Introduction - Carl Fischer

Transcription

1 Introduction - Carl Fischer Graduated Cornell U 1976-Engineering Launched Rockets Developed Commercial & Residential Mortgage Broker Business Manager Member Cama Self-Directed IRA s LLC Investments in PA/NJ/FL/NY/WI RE and Tax Liens 3rd Generation Investor IRA s and other Plans Investing in Tax Liens Investing In Traditional & Non-Traditional Assets Using Self-Directed Retirement Plans (IRA s/401k s) Disclosure CAMA does not provide investment advice or endorsements. All information and materials contained are provided for educational purposes only. All parties are encouraged to consult with their attorneys, accountants and financial advisors before entering into any type of investments. 1

2 Agenda Introduction What is self direction& what type of accounts? Compare Tax Lien/certificate and Tax Deed Identify IRA entity types for purchase of tax liens/certificates Evaluate pros and cons of different entities Examine a step by step approach to utilize your IRA/401k Review custodial fees What to do next & Questions What Does CAMA Do? The IRS requires you to use a 3 rd Party to open a Self-Directed IRA CAMA is a neutral third party No investment advice We specialize in the legal (IRS-approved) use of tax-free and tax-deferred retirement and savings plans for traditional and non-traditional investments. Part of your core team of professionals Relax and Listen 2

3 What is a Self-Directed IRA? An IRA in which the IRA owner directs all investments in the account. There is no legal distinction between a self-directed IRA and any other IRA except with a truly self-directed IRA the account agreement allows the broadest possible spectrum of investments. Types of Self-Directed Plans Tax Deferred Traditional IRA Spousal IRA Simplified Employee Pension (SEP) Savings Incentive Match for Employees of small employers (SIMPLE) Defined Benefit Plan Defined Contribution Tax Free Roth IRA Health Savings Account (HSA) Roth like 401k (2006) Coverdell (Educational) Assets & Investments Allowed Real Estate-Related Single family and multi-unit homes Apartment Condominiums Commercial Property Improved or unimproved land Leveraged and un-leveraged property Tax Liens, Tax Deeds Mortgages, notes, leases Trust deeds Foreign property investments 3

4 Other Investments Limited liability companies Commodities / future accounts Limited partnerships Securities, CD s, stocks, bonds Mutual funds Unsecured loans Contracts of sale Accounts receivable financing Commercial paper Joint ventures Like and unlike exchanges IRS Rules and Regulations Collectibles & Life Insurance Any Work of Art, Any Rug or Antique, Any Metal or Gem, Any Stamp or Coin, Any Alcoholic Beverage *Exception Prohibited Investments US Government Minted Gold Or Silver Eagle, Gold and Palladium Bullion Self Direction is not for Everyone 4

5 Example: Real Estate Purchase with IRA What does your advisor think? Accountant/Financial Planner/Attorney/Spouse About Self Direction Legal? Risky? Complex? Tax Deeds & Tax Liens Tax Deeds Property = Real Estate(Liability) Sale or rental of property for $ = work Quiet Title Time consumption? Tax Liens/Certificates Paper = Loan with interest (Liability) Limited control of cash flow/income Can result in tax deed(rare) Time consumption? 5

6 Process and Requirements Purchase Process Court House, Onsite Auction On-Line Auction, Pick-up ones not purchased Secondary market Basic Requirements Registration-Name, Address, and SS# or EIN Down payment Final Payment Entities That Buy Tax Liens/Deeds Personally IRA/401k/ Retirement plan Singularly- Plural- Limited Liability Companies(LLC) Personal Property Trusts(PPT) Corporations(C Types) Limited Liability Partnerships(LLP) Limited Partnerships(LP) Family Limited Partnership(FLP) Investment Clubs Entity Rational(Multiple) Advantages Beneficial interest/ownership in the entity More autonomy-control of the entity Risk mitigation Partners (Local Knowledge, Local Proximity, Time, Spread the work) Partner Expertise (Attorney, Appraiser, Builder/Developer, Title company, CPA, Bookkeeper, etc) Own EIN # Fees?(less fees to custodian vs. set-up fees) 6

7 Entity Rational (Multiple) Concerns More paperwork Partners (decision making liens vs. deeds) Fees?(less fees to custodian vs. set-up fees) What if you get a property? What if someone needs their money or dies? Partnering Summary of Cash Flow Owners Undivided Interest % Ownership in entity LLC, PPT, C-Corp, IC Money invested Tax liens paid $2400 Income for month $2000 principle redeemed $400 Interest Income APR Tax Status Bills Trad IRA 50% $ 125,000 $ 1,200 $ 1, $ % No Bill Roth IRA 10% $ 25,000 $ 240 $ $ 40 20% No Cheryl IRA 15% $ 37,500 $ 360 $ $ 60 20% No Jim Personally 25% $ 62,500 $ 600 $ $ % Yes Total 100% $ 250,000 $ 2,400 $ 2,000 $ 400 Disqualified People /Parties Business Entities owned 50% or more by a Related Party Parents You Kids Spouse Spouse Spouse 7

8 Another Method Loans (unsecured and secured by Liens) Fixed returns or percentage of profit, Minimal involvement, Less work, Lower ROR Why Invest with a Retirement Plan? Strategy for building wealth with considerable tax advantages Where is your IRA? --What s better? Increases diversification (vs. traditional stocks, bonds, mutual funds) Payments are not consistent which is not a factor for many IRA s Tax Free Roth IRA vs. Taxable Account T ax abl e Sa v i ngs Vs. T ax Fr ee Roth $1,200, $1,000, $16, 000 initial invest ment only 10% Rat e o f Re t u r n 30% Tax Bracket $ 1, 04 0, 99 7 $800, $600, $400, $200, $- $3 84,5 52 $2 97,2 51 $142,0 56 $ 14 7, 911 $ 52,4 76 $ 73,6 00 $3 6, Yea r s T axable savi ngs Account T ax Fr ee Rot h 8

9 Taxable Account Vs. IRA/401(K) Initial Investment $ 10,000 Tax bracket 30% Taxable IRA Taxable IRA Taxable IRA Years 5% 5% 10% 10% 15% 15% 10 $14,106 $16,289 $19,672 $25,937 $27,141 $40, $19,898 $26,533 $38,697 $67,275 $73,662 $163, $28,068 $43,219 $76,123 $174,494 $199,926 $662, $39,593 $70,400 $149,745 $452,593 $542,614 $2,678, $55,849 $114,674 $294,570 $1,173,909 $1,472,699 $10,836, $78,781 $186,792 $579,464 $3,044,816 $3,997,023 $43,839, $111,128 $304,264 $1,139,894 $7,897,470 $10,848,244 $177,357,200 Contributions have limits EARNINGS DO NOT! Steps to Buy Tax Liens/Deeds with Your IRA 1. Open an account with CAMA Self Directed IRA, LLC Fill out an application 2. Fund the Account Transfer funds from another IRA/401K or Make a contribution Bidder Application 3. Complete govt. bidder application The bidder title is Cama FBO Maddie Simpson IRA #12345 The bidder EIN is provided by Cama Steps may vary slightly dependent on Bidding process----- on-line vs. on-site and the government entity. 9

10 The Bidders application is completed. 4. Maddie completes a buy direction letter and returns it to CAMA with the Gov t. Bidders application. Maddie approves all documents by signing as read and approved Funding the Bidders Account 5. CAMA funds bidder deposit account per instructions provided: Wire funds or cashiers check delivered to client or trust check mailed to government entity or a series of checks. Bidding and Award 6. Client/agent bids per government requirements. On-line or On-Site 7. Assets are delivered to Cama FBO Maddie IRA. Added to on-line statement available 24hr/7 days per week. All expenses for the asset are paid by the IRA, any excess is returned to the IRA, all proceeds are paid to the IRA 10

11 Sale of the Tax Lien 1. Complete Sell Direction Letter when last Lien is redeemed 2. Maddie completes and sends a Sell Direction Letter with contract to CAMA for execution. Single account Vs. Entity IRA or 401k Buy tax liens/deeds Partial or full sale Future years sales? Both Open account Fund account Entity Buy shares or % of entity Entity maintains books and value of shares or % Tax Lien and Deed Concerns Eminent Domain Forcing Sale ($ and Timing) Timing Issues/Rules Title Work Prior and Post Year Liens Reinvest of Profits 11

12 Typical Custodian Fees Based on Value of Account or Based on # of Assets in Account Annual Maintenance $125-$1750 Miscellaneous Processing Fees Fees are insignificant to savings - guaranteed Example of Yearly Typical Fees Account Value # of Assets Assets Type Value Based Asset Based $15K 1 Brevard County tax liens 15K X.0085=$ asset X $250=$250 $90K 3 Brevard County tax liens Radnor tax liens Mercer county NJ tax liens 90K X.0055=$495 3 assets X $250=$750 $1M 1 Tax lien Invest club $1M X.003=$3000 (max $1850) 1 asset X $250=$250 $1M 3 Brevard County tax liens Radnor tax liens Mercer county NJ tax liens $1M X.003=$3000 (max $1850) 3 asset X 250=$750 IRS Info for the Doubtful Publications & Regulations Prohibited Transactions-IRS Reg. Sect 4975, Pub 514 Unrelated Business Income Tax Pub 598 IRA s Pub 590 and 5305 Retirement Plans Pub 560 Education Pub 970 Pub 969HSA, Form 8889 Private Letter Rulings( Court Cases ( 12

13 What to do Next Ask the Tax Lien Lady What Next-Take Action-(minimal cost) Read books on the subject-see attached($20 per book) Attend webinars, workshops, seminars-see attached Open an account ($50 one time) try it out Additional Reading Books How to Purchase Real Estate with Your IRA/401K and Pay Little or No Taxes-Hubert Bromma We Buy Houses Sometimes-Michele Gorman and Mark Halpern How Not To Go Broke At 102-Adriane Berg Real Estate Investment Using Self Directed IRAs an Other Retirement Plans-Dyches Boddiford Quincy Long, George Yeiter 13

14 Sessions to Attend Upcoming events - Webinars, Seminars, Meetings: Every Wed at Noon: Webinars on multiple subjects Mon/Thu 9:00AM: Intro classes and Q & A Visit our website for other events recorded events are now being posted Live on-line workshops Thank You Contact Information: Carl Fischer info@camaplan.com or www. CAMAplan.com Want a copy of this presentation? Give us your name and We Can Help You Get Started! Carl Fischer, Principal info@camaplan.com www. CAMAplan.com Thank you!!! 14