Investing In Real Estate And Other Alternative To Grow Your Retirement

Investing in Real Estate and Investing in Real Estate and Other Alternative Assets to Other Alternative Assets to Grow Your RetirementGrow Your Retirement

DisclaimerDisclaimer

The Entrust Group, Inc. and its franchisees ("Entrust") do not provide investment advice or endorse any products.

All information and materials are for educational purposes only. All parties are encouraged to consult with their attorneys, accountants and financial advisors before entering into any type of investment.

Who is Entrust?Who is Entrust?

LARGEST NETWORK of Self-Directed TPAs.

NO CONFLICTS OF INTEREST with how you want to invest.

WITHOUT LIMITS imposed by other custodians.

OVER 25 YEARS managing self-directed accounts!

Traditional CustodiansTraditional Custodians

What Wall Street Doesn’t Want You To Know

Traditional CustodiansTraditional Custodians

Never, ever think outside the box!

Entrust’s PhilosophyEntrust’s Philosophy

You don’t have to think outside the box, because the box is bigger than you think!

What is a “Self-Directed” IRA?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.

Take control of your retirement!Take control of your retirement!

What are the benefits of self-direction?What are the benefits of self-direction?

DiversificationDiversification

What are the benefits of self-direction?What are the benefits of self-direction?

IRSIRA Investor

Tax Savings

What are the benefits of self-direction?What are the benefits of self-direction?

Social investing! It’s midnight. Do you Social investing! It’s midnight. Do you know where your IRA dollars are?know where your IRA dollars are?

What are the benefits of self-direction?What are the benefits of self-direction?

Invest in what you know best!

What are the benefits of self-direction?What are the benefits of self-direction?

Why save for retirement?Why save for retirement?

• Realtor Rose is 51 years old.

• Rose has saved $200,000 for retirement.

• Rose earns $80,000 net per year on her Schedule C.

• Rose would like to have retirement income of $60,000 (75% of her working income) so she can retire in style and enjoy life.

• Assuming 6% income from her retirement assets, and ignoring the effects of inflation, Rose needs to have $1,000,000 in retirement assets when she retires in 15 years.

• This means Rose’s retirement savings must grow at a rate of more than $53,000 a year, including gains from her investments and contributions.

Why save for retirement?Why save for retirement?

Why save for retirement?Why save for retirement?

Rose’s choices include:

Dying sooner

Working longer

Relying on Social Security

Increasing savings

Increasing yield from assets

What types of plans can be self-directed?What types of plans can be self-directed?

• Traditional IRA

(including rollovers)

• Roth IRA

Employer plans:

• SEP IRA

• SIMPLE IRA

• Individual 401(k)

• Roth 401(k)

What types of plans can be self-directed?What types of plans can be self-directed?

Special plans:

• Coverdell

Education Savings

Account (ESA)

• Health Savings

Accounts (HSA)

What types of plans can be self-directed?What types of plans can be self-directed?

ALL of the above accounts can be self-

directed!

What types of plans can be self-directed?What types of plans can be self-directed?

Which account is right for Rose ?Which account is right for Rose ?

Roth IRARoth IRA

There are worse problems to have!But wait…there’s hope!

Roth IRA Fun Fact #1Roth IRA Fun Fact #1

You can take a tax and penalty free distribution to help purchase a home if you are a “First-time Homebuyer.”

“First-time homebuyer” means that you and your spouse have not had a present interest in a main home during the prior 2 year period.

First-time homebuyer can be you or other family members, including children or parents.

$10,000 lifetime limit per person.

Roth IRA Fun Fact #2Roth IRA Fun Fact #2

Distributions from a Roth IRA of any amount up to your total contributions at any time are PENALTY FREE and TAX FREE!

Great for those who may need access to these funds prior to age 59 ½.

Make your child a millionaire by encouraging savings in a Roth IRA risk free while young.

Traditional IRATraditional IRACan be converted to a Roth

IRA if modified AGI is $100,000 or less.

IMPORTANT NEWS FLASH: In 2010, the $100,000 limit for converting to a Roth IRA is removed!

For conversions in 2010, you may pay the taxes 50% in 2011 and 50% in 2012!

RoseRose’’s Work Plan Optionss Work Plan Options

In addition to her Roth IRA or Traditional IRA, Rose may have one of several types of retirement plans related to her working income.

Rose’s options include:

- SEP IRA- SIMPLE IRA- Profit Sharing/401(k) Plan

Rose’s Work Plan ComparisonRose’s Work Plan Comparison

For 2009 tax year, Rose can put:

- $16,216 into a SIMPLE IRA or

- $14,870 into a SEP IRA or

- $36,870 into a Profit Sharing/401(k)

Which is best?

But wait, there’s more….But wait, there’s more….

Rose may qualify for 2 additional types of Entrust self-directed accounts:

- Health Savings Account (HSA)

- Coverdell Education Savings

Account (ESA)

Health Savings Account (HSA)Health Savings Account (HSA)

Used to pay qualified medical expenses, which are broadly defined.

Contributions to HSAs are TAX DEDUCTIBLE.

Distributions for qualified medical expenses are TAX FREE FOREVER!

No income limits for contributions.

Health Savings Account (HSA)Health Savings Account (HSA)

Catch up contributions are permitted after age 55.

Must have a High Deductible Health Plan (HDHP).

Contributions after Medicare enrollment are not permitted (currently age 65).

Coverdell Coverdell Education Savings Account (ESA)Education Savings Account (ESA)Used to pay qualified education

expenses.

Eligible expenses include college expenses as well as expenses for elementary or secondary school.

Contributions are not deductible, but distributions for qualified education expenses are TAX FREE FOREVER!

How much can youHow much can you contribute with $30,000 in wage income (2009)? contribute with $30,000 in wage income (2009)?

Roth IRA – Husband (50+) $ 6,000

Roth IRA – Wife (50+) $ 6,000

Roth 401(k) Salary Deferral (50+) $22,000

Profit Sharing Contribution (25%) $ 7,500

Health Savings Account (Family) $ 5,950

(Catch Up Contribution $1,000 if 55)

Education Savings Account (1 child) $ 2,000

Totals $49,450

Restrictions on IRAs

People Restrictions

Transaction Restrictions

Investment Restrictions

People Restrictions on IRAs

Disqualified Persons = Those persons who cannot benefit from or enter into transactions with your IRA or other plan.

Think of your IRA as Mr. IraThink of your IRA as Mr. Ira

You Mr. Ira

People Restrictions on IRAs

Disqualified persons may not enter into Disqualified persons may not enter into transactions with Mr. Iratransactions with Mr. Ira

You Mr. Ira

NO

NO

People Restrictions on IRAs

Mr. Ira Fiduciary

Disqualified PersonsDisqualified Persons

People Restrictions on IRAs

Fiduciary “F”(includes IRA Owner)

Member of F’s Family

Corporation “C” if F owns

(directly or indirectly)50% or more of vote or

value of stock

Partnership “P” if F owns

(directly or indirectly)50% or more of capital or profits

interest in P

Trust or Estate “T” if F owns

(directly or indirectly)50% or more of

Beneficial interest in T

10% or more

partner or joint

venturer with CF’s Spouse

F’s Ancestor

F’s LinealDescendant “LD”

LD’s Spouse

Officer or Director of C

Highly Compensated

Employee of C (10% or more of

wages)

10% or more shareholder of C

Person with management

or administrative functions of P

Highly Compensated

Employee of P (10% or more of

wages)

10% or more partner of P

Trustee of T

Highly Compensated

Employee of T (10% or more of wages)

10% or more beneficial interest

owner of T

10% or more

partner or joint

venturer with P

10% or more

partner or joint

venturer with T

IRA

Prohibited Transaction RestrictionsProhibited Transaction RestrictionsAny Any direct or indirectdirect or indirect

Sale, exchange, or lease

Lending Money

Prohibited Transaction RestrictionsProhibited Transaction RestrictionsAny Any direct or indirectdirect or indirect

Goods, Services, or Facilities

Prohibited Transaction RestrictionsProhibited Transaction RestrictionsAny Any direct or indirectdirect or indirect

Fiduciary self dealing

Prohibited Transaction RestrictionsProhibited Transaction RestrictionsAny Any direct or indirectdirect or indirect

What is the effect of a prohibited transaction?What is the effect of a prohibited transaction?

Is there an IRA Jail?

What is the effect of a prohibited transaction?What is the effect of a prohibited transaction?

What is the effect of a prohibited transaction?What is the effect of a prohibited transaction?

Investment RestrictionsInvestment Restrictions

Life Insurance Contracts

Investment RestrictionsInvestment Restrictions

Collectibles

Collectibles are defined as:

• Any work of art;

• Any rug or antique;

• Any metal or gem;

• Any stamp or coin;

• Any alcoholic beverage.

An exception exists for certain U.S. minted gold, silver and

platinum coins, coins issued by U.S. states, and gold,

silver, platinum or palladium bullion.

Investment RestrictionsInvestment Restrictions

Owning a BusinessOwning a Business

Unrelated Business Income (UBI)Unrelated Business Income (UBI)

Renting Personal Property

Debt Financed Debt Financed Rental IncomeRental Income

Unrelated Debt Financed Income (UDFI)Unrelated Debt Financed Income (UDFI)

Debt FinancedDebt FinancedCapital GainsCapital Gains

Unrelated Business Income TaxUnrelated Business Income Tax

Partnership Income

401(k) Exemption401(k) Exemption

Unrelated Debt Financed Income (UDFI)Unrelated Debt Financed Income (UDFI)

What can I invest in with my IRA?What can I invest in with my IRA?

What investments are What investments are you knowledgeable you knowledgeable about?about?

You can buy that You can buy that in your IRA!in your IRA!

Investment ChoicesInvestment Choices

• Real Estate, including foreign property

• Real Estate Notes

• Secured/Unsecured Notes

• Limited Liability Companies

• Limited Partnerships

• Private Stock

• And a whole lot more……

HorsesHorses

Investment ChoicesInvestment Choices

Steps to Purchasing Real EstateSteps to Purchasing Real Estate Assets in a Retirement Plan Assets in a Retirement Plan

1. Open a self-directed IRA

2. Contribute or move funds

into the self-directed IRA

3. Locate an investment

4. Complete the proper documentation to purchase the asset

(Buy Direction Letter, Private Placement Instructions, Note, etc…)

5. “Read and Approve” all the documents prior to closing

6. After your approval of all documents, Entrust signs the closing

documents and funds your transaction

7. Asset is recorded in the name of your IRA, for example:

Entrust Retirement Services, Inc. FBO John Smith IRA #12345-11

8. All expenses come from your IRA and all income stays in your IRA

Steps to Purchasing Real EstateSteps to Purchasing Real Estate Assets in a Retirement Plan Assets in a Retirement Plan

• Rental Property

• Rehab Real Estate

• Flipping

• Options/Assignments

• Real Estate Note

• Entity Investment

Case StudiesCase Studies

Purchase Rental Real Estate for CashPurchase Rental Real Estate for Cash

Example #1Example #1

Example #1Example #1

• Purchase Price: $330,000

• No. of Units: 10

• Gross Rents Collected in April, 2008: $5,235

• Gross Rents for Year: $62,820 or 19%

(Still have yet to account for appreciation)

• Purchase Price: $40,000

• Tax Value: $94,000

• Square Footage: 2,928

Example #1Example #1

• Purchase Price: $438,900

• Loan Amount: $307,000

• Loan Terms: 8.15% fixed, non-recourse, annual payments

• Cash from IRA: $137,391

Tales from The Money VaultTales from The Money Vault

• Sales Price 18 Months Later: $614,460

• Net Profit Before UDFI Tax: $124,462

• UDFI Tax : $12,591

• Net Profit After Paying UDFI Tax: $111,871

• Net Return on Investment: 81.43%

Tales from The Money VaultTales from The Money Vault

Example #2Example #2

Purchase, Rehab and Resale

Example #2Example #2

• Purchase Price: $101,000

• Rehab Costs: $30,000

• Sales Price: $239,000

• Profit After Sales and Holding Costs: $94,000

Purchase and Immediate Resale (Flipping)

Tales from The Money VaultTales from The Money Vault

• Purchase Price: $503,553.60

• Sales Price: $650,000.00

• Net Proceeds to IRA/401(k): $146,281.40

Tales from The Money VaultTales from The Money Vault

Assignments and Options –

Getting Paid NOT to Buy!

Tales from The Money VaultTales from The Money Vault

• Purchase Price: $5,500

• Earnest Money: $100

• Assignment Fee: $8,500

• Profit in Only 30 Days: 8,400%!

Tales from The Money VaultTales from The Money Vault

Example #3Example #3

Hard Money Lending/Private Money

Jack Brown has $100,000 in an IRA and wants to loan $70,000 to an investor as a first mortgage on a $100,000 investment home.

• 70% LTV (loan to value)• 12% interest rate• Interest only payments with

balloon payment in 1 year• Minimum loan term of 3 months• 3% origination fee• Borrower pays all costs for legal and Entrust fees

Example #3: Real Estate NoteExample #3: Real Estate Note

Does lending work?Does lending work?

• Balance of Account 9/25/2006: $64,960.09

• Anticipated Balance 3/24/2009: $87,257.43

• Dollar Increase in 30 Months: $22,297.34

• Percentage Increase in 30 Months: 34.32%

Example #4Example #4

Private PlacementsPrivate Stock

Example #4Example #4

• Initial Investment: $50,000

• Partnership Distributions: $59,321

• Current Estimated Equity: $31,598

• Estimated ROI in 36 months: 82%

Example #4Example #4

• Purchase Price Feb. 2007: $10 per share

• Purchase Price April 2009: $15 per share

• Total Assets as of 4-30-2009: $250,000,000

• ROI after 2 years: 50%

1. IRAs can hold all types of investments, not just securities.

2. Partnerships and split ownerships are allowed.

3. IRAs and other Entrust self-directed plans grow tax deferred or tax free.

4. All plans qualify & partial transfers are allowed.

5. Take control of your retirement today!

5 Key Points5 Key Points

How can I get more information?How can I get more information?

www.EntrustTexas.com

800-320-5950 or 214-800-3488

RKimura@EntrustTexas.com

For More Information:For More Information: