| There are easy ways and there are hard ways to | | | | as well, whether for private placement of equity |
| raise private money. One of the easiest of the easy | | | | capital or a promissory note. With a ROTH IRA, the |
| ways to raise private money is to incorporate | | | | investor contributes after-tax dollars and does not |
| self-directed IRAs each time you talk to a | | | | pay any taxes on the gains after a 5 year minimum |
| prospective private investor. | | | | holding period if over 59.5 years old. Principal funds |
| Self-directed IRAs are still relatively unknown outside | | | | can be withdrawn without tax consequence if the |
| of the niche real estate investor world, which means | | | | account has been open for at least 5 years. ROTH |
| you have some huge advantages - you're not just a | | | | benefits may be even bigger for your private |
| face in a crowd saying the same thing everyone else | | | | investors, because they have the potential of big |
| is saying. Lest you forget that there are a lot of | | | | gains long term without yielding anything to Uncle |
| other forces out there competing for your private | | | | Sam. |
| investors capital (financial planners, stock brokers, | | | | The 'wow' factor - Since most people, accredited and |
| banks) it is critical that you have a unique proposition | | | | non-accredited investors alike, are unaware of the |
| for them. | | | | fact that they can invest in real estate with their |
| As soon as I began showing potential private | | | | IRA, you have what I call the 'wow' factor going for |
| investors self-directed IRAs - which meant educating | | | | you. You can take on the role of educator and |
| some of them on what they were and the benefits - | | | | provide valuable information to investors who never |
| the floodgates really opened up. Soon, some of my | | | | knew this option existing for their money. Most |
| biggest investors began developing in the process of | | | | private investors are quite receptive to learning about |
| converting their old 401(k)s and SEP/SIMPLE IRAs | | | | new ways to make money and grow their |
| into self-directed accounts and then placing those | | | | retirement accounts. Who better than you to tell |
| funds into my real estate investment projects. | | | | them. |
| At their core, self-directed IRAs are simply Individual | | | | Ease of use - Self-directed IRAs are quite easy to |
| Retirement Accounts that allow the account owner | | | | work with. The paperwork process is really no |
| to make decisions about where the funds go. The | | | | different than opening up an account with a large |
| funds can be invested in real estate, promissory | | | | financial institution or bank. The private investors mind |
| notes, private placements and more. The accounts | | | | is put at ease because their custodian will handle all of |
| we're talking about aren't offered by most financial | | | | the tax reporting requirements and account |
| service companies (like Fidelity or T. Rowe Price). | | | | maintenance. |
| There are special custodian companies that handle | | | | Access to more capital - Your investment pool |
| these accounts. Per IRS rules, a custodian or trustee | | | | widens significantly with self-directed IRAs. Private |
| must be involved and all the same tax rules apply for | | | | investors can roll over or transfer funds from an |
| early withdrawals, roll-overs and treatment of | | | | existing IRA/SEP/SIMPLE/401(k) or they can |
| distributions/RMDs (required minimum distribution). | | | | contribute funds from another source. In many |
| Here are 5 Reasons that Self-Directed IRAs should | | | | cases, private investors have investments that are |
| be your best friend when raising private money for | | | | under performing or languishing and will happily move |
| real estate investments: | | | | them to a new account for a few percentage points |
| Tax-deferred growth - The basic benefits of a | | | | more in return. |
| traditional IRA apply to self-directed IRAs: investors | | | | There are many more reasons why Self-directed |
| can contribute money to an account on a "pre-tax" | | | | IRAs should be your best friend when raising private |
| basis and defer income taxes on those gains until the | | | | money, but the preceding 5 reasons should suffice in |
| funds are withdrawn, at which point distributions are | | | | lighting a fire under you to incorporate these |
| taxed at ordinary income tax rates. This is great | | | | awesome tools in your business right away. Creating |
| because it allows the private investor to compound | | | | information sheets, brochures or other materials to |
| larger sums using what would be tax money owed | | | | show private investors these benefits and how they |
| to the government. Deferring income taxes alone can | | | | can take advantage of them by investing with you is |
| lead to huge percentage difference in investment | | | | a great start. Uncle Sam doesn't usually hand out a |
| value after just a few years. | | | | lot of breaks, so when he does (and it can actually |
| Tax free growth - Self-directed ROTH IRA's can be | | | | result in a truckload more private money) you should |
| used to place funds into your real estate investments | | | | take full advantage. |