your ira no tax enjoy yourself the other four hundred dollars also goes to the ira probably they'll pay back the loan yeah to the ira because the ira borrowed the money you didn't but the ira now has to pay income tax on 400 of income now as you pay down that loan of course the income tax comes down if you hold it long enough but uh with a 401k by the way solo 401k and a lot of people are going to qualify for that and we'll we'll write those up uh it isn't it's there is no income tax on that on that leveraged amount uh the leverage amount keeps changing of course as you're paying it down uh it is perfectly okay to borrow now how much can you borrow well it let me be honest there is no irs regulation on how much you can borrow you borrow all you want according to the internal revenue service however it depends on who you're borrowing from and i say this and i don't mean to sound you know sarcastic but there are two kinds of lenders there are smart lenders and they're dumb lenders smart lenders have a name they're called banks yeah and if i'm a bank and i see your ira is borrowing and i see wait a minute it's a non-recourse loan the ira is borrowing not this individual the only place i can go to get recapture is to the ira i'm going to look for a much larger dp yep so i'm not going to give you 97 percent i'm not going to give you you know 90 percent i'm not going to give you 80 it's going to be less and i can tell you there's a lot of banks out there not a lot there's some banks out there that are doing this and they're lending at about a 50 percent or 55 percent that's about it yeah now there's been experience too right and and but every now and then and we get them we get them we see them all the time that is seller financed and the seller just says okay we'll take the whole thing you know i know that there's you know you know only collateral is the building but that's that and and uh so there's no limit on it i i wouldn't want you to do a hundred percent finance in an ira because the tax yep uh do it in in a 401k but that's what we're here for we're here to kind of start those things out for you and then the last thing to talk about on this example again operating the building again whether it's a house a duplex fourplex whatever it is with a loan you everything is going through the ira right you need to pay taxes goes through the ira you need to replace the window because of the ira oh your your property taxes repairs yeah absolutely yeah and then of course rent goes in the ira to the ira and so so yeah it's very clean the ira is the owner and it has all the privileges and rights of the owner you know gets all the income pays all the costs yeah so there are so much to do and we will absolutely have you back um to talk about the irex i know a lot of my followers are going to go have him back we need more do me a favor talk about the videos because you've you've answered a lot of these questions in your content why don't you talk about that so we have we have two things besides you know if you want to start an account just call you know call us up let me give you that phone number it's 312 uh and or go to our website iraclub.org we also have the investors kit which has a lot of videos on all kinds of topics you know should i have a roth ira shouldn't i have a roth ira uh you know how do i name a beneficiary how do i borrow how do i lend there's much more in there on how to land than it is and how to borrow and uh you know i think there's a half there's a dozen or 15 videos on there uh when you buy the investor's kit by the way the investors kit is all video it has a bunch of other things that you get but the videos that what people seem to want uh it's 195 dollars you get a ton of information the cool thing about the investors kit is when you get done you get a free ira free ira account we don't charge you to start the ira account and i'll tell you one of the reasons we don't is because you just answered most of the questions you were ever going to ask and so it's much easier for us so it comes with a free ira account and so that's the investor's kit and and i know you have that link we also have a new book and the new book is called i have to look it up myself the new bus called make money during the biden administration and what we're talking about here in this book and it's free by the way and and the link will be available uh the book is free what we're talking about in this book is we're saying wait a minute what's going to happen during the biden administration and what's going to happen is we're going to start seeing a lot of inflation right because of some of the tax policies that are being proposed and some of the uh you know administrative policies being proposed it's going to cause inflation so it's going to cause the value of your hard assets to increase and that's a very very nice thing so so the value of that single family home you buy et cetera all those are going to keep going up and up and up at a faster rate than they have been that's a nice thing except keep reading the policies and you see there's huge tax implications coming up you know we are going up to a 39.6 i think it is a percent income tax we're uh taking the highest rate down to people who are only making 400 000 uh if you make a million dollars which is not hard to do once you're successful investor make a million dollars uh short-term capital gains goes away and you're not allowed to take that anymore so all these things are being proposed there's a long long list of them i won't bother you with them but so so it is going to be tougher and tougher and tougher to end up with a net profit right yes the value of the asset will increase dramatically but the net profit after taxes will be pressured deeply and so if you've got idle money sitting in a ira or you want to put money into an ira as much as you can let the ira be the investor especially a roth ira where it's never taxed and the difference could be as much as half again or more in profit wow lots of great stuff there i like that title making money during the br biden administration that is a wonderful book title that's that's a good one so dennis i want to thank you for your time today we will definitely schedule you back uh enjoy your trip to detroit and have a wonderful day [Music] thanks for having me you got it