FCP 119: Saving Taxes With Self-Directed IRAS – Featuring Dennis Blitz

Jack: Hello, everyone, and welcome to another episode of the “Forever Cash Life Real Estate Podcast.” Today, we’re going to talk about the exciting subject, and it’s really exciting of self-directed IRAs and how he can save tonnes of taxes using this vehicle. Who doesn’t want it to save taxes? Right? Let’s get started in just a second. Welcome to the “Forever Cash Life Real Estate Investing Podcast” with your host, Jack and Michelle Bosch. Together, let’s uncover the secrets to building true wealth through real estate and living a purpose-driven life. Okay, so we are back and welcome to our guest Dennis Blitz. Dennis Blitz from the IRA club, welcome to the show.

Dennis: Wonderful. I’m happy to be here.

Jack: All right. Actually, Dennis is my favorite IRA guy. We have worked in the past, as you guys know, probably if this is not your first podcast, we do land flipping, but we also do syndications of apartment complexes, and we have worked with multiple IRA companies, and I have to say IRA Club with Dennis is the easiest to work with, the most responsive, one of the least expensive also. I mean, the fees are some of the lowest. None of them are expensive, but their fees are really one of the lowest. And we just love doing business with you guys. So, I wanted to bring you on because I also love the level of expertise that you have. So, first of all, tell us a little about it. How did you start up this company, and what is so exciting about IRAs for you that you want to make it your career or that [00:01:34] your career for many years now?

Dennis: Wonderful. And, you know, I will do very fast why we started the company. People ask that all the time. It’s, I think, a particularly boring story, but I keep getting asked. So, we’ll do it quickly. I had worked my whole career in the publishing industry. I wrote textbooks. I wrote textbooks on law and security regulation, and if anybody out there knows any security representatives, they took license testing, Series 6, Series 7, Series 3s, etc., I wrote textbooks for those courses, and, you know, we had a pretty high market penetration. So, a lot of people took our courses. And nobody ever read any of my books because they wanted to do only because they had to. So, that was what I did. When I left that job, when I left that industry. I had been there a long time. I was a long-term employee. I was a highly compensated employee. I had a large 401(k). And like other people, I was wondering what to do with my 401(k), and I stumbled into reading about self-directed IRAs. I said, “This is a great idea. Why doesn’t everybody do it?” When I went around to talk to people, this is many years ago, there was no one to talk to. So, what I did was I ended up starting a club in Chicago of people who had self-directed IRAs. We would get together. We would talk about what we were doing, what we were investing in, how we were doing it, and pretty soon people wanted to start self-directed IRAs, you know, for their friends, family, etc., and I started doing that. And that was how it got the name IRA Club. I just saved the same name that we were using. And to be honest with you, not for any other reason than I already had the letterhead, and I wanted to save money [inaudible 00:03:17] letterhead. So, that was how the name IRA Club came about. So, that’s a boring story. I won’t bother you with anything more.

But the thing I want to talk about with Jack’s group is different than what I talked about with some other groups because Jack’s course…If you’ve ever taken it, and if you haven’t taken it, please do so, I think it’s one of the best three-day sessions for real estate investing I have ever been to, and I’ve been to many, many of them. So, I do recommend it, but Jack’s course has a problem, and the problem is that they make a lot of money and they make it quickly. So, nobody ever benefits, or very few people benefit from long-term capital gains. They’re always paying ordinary income tax on these transactions. It’s brutal. You know, every now and then I get the [inaudible 00:04:07]

Jack: One and perhaps the only disadvantage of working in land, that if you flip land even if you hold land, it’s like…There’s no depreciation. There’s no tax write-offs. It’s just either ordinary income, or if you hold it, it’s capital gains, but there’s nothing in between. There’s nothing to shield it, which is one of the reasons why we do the apartment complex is because they help us shield the income we do on the other side. But go ahead.

Dennis: Exactly. Right. So, what happens is, you know, you follow Jack’s program, you make an investment. The investment has, let’s say, an $80,000 profit. You’re excited. You’re calling your friends, family, your relatives, the people you didn’t like at work that you…you know. So, they get aggravated. You do all those things, and then April 15th comes, and it depends…You know, if you live…You know, what your tax bracket is. It depends on the state you live in. If you have a state that has state income tax, there are local income taxes now and etc. And so, you could end up with a $30,000, $34,000, $35,000, $36,000 tax bill under your $80,000 profit. It takes a lot of the wind out of you. You want to be able to think about the tax consequences. I mean, if you made just three investments in a year that made $50,000 each piece, you’re going to end up with a $60,000 tax bill come next April. So, there’s a lot of taxes that get paid on these programs that Jack does. They’re profitable with fast turns. They’re everything the taxman likes. And so, what we want to do is just take him out of the equation.

Well, you know, the tax code was written back in ’74 to allow you to take him out of the equation, and instead of you making these investments, let your IRA make these investments. Just a very simple self-directed IRA would make the investment of the IRA then sales the investment. The IRA makes the profit because you never made the profit. The IRA did. You don’t pay income tax, and IRAs don’t file the tax return. So, that whole $80,000, that whole $150,000, whatever it is, stays in the IRA for future growth. So, the question becomes, is it worth it to do that? And just to give you some numbers, it is worth it to do it because to start a self-directed IRA costs $175. So, the choice is, for many people, do I want to pay, you know, $175 to set up a self-directed IRA, or do I want to pay $30,000 or $40,000 in income tax? So, it’s a pretty simple choice and one that you wanna consider as you launch into this career as you’re looking at a transaction that you think is gonna be profitable.

Jack: Yeah, absolutely. So, there’s actually…I’m looking it up right now. There’s actually somebody in our Facebook group, Land Profit Generator Real Estate Investing Facebook group who literally just posted something a few days ago from Nevine is his name, where he posted a check that he made $36,000, and his check that he got back was for $48,000. So, in other words, he invested $12,000, and he got $48,000 back. So, if he does that, if you do that outside of your self-directed IRA, you made a $36,000 income. There is now nothing right after. You didn’t have to go in. You don’t even have to have gas costs, right? You don’t even have to go drive there and no hotel, no nothing, and no rehab something. You just bought it for $12,000 and sold it for $48,000. Made a $36,000 profit. So, other than a few mailing costs, like $1,000 of expenses or so plus closing costs, another $1,000 in expenses, which is already subtracted there, so he basically netted $35,000. Well, that means he’s gonna have to pay about $15,000 in taxes.

Dennis: Yeah.

Jack: But most people have…If you have an IRA with your company, you can roll it over, right? You can [inaudible 00:08:13].

Dennis: A 401(k).

Jack: A 401(k). Sorry.

Dennis: Yeah. Right. And so, it will come to funding these accounts, but, you know, a lot of the ones that Jack does, you get in so small, you know. We’ll talk about funding it by rolling over IRAs, rolling over 401(k) in a moment, but you could just start one because you can put in $6,500 today…

Jack: And that’s enough to do a few deals.

Dennis: …which is enough to do a few deals. Yes. And, you know, this is…I don’t know when you’re gonna be watching this, but we’re recording this in December. If you open an account and put in $6,500, in a few weeks is January, you put in another $6,500 and suddenly…

Jack: It’s $13,000 That deal that I just talked about could be possible then already.

Dennis: Very good point. Yeah. Very good. Very good.

Jack: Now, then, basically, by March, you fund it in December with $6,500, you fund it in January with $6,500, you do the deal like that in February, you sell it in March. By March, your account has grown from $13,000 to $48,000. Wouldn’t that be a nice thing? Yes.

Dennis: Yeah. So, a tremendous number of people who work with Jack’s program, you know, will wanna do that first deal outside the IRA and they’re proud, and they’re happy, and they’re excited, and they’re posting it on the internet, and then April 15th comes. So, we do wanna talk about, or you do wanna think ahead a little bit about, you know, how do I shelter all that income, and the IRAs will do it for you. One of the things that people ask is, is there any kind of a deal that shouldn’t be done in an IRA? And, you know, I can tell you I’m an IRA person, and you would expect me to say, “No, everything should be in the IRA.” Not really true. There are third deals that shouldn’t be…They don’t need to be in an IRA. First of all, the ones that we kind of discourage. We discourage people who really need that money for, you know, next month’s car payment, next month’s rent payment, and things like that. You know, if you’re not really ready to invest, you’re ready just, you know, to make your daily costs, don’t do it in the IRA. And the other thing is if it’s really a tiny deal, if you say that it’s a deal where you’re going to make $1,000, $1,500, you know, there’s no need to bother with the IRA. The amounts are not big enough for you to be a [inaudible 00:10:35] about the taxes.

Jack: Right. So, that actually brings me to a point is that only because of the taxes or when I talk to tax professionals, they tell me always that, “If you do too many deals…” and the definition of too many is a stray definition, “If you do too many deals inside of your self-directed IRA, you might be subject to UBIT, unrelated business income tax. In other words, that the IRS basically says like, “Hey, you’re getting a competitive advantage here. You’re getting to run a business inside of your IRA, and you’re saving the taxes. Therefore, you could potentially sell the products cheaper because you’re not having to give us our piece, and that’s not right. So, we got to slam you with actually disqualifying your entire IRA and charging you even more taxes on everything.” Where do you think is the limit for that?

Dennis: Thank you so much for asking that question. That doesn’t come up very often, and it takes more than a stupid person to bring it up. But I will tell you the practical matter is this. I’ve been doing this now for 11 years. We’ve done thousands and thousands of accounts. We’ve never, ever had anybody questioned you UBIT, so much so that I got irritated. You know, where is this limit? Because as we know, as you said, the IRS won’t tell you, “Well, this is the limit, you know, 12 deals, 10 deals, 9 deals, 99 deals.” They just won’t give a number. And, you know, they want that latitude, and I understand that. So, about three years or four years ago…My office is in downtown Chicago as you know, and I’m only about two blocks from the federal courthouse. And I was reading something, and there was a case that was coming up in federal court here in Chicago about somebody who had done exactly what we’re talking about, and he was going to go to tax court. So, I would just walk over there. Two blocks away and, you know, watch the argument, what was the IRS claiming this terrible felon did. I didn’t know who the person was. He wasn’t using our company. But I’m sitting in the gallery and what he had done was he had bought from a bank a tape. I think it was like 320 houses that were in foreclosure. They were all in a very, very tight neighborhood. And his IRA brother, he then set up an office, set up 800 numbers, hired a staff of canvassers to call out and did all those other things that looked like a business. It felt like a business. Smelled like a business. Three hundred and fifty homes or 320 homes, the IRS said this was clearly a business. So, the point is that when they go after this issue on UBIT, which is very…It’s in there, and you’re precisely right, they’re going after people that are obviously running a major business. It’s just not worth it for them to go after the guy who did, you know, three deals or four deals and, you know, which affected the [crosstalk 00:13:41.098].

Jack: So, the number I’ve heard that makes perfect sense. Now, having said that, our people do businesses, so it’s just that they don’t have a bunch of staff. It’s like them, their spouse, a virtual assistant, and that’s it.

Dennis: Yeah.

Jack: But many of them do it full-time, right? We have liberated hundreds of people from their jobs. We don’t know the exact number, but we have liberated a lot of people from their jobs, and they’re doing this full-time now. And so, with that said, what I always hear is that you should be doing the majority of your deals outside of the IRA in your business, but then perhaps a few deals in there. And what I always say is, like, how about you do your best deals inside of the IRA?

Dennis: That’s the point.

Jack: If you ever feel now that you gonna pick up for 12 and it’s worth $100,000, then move that thing into the IRA so that you get that $36,000 profit in the IRA. You do that five times a year, but all of your 50 deals, now it’s only five a year if you do there. And I don’t know if five is the right number. Perhaps three is the right number or seven, who knows?

Dennis: You don’t know this?

Jack: But you do your three, four best deals in there, but the majority you do outside, and then kind of, like, you can make the case off or perhaps you even do some buy and hold deals in your IRA. So, that is like a combination of buying holds and that you just buy and you hold them for a year or two, and then you sell them for 10 times your money. And so, it becomes a combination of like, “I’m doing my act of business here, and I’m putting my passive business over there, and every once in a while, I’d just sell one and sometimes I’m selling quickly, but sometimes I sell them slowly.” Is that the strategy you would endorse?

Dennis: I could not agree with that strategy more. That’s a wonderful strategy. I have again, never seen anybody who uses a strategy that’s not even that carefully thought through. I’ve never seen anybody bothered by the IRS. Again, the ones I’ve seen bothered by the IRS are people who are really…you know, 350 homes, 320 homes. You know, pretty major situation.

Jack: So major. I mean, 220 homes, even at the downturn when they were $50,000 a home, that’s still $10 million or $15 million. Then you buy and then you hire staff and then to sell those businesses, those deals exclusively. So, really 99% of your business is inside the IRA, and then you are obviously violating the rules. But if, like, 80% of your business is outside the IRA or 90, or whatever the number is, don’t trust me, just go look at…Like, follow your own advisors and counsel on that, but then you should be safe, you’re saying. Okay.

Dennis: Absolutely. So, let’s talk about…I’m just…Let’s see what I want to talk about next.

Jack: No. Actually, I want to ask you something. So, here’s the thing. Is there any rule? So, particularly when we’re dealing with apartment complexes, we have multiple investors right now. We’re almost pretty much-done raising, or if at the time just this is published, we already own another 158 apartment units, and we probably have 10 investors to invest on this self-directed IRA. Every single IRA company has their own documents and their own process on how to do that. Is there any kind of guideline of how that needs to be done? Or let me ask you the other way around. Typically, when an investor buys something through the IRA, who signs the paperwork?

Dennis: Oh, for sure. If the IRA is the buyer, the IRA is the signor because…

Jack: Now, typically, though, if that is like a bunch of paperwork, where is the limit between what the IRA person does and what the actual investor does? So, like 10 investors typically fill out these forms themselves, and then the IRA just signs it. Is that how I expect it? Because he knows all about the deal or…It seems like every company does it a little different. So, I want to [inaudible 00:17:39] know from an expert how this all works.

Dennis: Well, that’s a very interesting point because I’m actually involved with that in another situation right now. The reason that they’re all different is because the IRS rule is not clear. You know, the IRS, when they were writing this rule, did not take into account real estate. Did not take it to account syndications. They thought everybody is gonna buy stocks, bonds, mutual funds. And so, that’s really what the rules are written for us, so when we get to the alternative investments, which…By the way, you need to know, in our association, there’s well, well over $150 billion in self-directed IRAs. It’s not some fringe item. When it comes to something that’s not [inaudible 00:18:24] by a mutual fund, a lot of it is up to that IRA company, basically, their legal counsel that says, “Let’s have this in our files so that it’s very clear who owns what, who decided what.” In our particular case, we do as much as we possibly can for the client. But even that, we do want the client to sign off and say, “Yes, this is what I want. This is the investment that I want. This is how much I want to pay.”

Jack: All right. So, typically what’s involved. And again, a lot of our investors are beginning investors here, and all of our listeners are somewhat more beginning investors. So, when somebody sets their own self-directed IRA, they contact you. They set up an account. There’s a few forms they need to fill out. They transfer the money from their former employer or from…, or they fund it with the amount that they are legally allowed to fund it, and now they’re ready to go. So, now they find an investment that they want to do, what’s the process? Can you walk us through the process that they need to do?

Dennis: Thank you. That is so very simple to do. Once the account is opened and it’s been funded, as Jack says…It’s funded because it was either a transfer in, and people transfer in from existing IRAs. You know, we were moving money from Fidelity, from Charles Schwab, from [inaudible 00:19:40] literally every, every day. And so, you know, we’re on the phone with these guys every day, so they know us. We know them. It’s a very simple transfer. Or the transfer from a 401(k). Same thing. We’ll do all their paperwork for them. Or it’s a contribution. So, once the funds are in the account and you’re getting ready to make the investment, we say, “Look on your first one…” And I can tell you can do everything online. But, “On your first one, two, three, four, whenever you’re comfortable, transactions, we want you to call us.” Why do you say, “This is what I want to do? I’m going to buy this house here. I’m going to buy this syndication there. I’m going to buy this piece of real estate here.” And we’ll say, “Okay, let’s do it together. We want this and this and this.”And what we want is basically because we consider ourselves to be the buyer on your behalf, you know, for benefit of…What we want is really the things that you should be asking for. You know, did you ask for the offering document? Did you ask for…You know, if it’s a house purchase agreement, did you ask for those things? And so, we pull those things in and when the file, you know, says, “Hey, everything is here, and we’re talking to you every day on this stuff,” we’ll say, you know, “Let’s proceed with the investment,” and, you know, now you tell us that you want us to release the money and we’d send you this little one-page form called investment direction. In other words, you are directing your IRA to make this investment, and then we will, you know, complete the investment. We don’t approve an investment. People get very confused about that. We don’t approve an investment because you’ve decided that the client makes a decision to make the investment. We want to make sure that the client has their paperwork in order, and we’ll walk them through it. This is what it should look like. This is what is there, and then we have a nice complete file.

Jack: Wonderful. That makes sense. So, it’s not scary. Once it’s set up, it’s actually a simple process. And what I heard you say is, like…just to reiterate once more, you guys are what’s called the custodian. You’re not an investment advisor. So, can you talk about that one more time?

Dennis: And when you call us, we will never ever…You know, we don’t sell or offer opportunities. That’s a whole different industry. It’s a whole different, you know, situation. If you think of us as a bank, you’re about right because as a matter of fact, we’re regulated under the banking commission because you think about what we do, you bring your money in, we hold it, and you know, we do pay money market-rate interest on it, which is, you know, not very exciting, but we do pay money market-rate interest. And then, when you say, “No, I would not want to make this investment,” we say, “Okay, how much is it?” We send it out, but we take in the asset. So, the asset is in the name of your IRA, not in your name. And one of the things where we seem to, you know, get involved more than I thought we would is exactly that with titling. Titling the asset. I will call the…you know, especially if there’s a title company involved. And we like it when there’s title company involved because, you know, they’re going to dot the Is and cross the Ts. But title companies really want to hear from us because we’re going to say, you know, “Fred is not buying this property. Fred’s IRA is buying this property. Here’s how to title it.” And that’s what title companies want. They want titling instructions.

Jack: All right. Yes. And often they don’t know. That’s actually a question I get in our syndications. I was like, “Well, what do I put up there?” It’s like, You got to ask your custodian” because they will tell you exactly how it should be named, and I just had that yesterday.

Dennis: We’ll give it a name, including your account number. I mean, your account number will be on there, unless, you know…Your name, account number two, three, four, five.

Jack: All right. Wonderful. Exactly. That’s how it typically looks. So, great. So, that’s good. So, now let’s go back just one more time to the simple basics. So, in essence, what people understand, what they set up is an account just like they have in their job at 401(k). You can also set up IRAs. You can set up a Roth IRAs. You can set up all these advanced kind of, like, whatever they call, like [inaudible 00:23:57].

Dennis: Like SEP IRAs. Yes. Simples and SEP. Any IRA can be self-directed. And, you know, for us, I don’t want to make a big deal out of it, is really just changing the form, you know.

Jack: Okay. Yeah. Absolutely. So, then once they’re set up, it’s almost like there’s an entity that belongs to you, but that is outside and that in order to keep things clean, you cannot sign for.

Dennis: Right.

Jack: That’s how I think about it. That’s how I explain it to people. So, therefore, you make the decisions, but you, Dennis, and your team sign the forms based on the instructions that your clients give you.

Dennis: In other words, the client does everything that’s important. They decide what they’re gonna invest in. They decide when to buy, when to sell, what to pay, what to sell for. All the important decisions are the clients. What we’re doing is keeping it IRS-compliant.

Jack: Exactly. So, you’re signing to things. You’re making the money comes out of their account with you to purchase and then it goes back into your account with you. So, it’s compliant. That’s out of the reach of the investors. They can’t go buy their grocery bills with it. And it’s like it was with Charles Schwab or Vanguard or this where you couldn’t attach it anyway. Now, it just sits with the IRA Club, but you guys using the loophole that says that with any IRA, you can own everything really except for I think speculative pieces like art and certain kinds of gold and things like that, right?

Dennis: Yeah, no collectibles. You know…And we’ll take a minute here, but, you know, that is not in the original act. You cannot have collectibles in your IRA. So, I’ll tell you the short story. Collectibles, you know, you could have any investment for your future was what the original act says, and, by the way, it still says that. It can be in your IRA or any investment for your future. So, that was back in ’74. Well, guess what? You know, there’s always people who were nefarious, and there were some guys out in California selling to people with an IRA fine wine. Cases of fine wine because you know wine never goes down in value. Well, any times we says it never goes down in value, it’s time to get up and go the other way because, you know, things change. And the IRS got very irritated with it because how do you value fine wine? And then they got really irritated when they opened the bottle and find it was grape juice. And the whole thing was a fraud. So, the IRS originally back in ’86 was putting into the code, no fine wines, and then they realized, “Wait a minute. We can’t value any collectible whether it’s [inaudible 00:26:36] because the people had sports memorabilia. People had all types of things in there, you know, antique guns, God knows what, because they thought it had value. Now, here’s my personal story. My personal story is I happen to like classic cars. I have loved classic cars forever. I go to classic car auctions [inaudible 00:26:55].

Jack: [inaudible 00:26:56] to Phoenix in January. We have a great auction there.

Dennis: You have a wonderful one. I’d love the cost of that one. So, I have had a couple of classics, and one day a guy calls up here, and he opens the account. This is several years ago. And in the account, in the list of assets is a…I think it’s in 1939 Duesenberg, and it’s a picture of it, and it’s stunning, and it’s perfect, and it’s a wonderful car and something that I have lusted for. So, I have to call him up and say to him, when did the Duesenberg get into your IRA?” Of course, he gave me a day before 1986. He’s grandfathered in. It’s just fine. And once a year, I still to this day, call him, he’s way deep into his 90s, and I say to him, “Jack, how is the Duesenberg? How are you feeling, Jack, and how is the Duesenberg?” And he says, “Oh, you know, it’s in the garage. I don’t take it out much anymore.” And I always say to him, “That’s good. Don’t take it out. You know you got to be very careful with those.” And I said, “How are you feeling, Jack?” And he says, “Fine.” And I go, “Damn,” because I’m waiting for that guy to pass away because I know I’ve talked to the kids. They don’t want the damn Duesenberg. I would love it. So, there is that one collectible hanging out there that I’m watching. There was a morbid story, but it’s what I’m doing.

Jack: Wow. So, let’s not go deeper into that.

Dennis: One of the things that I do want to…You know what I want to talk about that we do so much of it we see more and more of is something that you talk about in your classes, and that is selling, you know, with seller financing and IRAs are wonderful at that because IRAs are very, very patient. And you can talk about it for a moment. You know, the two benefits of selling with seller financing, you know, which from my point of view are one, you’re generally able to sell it for a higher price because the person kind of gets in lastly. You know, they’re more concerned about the downstroke than they are about the total number. And two, you’re making interest on, you know, those payments over a period of time. When that happens in your IRA, it just really, really increases the income potential of that IRA. And again, not only the product from the sale of the land but the interest is all tax-free.

Jack: Right. Well, taxpayer tax-deferred.

Dennis: Well, I’m glad you said that. You know, I say tax fee too much, and tax-deferred is right if it’s a traditional IRA. If it’s a Roth IRA, it’s tax-free. And on these accounts, I’m going to…I do suggest that people consider the Roth. You know, the Roth does have the problem of that one little tiny prick of a problem at the beginning where you do have to…You know, you don’t get the deduction on the contribution, or if you’re bringing in a conversion of a mere transfer, I should say, you do have to pay the income tax on the value of the transfer, but then all the income for the rest of your life is tax-free and not only for the rest of your life but the rest of your heirs life. Because remember if you should pass away and there are still assets, the money is still in at IRA, you’re not leaving them money. You’re leaving them the IRA. And so, if they inherited a Roth IRA that has $1 million in it, you just gave them $1 million tax-free. If you gave them a traditional IRA with $1 million in it, you gave them a big tax bill.

Jack: All right. And that’s particularly the beautiful thing. That’s why particularly for land flipping, I actually am a big fan of Roth IRAs because if you fund that thing with after-tax dollars of $5,000 and let’s say that’s after-tax, $7,000 or $8,000 and you pay taxes, you have $5,000 in it, and you use that, and you do that like just we talked about earlier, and you grow that with like the deal that you buy for $2,000 so far or $8,000 then you do that a few times, and now you have enough money and then now you do that $12,000 deal you make $48,000 of it. Now, that same growth, you’re not growing in much slower than the other one. It’s the same thing except that on a very small amount of money upfront, you pay taxes, and then you use that small amount, so you end up paying $2,000 in taxes or so and then you go use that and propel that into hundreds of thousands of dollars over a few years, perhaps even millions of dollars over a bunch of years like we have done like other students are doing right now. All of a sudden, all that money is truly tax-free. And particularly for the ones that are older, I know we have a few students that do this like…Again, they keep the ratio and so on that we talked about earlier somewhat of a ratio, but one of our students is like in the 60s, and so he does all his best deals, and it’s a self-corrected Roth IRA. And the moment after the profits comes in, let’s say $25,000 profit comes in, he takes the money out, then it’s tax-free.

Dennis: You know, that’s exactly right. You know, once you’re over 59 and a half and you’ve had a Roth IRA for more than five years, just take it out tomorrow or take it out today because that money is 100% yours and just do it in the Roth IRA. But again, you have to have the Roth IRA open for five years. They don’t want you to open the Roth IRA on Wednesday and taking it out on Thursday.

Jack: Sure. Absolutely. That makes sense. All right. So great. So, is there any other subject you want to talk about?

Dennis: Yes, there is. I want to talk about two things. One is people comment all the time, you know, “Gee, the money is tied up.” I want to talk about money being tied up. It’s not really tied up. You know, if you have an IRA, people say, “Well, it should be that until I’m 59 and a half,” etc. If you’re over 59 and a half, you don’t worry about it, but if you’re not 59 and a half, you might. Here’s the thing. It’s not tied up. If you have money in an IRA and you want it tomorrow, we’ll send it to you tomorrow. There’s no rule that says we have to hold it. We’ll send it to you. Do what you want to do. You know, you’ve always wanted to buy the new Corvette, you know, knock yourself out. However, the IRS gives you all these tax benefits of text deferral or tax-free because you, in essence, have promised them I’m saving for my future, and somehow, they just had to pick a number, and they themselves admit it was just a guess of a number. They used 59 and a half. That’s your future.

And so, they said, if you leave it until you’re 59 and a half, there’s no penalty. If you take some money out before 59 and a half, well, maybe you kind of misled us. You weren’t saving it for your retirement. You weren’t saving it for your future, and so there is a penalty, and it’s 10%. Now, you know, it’s kind of like cashing in a bank CD early. And every now and then people, you know, have a need for the money and they need the money, and they say, “Well, 10% penalty isn’t all that bad,” and they pay it and they get the money. So, the money is always there. It’s always available. 10% penalty by the penalty even that goes away at age 509 and a half. The last thing I do wanna talk about is the cost of these things at $175. And I wanna do a special [inaudible 00:34:16] just for this podcast, and that is if anybody contacts our office, I have to watch this podcast and asks for Kasia, K-A-S-I-A. Kasia is a very nice person. Kasia will talk to you and just tell her the promo code, Jack, and we will knock off the setup fee. The setup fee is $40, and so it’ll be not the $175 but $135 to get yourself started. So, there we are. I think we’ve covered the topics.

Jack: Wonderful. So, actually, along those lines, I wanted to ask something. Just one quick question. And I forgot it right now. Whatever it was, it’ll come to me again. What was the thing that you just said right before this?

Dennis: I just said [crosstalk 00:34:58.086] Jack is.

Jack: Oh, yeah, the taxes. Yes [inaudible 00:34:59]. So, how does the IRS look at borrowing from your IRA?

Dennis: If you’re going to borrow from your IRA, we would strongly, strongly discourage that the IRS doesn’t like that. And, you know, when a person calls us up and says…and it happens all the time, especially with rookies because they’ll put X dollars in their IRA and they say, “Now, I want to make this investment. Let me borrow the money out of the IRA,” and we say, “Okay, slow down. You’re not gonna borrow any money from the IRA. Let the IRA make the investment and let the IRA own the investment and let the IRA get all the…” And then that’s where all the tax benefits are. If you’re going to borrow from an IRA, there is a backdoor. We don’t recommend it, and that is the IRS will completely look the other way. No penalties, no nothing if you get it back in within 60 days. It’s just a backdoor. It’s not worth it. And if you want money from your IRA, just call us up. We’ll send it to you. There’ll be a 10% penalty because you’re not 59 and a half, but we’ll send it to you the next day.

Jack: All right. Okay. Wonderful. That’s good. So, good. A couple of final questions. I see books in the background. What is your favorite book that you have been reading lately that our audience might also enjoy?

Dennis: Well, my favorite book that I’ve been reading lately is what I’ve been writing lately, and you’re in it, by the way, and I don’t think by name, but your topic is, and the book is called “15 Things You Can Do To Make Money With Your IRA And Old 401(k),” and that book is coming out in April.

Jack: Wonderful. All right. Looking forward to that. And then secondly is, do you have any kind of, like, a daily routine that keeps you in line towards continued success?

Dennis: You know, I would love to say something really brilliant and insightful that people carry away, but the fact of the matter is, ever since I’ve gotten involved with this topic, I have been having so much fun. I’ve met wonderful people, but I’ve learned something new every couple of days. As just with your business, Jack, every deal is a new experience. Every deal has some little twist to it that it gives you information you didn’t have before and is a “Gee, I can use that in the future.” And that constant learning opportunity, that constant experience really gets me motivated and really gets me excited, and I jump out of bed to come to work every morning.

Jack: That’s just wonderful. All right. So, that’s about the best way you can be, actually, right? Anyway, so great. So, with that again, give us the link I mentioned already. It’s the iraclub.org, right?

Dennis: .org. Yeah.

Jack: So, iraclub.org. So, there’s no [inaudible 00:37:53]. There’s just irclub.org. We always are going to put in the show notes, into the comments. Again, as I mentioned at the beginning, we have been working with a lot of different IRA companies. This is the one that I moved my…Yours is the one that I moved my own IRA much. I don’t do much in the IRA. I should do much more. But at the beginning, our problem was that we were broke and just that you said, if it’s your first deal, don’t necessarily put it right in the IRA. Don’t ever put in the IRA if you need to pay your groceries with it the next day.

Dennis: That’s right.

Jack: So, we needed to get out of that. We needed to get out of…and we wanted to also use the fruit of our…in other investors, the cash flow for it. So, we did a lot of things outside of the IRA, but we are starting now to put a bunch more in the IRA because all of our cash flow needs and our things are obviously taken care of. And so, the other part that we’re doing now is really just for tax prevention and for tax shielding. So, for that, an IRA is an absolute wonderful situation. That’s why I even said earlier, do some of your deals outside. Put some of your best ones inside so that this grows while here’s enough money left over to pay for your lifestyle and upgrade your lifestyle and live the life that you want to live. Again, so of the ones that we work with, we chose IRA Club for our own IRA, and I recommend everyone, you guys go and contact Kasia, contact Dennis, and they’re great to work with.

Dennis: Well, thank you very much. I can clarify that. [inaudible 00:39:25] Kasia.

Jack: Okay. Right. Great, great. Kasia, you’re probably [inaudible 00:39:30] all day. You’re going through event after event. So, contact Kasia. With that said, we’ll get your contract formation again, and we’ll put it on there too. [crosstalk 00:39:40.447] Thank you very much. It was a pleasure having you on the show.

Dennis: I enjoyed it. Let’s do it again.

Jack: Wonderful. So, with that said, thank you very much, everyone. This concludes our next episode of the “Forever Cash Life Real Estate Podcast.” Make sure you give us five stars on iTunes. Go put a review on there. It helps us reach more people. If you’re watching this on YouTube or any other audio or on Facebook, if we’ve posted there, just give us a thumbs up, share it with your friends and your family so we can reach more people. With that, thank you very much. Bye-bye.

Dennis: Thank you.

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