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Self Directed Investor Talk: Alternative Asset Investing through Self-Directed IRA's & Solo 401k's
SDI Talk Special Episode - Daren Blomquist Interview
In this special Expert Series edition of Self Directed Investor Talk, Daren Blomquist, Vice President of the respected data firm RealtyTrac gives his insights on the suitability of today’s market for house flipping, along with his predictions for what 2017 holds for America’s real estate markets. I’m Bryan Ellis, your host and I’d like to welcome you to a very special edition of Self Directed Investor Talk. Please send your questions and comments to us by email at feedback at sditalk.com or on Facebook or Twitter at SDITalk. With that…
Bryan Ellis: Mr. Blomquist, how are you today, sir?
Daren Blomquist: I'm doing very well. How are you?
Bryan Ellis: Very well. Thanks for joining us. Look, I've always or have long been a fan of Realtytrac and what is now ATTOM Data Solutions, and particularly your quarterly home flipping report, because that's one of the businesses that we're in. I had a look at the Q3 2016 report, and it's interesting because it looks like overall, the information's positive, 45,000 flips last quarter with a pretty substantial gross ROI. Some of the other data, such as slowing volume of flips compared to both last quarter and compared to a year ago. At least a significantly the declining percentage of flipped funded with cash. Those things raise my eyebrows as someone who looks at this market. What do you make of those things?
Daren Blomquist: Yeah, I think the decline in flips is ... Right now, I would consider that more of an aberration that's interrupting a long-term trend upward home flipping, and the market is very favorable to home flippers right now. Now it's becoming tougher because prices are getting so high and flippers are jumping into the market, it's becoming more competitive.
Bryan Ellis: Right.
Daren Blomquist: Still, you have low inventory that's very favorable to flippers. They're providing inventory that the new home builders are not.
Bryan Ellis: Right.
Daren Blomquist: Then you have rising home prices, which is a double-edged sword. It's tough, it makes it tougher for flippers to find discounts on the front end, but it makes it a lot easier for them to sell. It gives them a cushion to some on the back end. All that to say, I think actually we saw a decrease in overall sales in the third quarter, and I think it's partially a reaction to uncertainty around the election.
Bryan Ellis: Sure.
Daren Blomquist: I think we'll see that aberration pick back up in terms of the number of home flips. Now I think we'll see it shift, which we're already starting to see to the flippers are shifting to different markets where they can actually find, still find discounts on properties on the front end, or there's more availability of discounts. A lot of times in the form of foreclosures.
Bryan Ellis: Right.
Daren Blomquist: In terms of the cash piece of it, there's fewer. It's still 68% of flippers are using cash to buy, which compared to the last housing boom, we were seeing about 35% of flippers using cash to buy.
Bryan Ellis: Wow.
Daren Blomquist: Much more of them were using lending. We are seeing that number at an eight-year low, which means there is more availability of funding for flippers rather than having to use their own money in terms of crowdfunding. In terms of other alternative financing sources. That actually is one of the reasons I think we'll see flipping continue is that's going to enable more flippers to jump in. That may not always be a good thing, but it is going to push the market higher I think in 2017.
Bryan Ellis: In your analysis or if you guys track this, who buys those flipper properties? Owner occupants or other investors?
Daren Blomquist: I don't have the exact percentage on that, but the majority is owner occupants. When we look at that ... We look at who's buying basically as a proxy, who's buying the flip, not the flipper buying with cash, but if the person they're, or entity they're selling to, is buying with cash, and we do see a fairly substantial number selling to other cash buyers, which for us is a good proxy likely for investors.
Bryan Ellis: Right.
Daren Blomquist: The majority is owner occupants, but I think you look at markets like Memphis and Cleveland, and places like that where we're seeing quite a bit of home flipping, and a lot of-
Bryan Ellis: There's a lot of investor to investor stuff there.
Daren Blomquist: Those are going to other investors who then are taking those properties and turning them into rentals. They don't want to deal with the rehab portion of it.
Bryan Ellis: Yeah. I have wondered if there are any homeowners left in Memphis at all.
Daren Blomquist: Yeah, it's the top market for flipping and it's also one of the top markets when we look at single family rentals for purchasing those.
Bryan Ellis: Right. You recently had an article called "Blue State Buyers Swing to Red State Rentals," which I thought was interesting. It was a discussion of the whole turnkey rental property phenomenon that's going on, which really reflects exactly what's going on with the clients of the Self Directed Investor Society, namely that California investors, and in our case, particularly those in the Bay Area, are finding it really interesting to buy real estate in the Southeast. What's your take on that? Why is that happening?
Daren Blomquist: Yeah. I think that investors realize that real estate is one of the best places to still get a return in this low interest rate environment. The stock market is good, it has been good, but they want to diversify and they say real estate is a great way to do that.
Bryan Ellis: Yeah.
Daren Blomquist: Investing in their backyard is really a non-starter when you're ... You just can't cash flow property.
Bryan Ellis: Right.
Daren Blomquist: Flipping a ... These are the type of investors who probably don't want to get into flipping. They're professionals, they have a day job. They're going to those markets where you can't cash flow and there's still a lot of lower priced properties available that can be purchased and cash flow very well. I would just mention we're not just seeing it in the South. Southeast is a big center of it, but we actually broke it down for Orange ... I know you look a lot at the Bay Area, but we looked at Orange County, California, which is where we are, and where the top counties were, Orange County buyers are purchasing rental properties basically. Not surprisingly, the first few counties were right in the immediate vicinity, but in the Inland Empire where prices are cheaper. Then after that, you have of course Las Vegas, Phoenix are near the top. Then you have places like Memphis. Memphis was in the top 10.
Bryan Ellis: Yeah.
Daren Blomquist: Shelby County there. Of places that Orange County buyers are purchasing rental properties, you had Wayne County, Michigan [inaudible 00:06:14], which is not really Southeast. That's Detroit. Was one, was in the top 10 for places that Orange County buyers are purchasing rental property. That was-
Bryan Ellis: That's interesting.
Daren Blomquist: That was an eye opener and certainly we see ... Anecdotally, we hear a lot about that as well.
Bryan Ellis: Yeah. Daren, in February or so this year, you had an article out that had some housing predictions, some forecast for 2016. I wanted to take a minute to hold your feet to the fire, so to speak. See how things actually worked out in practice. Let's look at the predictions here.
Daren Blomquist: Great.
Bryan Ellis: I'm not sure if these are your predictions or the predictions of the other experts that were cited in the article, but the key ideas here were, number one, the prediction for growing rental rights and moderate home price growth, which should force more people, or motivate more people to look to buy in 2016. The second-
Daren Blomquist: We did. Yeah. I'll just stop you.
Bryan Ellis: Yeah.
Daren Blomquist: We did see that pretty much play out. The home price growth was stronger than I expected. It's about five percent for the year.
Bryan Ellis: Okay.
Daren Blomquist: It was actually a little bit stronger, but it is moderate and we were at double digit price growth. Now we've come down. Rental rates continue to be strong.
Bryan Ellis: Right. That was a definite check mark. The second prediction was mortgage rates will rise, which should help boost the number of buyers out there. It looks like that one was a little less accurate I guess. Started to rise at the end of the year.
Daren Blomquist: Right, yeah. Get that right if you count to the last couple months of the year, but it really didn't rise ... A year ago ... It feels like Groundhog Day. A year ago, the fed was raising rates in December and predicting that they would raise rates throughout 2016 and it didn't happen. Now they're doing the same thing again. We'll see if that happens in 2017. I do. Really we're off the mark there, but I think more ... The fed has limited control really over mortgage rates.
Bryan Ellis: Yeah.
Daren Blomquist: I think what we saw following the election is more going to be a driver of rising interest rates than the fed necessarily, but I do expect to see that going into 2017.
Bryan Ellis: Yeah, I think we're all surprised that rates didn't go higher than they did. Then that third prediction was inventory's expected to remain a problem in 2016. That certainly looks to continue to be true.
Daren Blomquist: Yeah. It's a major theme, and I think most people view it as a challenge in this housing market, but it's really ... It's a good problem to have because it's keeping ... It's a safety net for this market, even if we are seeing some bubbles forming, overheated markets. Those markets typically do not have an oversupply of inventory, which means even if you see demand fall, there's a safety net of low inventory.
Bryan Ellis: Yeah.
Daren Blomquist: To keep those markets chugging along.
Bryan Ellis: Yeah, exactly. Now this leads me to the predictable final question. You did pretty well in predicting 2016. You definitely got two right and the one was flat. What does 2017 look like for you? What do you expect to happen?
Daren Blomquist: I'll go out on a limb and do, as I mentioned, we will see interest rates rise, and I think we're seeing that already at the end of this year.
Bryan Ellis: Yeah.
Daren Blomquist: I think we'll see more substantive rising of rates in 2017 that will, and then that in turn is an important factor that will start to slow down some of these overheated markets in terms of home sales and home prices particularly. Again, we're at about five percent appreciation this year. I think we'll see it go down to two to three percent appreciation. This is a nationwide number of course.
Bryan Ellis: Yeah, sure.
Daren Blomquist: There's a lot of variance from market to market, but I think in general, we'll see cooling appreciation. We will see I think a surge in home sales early in the year. We already saw it a little bit in November as people try to beat out the higher interest rates. That's going to be an overriding factor.
Bryan Ellis: Sure.
Daren Blomquist: Another prediction that's a little more localized in nature is I think ... I'm very bullish on the Rust Belt.
Bryan Ellis: Are you?
Daren Blomquist: They were a big part of the election, and in determining the election, and there's been a lot of talk by now president-elect Trump to invest in infrastructure, and there seems to be a lot of bipartisan support for that. The cities that need the most infrastructure improvement tend to be in the Ruse Belt.
Bryan Ellis: Yeah. They're going to feel the love.
Daren Blomquist: Places like Flint, Michigan, that have aging water systems and what not. We see that investment happening, that's going to really help housing in those markets and improve the overall value of the housing market.
Bryan Ellis: Awesome. Daren, thank you so much for your time. I am very grateful to you, and hopefully we'll get to have you back on and maybe dig a little bit deeper into the single family rental market, because I know that's an area of expertise for you and ATTOM Data Solutions. Thank you so much for being here.
Daren Blomquist: Yes. I'm glad to be here and happy to come back at some point in the future.
Bryan Ellis: Awesome. Thank you, sir.
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327. Joe Biden Announces Targeting of IRA and 401(k) Funds | SDITalk.com #327
05:20He’s gone and done it now. Joe Biden is officially targeting your IRA and 401(k). If you value your retirement savings, you need to listen right now. I’m Bryan Ellis. This is Episode #327 of Self-Directed Investor Talk.----Hello, Self-Directed Investor Nation, all across the fruited plane! Welcome to the SHOW OF RECORD for savvy self-directed investors just like you.Joe Biden, Democrat candidate for President of the United States, has tried to slip in a doozy of a tax policy change that, frankly, will hit me and you right in the pocketbook… and he’s trying to make sure that nobody knows about it by not bringing any attention to it.But this has not escaped the watchful eye of the team here at Self-Directed Investor Talk.On today’s page, which being that this is episode #327, that page is, of course, SDITalk.com/327… On that page, I’ll link to the sources from which this data comes so you can judge it for yourself.But here’s the bottom line: If you elect Joe Biden as president, your IRA and 401(k) tax benefits are going to be slashed. Period.The specifics of the policy are not yet well described by the Biden campaign, because I suspect they’re trying to avoid the absolute CRAPSTORM that will result whenever the public gets wind of this. But it’s such a clear and obvious negative that, well… I’ll just read a quote to you from RollCall.com that has some good coverage of this issue. The quote is:The former vice president’s "drastic" proposal, in the words of one industry lobbyist, would upend existing tax preferences for retirement saving in 401(k)-style plans. The Investment Company Institute, which represents mutual funds, exchange-traded funds and other investment vehicles in the U.S. and abroad, has already promised opposition.So, my friends, it looks something like this:Under the current system - which has worked beautifully for decades - when you contribute money to a traditional IRA or 401(k), you get to deduct that contribution against your taxable income.And old creepy Joe… it will work the same way under his system. But with one “little” caveat.Joe will still let you take a deduction for your contribution. But he’s going to limit the amount of that deduction to some as yet underdetermined top rate… probably 26% according to current expectations.So that means that, for those of you higher income earners - of which there are many in the SDI Talk audience - and whose marginal tax rate is not a mere 26% but is 32% or 37% or even higher…Well… you’re just out of luck. Sure, you can still make the contributions… only your tax benefits will be puny under Joe Biden versus how every other President - Democrat and Republican - has handled things in the past.But that’s not the worst of it, my friends. What happens whenever Washington begins to limit a tax benefit? The answer is always the same: They limit it EVEN MORE in the future.So mark my word: If you elect Joe Biden and let him begin to slash your tax benefits on your IRA or 401(k) now… it’s just a matter of time… a matter of VERY LITTLE TIME… before somebody decides that even Joe didn’t slash your tax benefits enough…...and soon enough, the tax advantage to your IRA and 401(k) is gone.But you have a choice. You can make sure that doesn’t happen. If you’re made the connection that voting for anybody but Joe Biden could be a wise decision, you’ve reached a wise deduction indeed.Oh… and a quick note… the latest edition of Self-Directed Investor Magazine is now out, and it’s a SPECTACULAR edition, if I do say so myself. If you’d like a complimentary copy, just send a text message to my office to request it and we’ll take care of you. The phone number is 678-888-4000…. Again 678-888-4000.My friends… Invest wisely today and live well forever!326. Presidential Politics & Your Investments | SDITalk.com #326
05:40It seems pretty clear that ONE of the two Presidential candidates absolutely opposes everything you and I stand for as self-directed investors. I'm Bryan Ellis. Right now in Episode #326 of Self-Directed Investor Talk, I give you the proof...---Hello, Self-Directed Investors, all across the fruited plane. Welcome to the show of record for savvy self-directed investors like you, where in each episode, I help you to find, understand and profit from exceptional alternative investment opportunities.It is the season for Presidential Politics... and you know, of course, that means I'll poke my head out of the shadows and begin to share with you the harsh realities of politics as it relates to my plight and yours as self-directed investors.You and I, we think alike. We're looking for opportunity. We're looking for a way to apply that most valuable asset of them all… our minds… to fortify our financial positions for the benefit of ourselves, our families, future generations and to help the causes that matter most to us.Yesterday, Motley Fool published a list of 12 tax law changes that one of the Presidential candidates is pushing in his bid to serve in the highest office in the land for the next four years. I’ll link to it on today’s page, at SDITalk.com/326 so you can check it out yourself.Now I won’t even sully the conversation by saying WHICH candidate – obviously there’s only Trump and Biden – but I won’t shift this to being about those men. Let’s just look at the policies and how they’ll impact you and me as builders of wealth.Policy Shift #1: An increase in the corporate tax rate from 21% to 28%. That’s an obvious negative… rising corporate tax rates are ALWAYS – I repeat ALWAYS – passed on to consumers. I could say more, but I suspect it’s unnecessary, so let’s look at...Policy Shift #2: A minimum tax on corporate income. Basically the idea here is this: If a company complies with the tax law in such a way that even the U.S. Treasury is unable to fault their tax planning, and as a result that company does not have to pay income taxes, this policy would mean that that company must pay taxes ANYWAY. Basically, this is a tax on good planning.They’re targeting this one at Amazon and some others that have been astoundingly good at using the tax law to their benefit. But hey, remember: This means that all of those Amazon packages WILL be more expensive in the future… no doubt about it. More expenses for the providers means more cost to the consumers.But surely… SURELY… the remainder of these new policies won’t so directly target – and thus discourage – productive members of society… right?Wrong-o. Whether it’s policy #5 that increases marginal income tax rates for higher earners, or policy #6 that raising the payroll tax on high earners or raising capital gains taxes on… you guessed it… high earners…Well, it almost sounds like the particular Presidential candidate who is pushing for all of these changes really doesn’t like high earners or successful companies very much, does he?And don’t forget… if building a FINANCIAL LEGACY is important to you, then the STEPPED UP basis changes – that’s policy #8 – will matter to you. This is a way of making sure that a horrible tax burden is transferred to your beneficiaries when they receive your assets in the future. Right now, that does not happen… but it would under this proposed tax policy.All that isn’t even to mention the slashing of tax deductions for both personal incomes – that’s policy # 9 – or phasing out small business deductions if you happen to be a successful small business owner, which is policy #10.If you hear a common theme here, it’s because there is one. The candidate who wants these policies to be law – none other than the basement baron himself, Joe Biden – wants, quite fervently, to punish your success.In other words, if it’s your objective to minimize your taxes, creepy Joe wants to MAXIMIZE them.If it’s your objective to build a small business, creepy Joe wants to make sure your tax bill stands in the WAY of your doing so.If you want to build a basis of financial assets for the benefit of future generations, creepy Joe wants to make sure that when those future generations receive your assets, that they’re forced to sell off those assets to pay their tax bill.My friends, a vote for Joe Biden is a vote against yourself. It’s that simple. Don’t vote against yourself.My friends… invest wisely today and live well forever.325. CoronaVirus, Warren Buffett & Greed Amidst Fear
09:13CoronaVirus has created more abject terror than anything I’ve ever seen. If we’re to believe Warren Buffett, then wise investors are to be “greedy when others are fearful”. So how, exactly, can you be wisely greedy right now? I’m Bryan Ellis. I’ll tell you RIGHT NOW in Episode #325 of Self-Directed Investor Talk.---The world changed radically a few weeks ago. Free countries went on total lockdown. The hottest commodites in the world became hand sanitizer, toilet paper and medical masks. And the stock market went on a volatility spree never seen before or since.And yet, the whole time, savvy investors kept hearing the famous words of Warren Buffet echoing in their minds: "Be fearful when everyone else is greedy, and greedy when everyone else is fearful."The question, my friends, is how to be very wisely greedy during a time when the prevailing emotion all around us is, without any doubt, not mere fear... but abject terror.The one clear answer - well supported by history and the leadership of current experts - is to invest in well-vetted, well-operated RV Parks.Now, in case you're not a user or owner of RV's yourself, I understand. I'm not either. Just in case you don’t know, RV stands for “Recreational Vehicle”… the big rolling hotel rooms like Winebagos.But whether that’s “your thing” doesn't matter. Kind of like you don’t need to live in an apartment in order to justify investing in a great apartment complex.So I’m going to make a very quick, but rather overwhelming, case to you right now that RIGHT NOW, in the height of this epidemic of terror and infection, that RIGHT NOW is the right time to jump into RV parks.And as always, I don't expect you to take my word for it. In fact, I insist that you don't take my word for it... that's because history makes this case for me in such a compelling, unquestionable way.Before CoronaVirus, the pinnacle example of economic downturn during most of our lifetimes was the Great Recession of 2007 & 2008... if any economic event was going to doom an industry where "recreation" is the literally first word in the name, the Great Recession would have been that phenomemon. But what actually happened?Well... not much. As the economy of the United States slowed and weakened with each passing week, the data shows us that average length of stays at RV parks got LONGER. Not shorter… LONGER.And I take this from a deeply authoritative source. It’s a report called “Effects of COVID-19 on the Campground Industry”. It’s written by American Property Analysts – the absolute leading valuation experts in America for the RV Park and campground industry. This report was written last week, at the request of and for the benefit of the banking industry. As the economic carnage began to mount from the CoronaVirus scare, banks who finance RV parks wanted to know where their exposure stood in connection with COVID-19, and of course, they hired the most knowledgeable experts in that field at American Property Analysts, Inc.And according to that report, when looking at the Great Recession, it’s all summed up in this quote: "What campers did not do was discontinue using their RV's." That report goes on to say that "In most locales, demand exceeded available supply" and that "attendance held fairly steady".Now remember... the setting here is the aftermath of the Great Recession, when our country suffered the worst economic contraction since the Great Depression. It was a time when, according to the respected California-based newspaper called the Orange County Register, nearly 9 MILLION jobs were lost... 4 million homes were foreclosed EACH YEAR... and 2.5 million businesses were shuttered.It was the worst of times for the American economy.But what happened in the RV park industry? Well, I remind you: "attendance held fairly steady" and "in most locales, demand exceeded available supply."But it's better than that still: To further quote the American Property Analysts report, "Waiting lists for seasonal sites popped up nearly everywhere, and many of those lists remain in place today at the more desirable properties. Some folks even paid non-refundable fees just to be on certain lists, and some of those campers are just now nearing the front of their lines."If you understood me to say that the backlog of demand created during the LAST recession still exists to this day, you understand me correctly. I can't imagine how much demand and backlog the economic fallout of the CoronaVirus pandemic will create for the RV park industry... but history suggests it will be HUGE.Am I suggesting to you that every RV park in America did a booming business during the Great Recession? No. Not at all. There will always be the superstars and the laggards, and doubtlessly that's true here as well.But what I am telling you... scratch that... what the historical data cited by the American Property Analysts report is telling you is that, overall, RV parks as an industry hardly - if at all - noticed that a recession happened at all.And my friends, history is repeating itself right now. And if you think about it, it makes complete sense for at least 3 strong reasons:Reason #1: One of the immediate results of the national shutdown from CoronaVirus was the closing of National Parks. Now that's an awful thing because I, for one, realy love and frequently visit the parks in my area. But as owners of RV Parks, we aren't sad to see it. Why? National parks are one of our biggest sources of competition. Right now, that competition is completely GONE... Kaput... poof. It'll return someday, but for now, it's GONE.Reason #2: The totally justified concern over the risk of infections connected with hotels, cruise ships and other recreational destinations likely will drive growth in the RV industry, as one's RV is a completely private space, not subject to the risk of exposure from third parties.and Reason #3: I'm happy to report to you that our EXPERIENCE is matching the THEORY I've shared with you, because presently, we've seen exactly ZERO cancellations at any of the RV parks that we already own... and there has DEFINITELY been an uptick in interest since CoronaVirus was declared a pandemic and the nation was put on lockdown.My friends, I return again to Buffett's famous advice: Be fearful when others are greedy, and greedy when others are fearful. Now here’s what you might not know about RV parks: Even average ones can be incredibly profitable. Imagine if you had all of the benefits of owning a great apartment complex, but your cash flow was more like a mobile home park. Well, it’s like that, only better. Well-vetted, well-operated RV parks don't merely compare favorably to other real estate asset classes, RV Parks dramatically outshine them and the data makes that overwhelmingly clear.So where does that leave you? If you're savvy enough to take seriously the advice of Warren Buffet, the man widely considered to be the greatest investor of our lifetimes, then the only reasonable conclusion you can draw is this: These are times of great fear... and that's your signal to be wisely greedy. And there's no better asset class - as proven by history - for that wise greed he recommends than RV Parks.The time is now.Thank you for listening in today. Every now and again, we encounter exceptional RV park investment opportunities. Best for well-qualified investors, these opportunities always fill rather quickly as only a small number of openings for outside investor partners are made available. If you'd like to be considered for participation in the next such project, please send an email now to feedback@sditalk.com, that’s feedback@sditalk.com., `to set an appointment to speak with me or a member of the team. Happy investing!324. an IRA/401(k) LANDMINE for Affluent Investors
07:02There’s an asset class that affluent investors REALLY love… extraordinary cash flow is the norm and the tax benefits are the best around. But there’s a HUGE LANDMINE just waiting for affluent investors who try this in their self-directed retirement account. I’m Bryan Ellis. Today, you affluent investors learn how to sidestep certain disaster in Episode #324 of Self-Directed Investor Talk.-------Hello, Self-Directed Investors, all across the fruited plane. Welcome to the show of record for savvy self-directed investors like you, where in each episode, I help you to find, understand and profit from exceptional alternative investment opportunities.For you folks with a bit higher net worth, you need to pay close attention today.So for those of you who may not yet quite be in the high net worth world, something you should know about your wealthier brethren is that one of the most popular asset classes among them is one I’ve mentioned here before, but only very briefly… and that is oil well drilling.It makes perfect sense because the cash flow beats the heck out of basically everything else, and the tax benefits makes real estate and other supposedly tax efficient investments look like child’s play. Yes, the risk is theoretically higher, and that’s why this is the domain primarily of accredited investors.But to set up this dilemma, and the brilliant solution for it, let’s consider a scenario, with real numbers. So here’s the deal.This investor… we’ll call her Tara… has decided to invest in an oil drilling deal. It looks like a pretty good one, I’m actually quite familiar with it… she’s got to invest $150,000 to buy into the deal, and based on the preliminary geological research, the expectation is that she’s going to bring in something on the order of $12 to $13,000 per month or so, based on current oil prices.Now if you’re doing the math, you know that $12,000 per month equals $144,000 per year, which is shockingly close to being a 100% cash-on-cash return. Well, that’s one of the reason high net worth investors love this stuff… the cash-on-cash numbers are just breathtaking, enough so that the additional risk is quite regularly totally worth taking.So that’s great, right? Tara makes this investment, and assuming it works like expected, then she yields a MASSIVE cash-on-cash return for 5-7 years until the oil well runs out… and then she’ll likely do it again, if she’s like most high net worth investors I’ve worked with.And to make it better, she’s doing this in her Roth IRA… so all of that juicy ROI is totally tax free! Right? Right? Isn’t it tax-free?Well… no.Here, my friends, we consider an important distinction between the two types of income: Earned and Unearned. Earned income is just what it sounds like… money you earn from a W2 job or a 1099 contracting position or something like that. You work, you get paid. That’s earned income.Unearned income, on the other hand, is profit from investments… it’s a more passive type of thing So if you buy stocks and they rise in value or pay dividends, that’s unearned income. If you buy real estate and it appreciates and/or generates cash flow for you, that’s unearned income. If you make a loan and are repaid for that loan, that’s unearned income.So here’s the thing: it’s widely believed that IRA’s and 401(k)’s – particularly the Roth variety – are just not taxable. Unfortunately, that’s not true. It’s almost ENTIRELY true that any UNEARNED income – the kind from stocks and real estate and loans, for example – pretty much all of that will be tax-favored inside of a retirement account and that’s great!But this is where we return to Tara’s oil & gas deal. Yes, she’s going to make a lot of income from that deal. But there’s a catch. Federal tax law makes it abundantly clear that under most circumstances, the income generated from drilling an oil well and selling that oil is NOT UNEARNED income, but is EARNED income.That means two things: First, that the money is taxable. And second, that the tax rate that’s relevant in that case is NOT personal income tax rates, but is the income tax rates for TRUSTS, since both IRA’s and 401k’s are, under the law, types of trusts.And that, my friends, is BAD news. You see, income tax rates for trusts are, for all intents and purposes, 37%. That’s astronomical. If Tara brings in $12,000 per month on average as expected, that equates to $144,000 per year. 37% of that is over $53,000… so her IRA would have to stroke a check for over $53,000 to pay income taxes. That would leave her with a net of nearly $91,000 per year which is still just off-the-chain exceptional… but still… that’s a BIG tax bite.What to do, what to do? Most of the time, investors do oil & gas deals OUTSIDE of a retirement account because the VERY BEST tax benefits in oil & gas don’t really apply to IRA’s and 401k’s. But in Tara’s case, that’s where she happens to have the available capital, and quite justifiably, she doesn’t want to miss this opportunity.So here’s what I recommended to her: Since we can’t eliminate those taxes, why don’t we just slash them dramatically? You may remember that one of the thing that President Trump’s signature tax bill did was to slash corporate tax rates to 21% as the maximum. So I suggested that Tara form a c-corporation inside her IRA, and capitalize it with $150,000 from the IRA. She could then buy the oil & gas interest with that money, inside the corporation. That money – we’ll just say $144,000 per year – will still be taxed, but not at 37%. It’ll only be taxed at 21%. Bottom line… she’ll pay about $23,000 PER YEAR less in tax this way!Over the course of 5 years, that’s a very real saving of over $100,000… just by using the subtle brilliance you learned right here on Self-Directed Investor Talk!Now before I sign off for the day, I’ll go ahead and answer the question I know is coming: Maybe. The answer is maybe. The question, of course, is something like: “Bryan, I just heard you talk about the crazy results people are getting from oil and gas deals… can you hook me up with some of those opportunities?” Well, the answer is MAYBE.There are some qualification requirements. So the best path to take is this: If you’re interested in learning more, just text me now at 678-888-4000 and I’ll be happy to have a team member talk this through with you. Again, just send a text to me at 678-888-4000 and we’ll chat about it right away.My friends… invest wisely today and live well forever!323. Coronavirus, Stocks and JACKASS Real Estate Investors | SDITalk #323
04:54Coronavirus, real estate investors and the stock market… or, how real estate investors are making absolute jackasses of themselves during a very bad time. I’m Bryan Ellis. This is Episode #323 of Self-Directed Investor Talk.-----------Hello, self-directed investors, all across the fruited plane. Welcome to the show of record for savvy self-directed investors like you where in each episode, I help you to find, understand and profit from exceptional alternative investment opportunities.Today, my friends, I share with you my expectations about the REALITY of the coronavirus and how I see it affecting our economy and more importantly my and your investments. But first, a quick word about a clear way to identify some people who, at their very core, are clearly complete jackasses.Now, note that this isn’t a test for ALL jackasses, just some of them. But here we go:You probably know that, due to Coronoavirus fears, the stock market has taken a MASSIVE dive in the last two weeks. The Dow Jones Industrial Average has fallen by over 15%... it’s been just absolutely brutal. I’ll tell you when that ends in just a minute, but that’s a different story.So back to identifying jackasses: If you see a real estate investor post something on Faceobok or elsewhere that basically says: “Hey, all you stock market investors, you’re really taking it on the chin now, aren’t you? I’ll bet you wish you had gotten into real estate instead of stocks now!”When you see something like that, what you’re seeing is a jackass. Someone who is childish, pathetic and heartless. Such a person, regardless of whether they’re successful in real estate, deserves to be ostracized and ridiculed for their short-sighted and juvenile attitude.So to all the jackass people out there, remember: You’ll get yours. I don’t wish it on anybody, but nobody bats 1.000. Where financial market losses are concerned, your attitude should always be: There but for the grace of God go I.”Now, as for the Coronavirus, the stock market and the economy?Totally overblown. I see stocks beginning to recover today, frankly. Is it a serious thing? Yes… but almost entirely for psychological reasons… because the media has scared people so badly that there’s a lot of irrationality out there.Remember this: We all keep hearing that 2% of the people who get this disease die from it, compared to the flu, which kills only 0.1% of the people who get it.That would be disturbing, for sure. BUT there are 3 facts you should know.Fact #1: The actual mortality rate in China, according to a report from China published in the New England Journal of medicine 3 days ago, is much lower, at only 1.4%. That’s a significant difference.Fact #2: The mortality rate is almost certainly much lower than that because most of the cases of it are so mild that they are never caught or reported. That’s not my opinion… but the opinion of Dr. Anthony Fauci, director of the U.S. National Institute of Allergy and Infectious Diseases… the one guy who everybody agrees is THE authority on these matters here in the U.S.And finally, Fact #3: Whatever the mortality rate, that’s the mortality rate in CHINA… not in America. CHINA! That’s a country that literally is happy to execute their citizens as a matter of convenience… an evil regime that exists to protect the Xi Xinping and the Communist Party as it’s highest priority… a place where the health of the citizenry is the last thing they care about.So how you SHOULD think about this is as follow: Even in China, the death rate of coronavirus is, at worst, 1.4%. We don’t really know how many people are killed by the flu in China. I’ll bet it’s quite comparable.Does that mean Coronavirus isn’t serious? Nope. Be careful, of course. But what it does mean is that while it is highly contagious, it’s more likely to be a pain in the rear rather than an issue of fatality.As for the effect of Coronavirus on stocks?I think we saw the bottom on Friday. I wouldn’t bet the farm on it… but I’d be willing to bet a barn door or two.By the way… if you’re looking for an astoundingly powerful tax break that happens to be coupled with an investment offering a potentially exceptionally high yield… well, drop a note to me at bryan@sditalk.com and I’ll fill you in. This is crazy good stuff, folks.Well my friends, that’s all for now… invest wisely today, and live well forever!322. The BEST Asset Class, Part #2
05:34If for every dollar you put into improving one of your real estate assets, you could get that dollar back within 12 months… and then enjoy decades of free and clear cash flow… wouldn’t you do that? Right now, I’ll show you not 1, but 2 ways to do that in my current favorite asset class. I’m Bryan Ellis. This is episode #322 of Self-Directed Investor Talk.----Hello, Self-Directed Investors, all across the fruited plane. Welcome to Episode #322 of Self-Directed Investor Talk, the SHOW OF RECORD for savvy self-directed investors like you. Guess what’s going to happen today? Today, I’m going to help you find, understand and PROFIT from exceptional alternative investment opportunities!In yesterday’s exciting episode, I introduced you to the asset class that I think is stealing the crown from multi-family housing as the GO-TO real estate asset class. If you missed that episode… you missed a great one! Drop me a text message to 833-212-2112 and ask for the RV Parks episode I’ll send you a copy so you can get caught up…...and you’ll certainly want to do that because today, I’m going to tell you two ways that, using that asset class - which is, of course, the high-cash-flowing world of RV parks - I’ll tell you not one but TWO ways that my partners and I - and maybe you, too, possibly - are planning to spend a bit of money on some of our RV park properties and generate a MASSIVE and rather immediate return of our capital… to be followed immediately by many years - possibly even DECADES - of free and clear cash flow.But understand this: I’m not just bragging on our deals - though I’ve got to admit, maybe there’s a LITTLE BIT of that hehehe - but more importantly, I’m trying to show you what’s POSSIBLE… because deals like this are in much greater supply than financially similar deals in other asset classes like self-storage facilities and mobile home parks.And I’m also telling you because, who knows, maybe you can actually participate in these deals with us. More on that in a bit.So what are these two crazy-powerful value adds we’re going to perform?So you may recall from yesterday, we’re acquiring 2 separate RV parks. Specifically on the one in Wisconsin… we’re going to be able to add, at a cost of about $50,000 per cabin, about one dozen nice little cabins which will be available for rental in our parks.Now here’s the really CRAZY thing… based on the rates our clients are ALREADY PAYING for space in that park, it’s actually quite plausible to think that we’ll collect more than $50,000 of income per unit after just two, or maybe 3, seasons. RV parks, you see, are seasonal, generally with 2 4-month high seasons per year. And after only 2 or 3 of those season, those cabins will basically be totally free and clear cash flow, with only minimal incremental expense for maintenance!That, my friends, is ASTOUNDINGLY WONDERFUL… super-high-ROI stuff. I’m so excited about this deal!And that’s not allFor the property in Michigan, we’re going to add a particular water feature there which is an absolute super-powered electromagnet for attracting families with children. This is just an amenity we’re adding to the water amenities already onsite. It won’t be cheap to do this… with the cost coming in around $150,000 or so, but get this:The evidence is absolutely overwhelming that this type of amenity brings more families with children to an RV park… and these are families who wouldn’t have otherwise come. In other words… new customers!And what’s astounding is that there’s data - anecdotal, admittedly, but still relevant - that suggests that the presence of this type of water feature can, all by itself, increase the net income of certain well-run parks by 20-30% after 3 years. With rates like that, it takes no time at all to recoup the $150,000 and investment and then be SOLIDLY in the money.And what’s EVEN BETTER is that I haven’t even begun to scratch the surface of what’s possible with RV parks. If you find multi-family real estate attractive because of the potential to add value and create new income streams, then you’ll find RV parks to be like an absolute candyland of potential, much of which can be realized near term and at shockingly low costs.I couldn’t possibly be more excited about the future with these assets. We’ve already begun the hunt for even more of them.If you’d like to learn more about investing in RV parks… and maybe even participate in some of the deals that my partners and I are doing, drop a text to me at 833-212-2112 and let me know. We haven’t yet decided if we’re going to take on outside investors, and if we do, we’ll open up an application process, the first step of which is to be on my investor alerts list… and the way you make that happen is to text me at 833-212-2112 and let me know you’d like to be included.Oh… and failed to mention… you can actually use your IRA or 401(k) to do this type of investing! Want to know how? Well how about I give you those details in the very next episode of Self-Directed Investor Talk?!My friends… invest wisely today and live well forever!321. the New KING OF THE HILL Among Real Estate Asset Classes | SDITalk.com/321
07:13For the last few years, the asset class that’s been all the rage is multi-family housing. But I’m here to tell you, my friends, there’s a new king of the hill. You’ll find out what it is RIGHT NOW in I’m Bryan Ellis. This is Episode #321 of Self-Directed Investor Talk.----Hello, Self-Directed Investors, all across the fruited plane. Welcome to Episode #321 of Self-Directed Investor Talk, the SHOW OF RECORD for savvy self-directed investors like you. Guess what’s going to happen today? Well, I’m going to help you to find, understand and profit from exceptional alternative investing strategies and opportunities… so buckle up!So, the telephone rings, and I recognize this guy’s name. He’s a friend, a fellow investor, and someone whose judgment I trust quite strongly. He’s the kind of guy that when he says “I’ve got a deal”, if you’re smart, what you say in response is “where do I send the money”.So I picked up the phone, earnestly hoping that one of his life-changing opportunities awaited But that’s not what he said, this time. Instead, what he says, is this: I’ve got TWO deals… and instantly, I know this is going to be my lucky day.I’m going to tell you about those two deals and why you should keep your ears open for similar opportunities for yourself. In fact, it may even sound to you, as I describe these deals to you, that I’m trying to sell YOU on investing in these deals with us.Nope. We’re closing on both of them with our own money, because both of these are just too sweet to turn down. But I can tell you, with some confidence, that you’re going to wish you were in on this when you hear about it. Who knows, we may raise capital for these deals so we can get some of our money back out to find even more of them… but we may just keep them… they’re that good. If you’re already on my investor waiting list, I’ll let you know if we decide to make this available. And if you’re not already on my waiting list, and if you are liquid for atleast $100,000 - then you probably want to get on that list right away. Just text me at 833-212-2112 and ask to get on the waiting list and I’ll take care of you.So what is this spectacular asset class?Oh now… surely you can venture a guess? Think with me… the biggest demographic phenomemon of the last 60 years… the BABY BOOM generation… they’re retiring at the rate of about 10,000 people per day. A whole lot of them have MONEY, and lots of it. And all of their kids and grandchildren have spread out all over the country. What are these people doing? They’re buying RV’s - in MASSIVE volumes - and taking their home with them all over the country.So what opportunity does this create for me and you… and what is the ACTUAL opportunity that my friend reached out to me about?RV parks, baby! Imagine the benefits of owning a hotel… where you get a very, very high rental price for a very, very small portion of real estate… but you do NOT have to think about things like laundry or furniture or linens or any of the things that makes a hotel so very expensive to establish, operate and own.Instead, what you’re renting out is, essentially, a piece of concrete. A small piece of concrete, where your customers bring THEIR OWN bed and THEIR OWN furniture and THEIR OWN linens. All you do is provide them with a hookup for electricity and water and, if you’re smart, some great amenities, and what do you have? You have a situation where you’re collecting hotel-like nightly rental rates in exchange for a service that is FAR LESS EXPENSIVE and SO MUCH EASIER to provide than with a hotel.But there’s another HUGE benefit to RV parks… lots of them, actually. And this one explains why, we are expecting, conservatively, an internal rate of return of 15-20%+. That benefit is REPEAT BUSINESS! You see, we know, as a sociological fact, that people who use RV parks are, by and large, very habitual in their behavior. Once they find an RV park that they like, chances are they’ll come back every year or two over and over and over again…...and that means not only are the profits in this business VERY HIGH, but they can also be incredibly CONSISTENT.Both of the deals that we’re buying and closing on in the next two weeks are actually ALREADY very profitable… and the REALLY beautiful thing is this: A little money spent wisely goes a REALLY LONG WAY with RV parks. There are two examples I want to share with you, both of which will ABSOLUTELY blow your mind… you’ll see why we are SO UTTERLY THRILLED with this asset class.But before I share those two examples with you, think about this name: Sam Zell. Sam Zell is a LEGENDARY real estate investor, Bloomberg pegs his net worth at $4.4 BILLION. Zell started and currently owns a very large percentage of several publicly-traded REITs - kind of like a mutual fund for real estate investments - and each of those REITs are focused on different real estate segments like commercial real estate, multi-family and… surprise, surprise… RV parks and mobile home parks. And guess which one is outperforming the others? According to a recent story in BisNow.com, the answer is no surprise at all: Zell’s RV parks are CRUSHING the results from commercial real estate, multifamily and every other real estate sector.As for those two examples of how an investor can easily spend a TINY amount of money in an RV park and get that money back entirely very, very, very quickly… you’re just going to be bowled over, my friends.Unfortunately, we’re short of time today, so I’ll tell you those two things tomorrow, so be sure that you have SUBSCRIBED to Self-Directed Investor Talk in Apple Podcasts or whatever podcast system you use.If you’d like for me to send you a notice when I release that episode so you are sure you don’t miss it, just drop a quick text to me at 833-212-2112 and let me know.I’ll look forward to pulling back the curtain for you a little more tomorrow, my friends… and I’ll even give you my advice on how YOU can get involved in this incredibly, incredibly attractive asset class yourself… maybe even using the money in your IRA or 401(k), so don’t miss it!My friends… invest wisely today and live well forever!320. Secrets of Highly Tax-Advantaged Investing | SDITalk.com/320
42:53Secrets of Highly Tax-Advantaged Investing -- Episode #320 -- https://SDITalk.com/320For more information: text the word FLOWTEX to 833-212-2112319. A Great Idea For Real Estate Flippers... But It Doesn't Work | SDITalk.com/319
05:49Want to flip real estate in your IRA or 401(k)? Think you won’t owe taxes on your profits? You’ve made a very common error… but so did I in a solution I devised to that problem. Maybe my error will keep you from making any of your own, and I’ll tell you about it right now. I’m Bryan Ellis. This is Episode #319 of Self-Directed Investor Talk.----Hello, Self-Directed Investors, all across the fruited plane. Welcome to Episode #319 of Self-Directed Investor Talk, the SHOW OF RECORD for savvy self-directed investors like you, where each day, I help you to find, understand and profit from exceptional alternative investing strategies and opportunities!I have a great show headed your way right now. If you’d like to get the transcript or links to the resources I share with you today, just send text the word ep319 with no spaces to 833-212-2112. Again, to get a link to the transcript and resource links for this episode, #319, just text the word ep319 with no spaces to 833-212-2112 and we’ll get it right out to you.Well, I’ll admit it, folks… the brilliant idea I had yesterday isn’t going to pan out. Still, there’s a very helpful lesson in it that you’ll want to know, particularly if you like the idea of flipping real estate in your IRA or 401(k), and I’ll tell you all about it right after this…So here’s the idea: In the last couple of episodes I’ve shared with you 5 reasons that I’ve reconsidered my formerly 100% negative stance against oil and gas investing. It’s not that I never believed it could work, just that I had a misunderstanding of how risk can be mitigated, so the risk was all I saw. I’m definitely infinitely more open to that asset class now, and one of the big advantages created by many oil & gas investments – which is HUGE tax deductibility – sparked an idea in my mind:The idea was this: There are a lot of people who like to flip real estate in their IRA or 401(k). Unfortunately, most of those people seem to not be aware of the fact that most such transactions are technically “earned” income rather than “unearned” income, and as such, the IRA or 401(k) will have to pay income taxes on any profits realized from flips.So here was my thought: If a person does a flip deal that generates a lot of profit, why not just – assuming you have the available capital to do so – just mitigate those taxes by doing a separate oil & gas investment? That would generate a tax deduction which would otherwise be totally irrelevant for a retirement account since oil & gas probably IS unearned income, and therefore shielded from taxes by the IRA or 401(k), so you could take the tax deduction generated by the oil & gas deal and apply it to the income generated on your flip deal and VOILA, problem solved.Right?Well… Yes… until recently, that is. During the end of yesterday’s show when I described this idea, I kept hearing a voice in my mind saying… check it out, check it out! It was as if this idea absolutely SHOULD work, but for some reason, it won’t… I just couldn’t remember why.Well, I did what I always do when I have a question of this nature… I reached out to the Great One, attorney Tim Berry, for clarification. And he filled in the blanks for me. Apparently, before the recent Trump tax cut, it WAS possible for deductions generated by one investment to offset the profits generated by another investment in an IRA or 401(k). But apparently, that went away with the new tax law. That’s unfortunate. That tax bill has been so very good on such a broad basis and so clearly very good for our economy… but the fact is that there are still some somewhat crappy parts to it, and this is one of them.So… this idea won’t pan out. Not all of them do. That’s ok. Let’s keep thinking creatively together, shall we?My friends, invest wisely today and live well forever.