Real Investor Radio Podcast

Craig Fuhr (00:12)
Hey, welcome back to Real Investor Radio. I'm Craig Fuhr joined again by the great Jack BeVier Jack, good to see you. Jack's having a bad hair day. He's rocking the cap today. We understand.

Jack BeVier (00:18)
Good to see you, sir. Thank you much.

Mat Sorensen (00:23)
.

Jack BeVier (00:25)
So I've been growing it out. I've been growing it out for like six months. It's an unholy mess. My wife has not, she's been on board. She's letting me get away with it. I'm getting a lot of comments about the flow, which I didn't even realize was a thing, but apparently I'm rocking a flow and getting enough positive feedback that I'm gonna keep it going for a couple more months.

Craig Fuhr (00:43)
feel like it's in that sort of transitional stage, Jack. It's not quite long yet, but it's not really short. You're getting there. Give it.

Jack BeVier (00:52)
I've

been living in transition for about four or five months now. Yeah, that's true.

Craig Fuhr (00:56)
Well, man, we have for the listeners today an awesome guest. Can't wait to jump in. Today we're thrilled to have Matt Sorensen on the show. And if you've ever explored the world of self-directed IRAs, you've probably come across Matt because he's one of the leading voices in the space. Matt's a CEO of a IRA and directed trust company where he and his team oversees more than $2.2 billion in assets for over 20,000 clients.

He's also a senior partner at KKOS Lawyers, a firm that specializes in business and tax law, especially for investors and entrepreneurs like us and our listeners, Jack. Matt, it's great to have you on the show. I could go on and on. Matt also has two very successful podcasts. Yeah, man, the check is in the mail. know. He's written a book called The Self-Directed IRA Handbook, which has become

Mat Sorensen (01:43)
Keep going, Craig. It's okay. Keep going.

Craig Fuhr (01:51)
really a go-to resource for anyone wanting to maximize their retirement savings through alternative investments. And if that's not impressive enough, I mentioned the two podcasts that he co-hosts. You can see the production value and Matt's studio is amazing where he hosts Main Street Business podcast as well as the directed IRA podcast, which together have almost as many views as us, Jack, 2.5 million downloads.

Mat Sorensen (02:03)
You

Jack BeVier (02:16)
you

Mat Sorensen (02:17)
Yeah.

Craig Fuhr (02:17)
Matt, it is awesome to have you on the

show. We have had an illustrious stream of guests since starting the podcast about a year and a half ago, but it's a real honor to have you on, man. Can't wait to jump

Mat Sorensen (02:28)
Yeah, thanks so much, Craig. And thanks, Jack, for letting me be on. And I love talking about real estate and also self-directed IRAs. I think that's one of the most underutilized strategies out there. Just to put in context for everybody, you may have heard about this strategy before, but if you haven't, and even if you have, I want to make sure you understand one thing out of the gate. There is $40 trillion in U.S. retirement accounts. That is more money anywhere to invest in anything. And if you're a real estate guy,

A lot of people have thought about it, maybe they've heard about it, some people have never heard about it, but most people have just thought of that 40 trillion dollars, frankly not understanding how much it is, as being mutual funds, stocks, and I want you to stop that and start thinking about, hmm, how can this greatest pot of money out there, there's no pot of money bigger than U.S. retirement accounts, how can that money be used to invest in real estate?

And if you're a real estate person, you've got to know this. This is so underutilized. There's a lot of opportunities, whether you got your own little sliver of a retirement account or other people's money. Everyone else has got the 40 trillion to help fund and do your deals. So I think it's a powerful topic. Thanks for having me on. And I have to say, I do like the hair jack. I was actually growing mine out and I bailed. I was in the in-between. Okay. And I was going for like the Patrick Dempsey look.

Craig Fuhr (03:49)
Gotta jump in with both feet,

Jack BeVier (03:51)
It's hard.

Mat Sorensen (03:54)
I even took it to my hairstylist and I'm like, this is what I want. I had to bring a picture, you know? And she's like, okay, all right. And I just couldn't make it through the in-between stage.

Jack BeVier (03:58)
Yeah, yeah.

Yeah, no, it's a test. It's absolutely a test. We're gonna see if it's worth it. I don't know. I might just look like a scrub for the entire 10-month period.

Mat Sorensen (04:07)
It's testing out here.

You know what, the hat is a good little trick to get through it maybe. That helps. just, anyways.

Jack BeVier (04:18)
Yeah. Yep.

Craig Fuhr (04:21)
It's clear that I

don't have such worries and I'm pretty thankful for it.

Mat Sorensen (04:24)
Yeah, you you just don't have to these problems. Just don't need to hit your plate, Craig. It's okay.

Craig Fuhr (04:29)
Dude, I was doing a dive

on you as I prone to do prior to the podcast. And man, if you could just share three minutes of your story on sort of your trajectory to where you were, how you got into the space and then, know, sort of where you are today, that'd be awesome.

Mat Sorensen (04:39)
Yeah.

Yeah. Okay.

Okay. I'll give my quick story. Pretty much. mean, I'll give it quick. I got my girlfriend pregnant in high school. Okay. And I got married. I was a teen dad at 18. And so I started early and had to grow up fast. I went through undergrad, went to law school in Maryland, where you guys are at in the University of Maryland, which law school is in Baltimore. And, but got out and started practicing law.

And we had a client that was like, I want to buy real estate with my IRA. And I'm like, I don't think you can do that. I'd never heard of that. And then started figuring it out. What can you can't can or can't you do? I really became fascinated with just that topic as a lawyer. And then I just decided, you know what? No one's really claimed the space as the national expert on this field. No one's written the book. Now, it took me like five to seven years to write that whole thing, the self-directed IRA handbook, which is the best move I ever made.

It made me the expert in the space. People are buying my book to come become a customer, right? It was like paid for marketing. But also solidified me as an expert. gave me a ton of credibility. mean, my book is used by the National Association on our industry as part of the credential called the Self-Directed Diary Professional Credential. Government regulators buy my book. And so it's been good to like become an expert in something like this that's a niche.

But then what I started doing is I realized all these companies that I was sending my clients to, to do a self-directed IRA kind of sucked. And I'm like, I'm going to go be the company where you can have your account. It's not easy to do that. You got to go to trust charter and banking license. So that's what we did at the end of 2018. 2019 was really our first year and we're directed IRA is our company. We are just the fastest growing in the space because we understand the investor. Like we come from the perspective of we,

we self-direct our IRAs ourselves, like my entire board, our management team, like we do this ourselves. So we come from it from that perspective, not just like it's a business opportunity. And so we try to cater to what their needs are and really understand the customer that's gonna use their retirement account to go invest in real estate or whatever alternative asset they wanna do. So, but we're now at 2.3 billion in assets. We're a little shy of 20,000 accounts. We opened a thousand, over a thousand new accounts last month alone. So,

Jack BeVier (07:00)
Wow,

really, that's wow.

Mat Sorensen (07:01)
Yeah. So we're crushing it. We hit the Inc 5000

Craig Fuhr (07:01)
same.

Mat Sorensen (07:04)
list at number 387 last year as one of the fastest growing companies in America. And we just built a great team and we're growing well by just serving customers. But we believe in this message of investing in what you know, whether it's real estate or oil and gas or private equity or startups, I don't care what it is. We just want people to be able to invest in what they know and believe in.

Real estate happens to be like the most popular area people use in IRA. But that's kind of where the company's set is letting people have the freedom to invest in what they know. Don't box them into Wall Street products. And then also having a team that can help execute on that and make it as painless as possible.

Jack BeVier (07:44)
So real, real quickly, just to contextualize, we're not going to go, this isn't like IRA one-on-one, but just to contextualize the conversation I learned about IRAs young. My dad was in my year about tax strategies and stuff when I was a kid. so he's young. set me up a Roth IRA, the advantage of which you're putting after tax money into the account, but anything that grows within that account is never taxed. for as long as you live, including when you start making withdrawals in retirement.

Mat Sorensen (08:02)
Awesome.

Jack BeVier (08:12)
And so, you know, if you're, and so people think about, Hey, that's great. I'll buy stocks and then my stock appreciation or my dividends will never be taxed. But the, real power of it, I think in the, context of real estate investing is that that home price appreciation never gets taxed. don't get, you don't even get capital gains on the backend and the rental income, net rental income that you're, if you own real estate in your IRA never gets taxed. If you're lending out of your IRA.

the interest income is one of the worst, most tax inefficient forms of income. so that, you know, lending out of an IRA is a, a tremendously advantaged structure for that, for that business practice. And so I already had a Roth IRA in place when I started real estate investing, when I, when I started learning about real estate investing and doing that when I was 23. And so, and my partner, Fred, had an IRA as well. And so we both started

Mat Sorensen (08:50)
Mm-hmm.

Jack BeVier (09:07)
doing deals in that, in that structure is really small at the time. you know, was barely able to make my $7,000 a year contributions at the time. And, but we've made an effort to, really try to do deals in the context of our IRA. And at the time it was, you know, all we knew about it, there was no book for us to buy, as you mentioned. and so we were kind of stumbling through it. We found ourselves a custodian who could help us stay in compliance and,

Mat Sorensen (09:14)
Yeah.

Hehehehe.

Jack BeVier (09:33)
But it was, yeah, we had to title the real estate in the IRA was kind of a pain in the butt. and the, the concept of a checkbook LLC was one of the first things that for us really kind of decreased the, barriers to entry of doing, know, of, transacting frankly, right. They took the hassle factor down and that ended up, you know, kind of turbo charging our, use of that structure. That's a little bit about how that works. How often you see that.

Mat Sorensen (09:38)
Mm-hmm.

Yeah.

Jack BeVier (10:00)
actually in use.

Mat Sorensen (10:02)
Yeah, I mean that was something for particularly real estate investors that checkbook IRA or we call an IRA LLC was something that decreased the friction because you know a lot of people they're busy you know most people who are attracted to a self-directed IRA or real estate investors entrepreneurs high income earners and so but they're busy you know I mean and so when you're buying an asset like real estate in your IRA for example it would be like

you the contract need to be in the name of directed trust company, FBO, Matt Sorenson, IRA. And then you're signing the closing documents and then the incomes go into the IRA. You got to authorize expenses out of the IRA and maybe get a property manager, help with some of that. But it becomes kind of administratively a pain in the butt. And what I think about a lot of like our great clients is like there's a this like return on hustle aspect is like, if I'm gonna do that deal in my IRA, and I got to do all that, even if it's a good deal, it's not worth my time.

So the return on hustle is not good. So the LLC is an awesome structure for people doing a lot of deals, or particularly real estate deals, which is a buy and hold property. And so what happens there is the IRA invests its cash into an LLC and could own the LLC 100%. And then you're the manager of the LLC. You don't own the LLC at all, your IRA does, but you can be the manager, which is like president of corporation. And then that LLC has a bank checking account.

and you can have authority on the bank checking account. Now when you go buy property, it's not your IRA on title, it's ABC Investments LLC, that's the purchaser. And you have a bank account, so you send the wire, you sign the contracts, you sign the, the inspection stuff, you're paying the bills, receiving the income, and it's all happening at the LLC level. I mean, I'm CEO of Directed IRA and sit in the desk where I can like tell everyone what to do and push the buttons to send money. You know, I have to two party approval for that type of stuff. But I use an LLC.

Because it's easier for me. I'm doing deals. I'm buying. I'm doing real estate deals. I'm doing private money loans with my own retirement account. And I want that ease and that speed of the LLC. So and that's a good example of a strategy that, particularly for real estate, is something you've got to know. And there's some companies in the space that don't let you do it or that used to let you do it. Now they finally do. And so but it's a strategy that over the last 10 to 15 years, it's really taken hold. And it's like kind of a no brainer if you're a real estate person.

Now, if you're like, well, I want to invest in a private fund or a syndication, you don't need to do the LLC. Don't do this IRA LLC or checkbook IRA. You don't need to. Just have your IRA invest in that syndication or deal because there's not a lot of administration stuff. You sign a subscription agreement, your money goes into that deal. And so knowing what tool to use in the self-directed world is helpful because there's a cost to the LLC. That might cost you 1200 bucks to set that thing up.

You might have a state fee to keep the LLC active so it can add a little cost but it's totally worth it. You're buying properties at auction, you're rehabbing properties, you've got rentals, you're doing private money loans that are six months at a time, you know, you don't want to go back and forth with your custodian all the time. You can just use that LLC to go and do the transactions and it creates a ton of efficiency for you.

Jack BeVier (13:09)
So in terms of like, mean, people are getting, know, people who maybe have less familiarity are probably getting excited because they're like, my God, if I'm just going to start an LLC and have, could just have my self-directed IRA on that LLC. Why shouldn't I be doing all of my business this way? Why aren't I building a rental portfolio this way? put the brakes on them a little bit and let's talk about where, where within the context of real estate investing self-directed IRA makes sense and where it does not, when you get, and the pitfalls that people get themselves into trouble there.

Mat Sorensen (13:25)
Mm-hmm. Yeah.

Yeah, I think my message isn't use your IRA for everything. You know, it's a it's a long term wealth building tool, right? And a lot of people happen to have money in it. So I want you to think about it from what is your retirement account invested in right now? And most people's IRA or 401k dollars that could otherwise be doing this self directing we're talking about. Most people's dollars are in a mutual fund or a target date fund. Maybe it's in some individual stocks.

I want you to look at that and say, what's the return I've received over last 10 years?

And then say, all right, if I did a real estate deal, this is my long-term wealth building. Okay, I'm not talking about the money you're living on tomorrow unless you're 59 and a half or older, this is your long-term wealth building. But that bucket of money, could I get a better return in real estate? And then you need to look at the different strategies within real estate. The private money lending is one that you mentioned, I do a lot of that with my own account right now because I can get great rates on it. It can be secured on real property. So I'm lending money at 12 % interest in two points right now.

when I'm charging other real estate investors that are flipping or rehabbing a property and I'm getting it secured on the property. I can make sure there's enough equity. feel protected and I haven't lost on it yet. But that 12 % interest and two points, I lend that money out two to three times a year. I do six month loans, but I'm getting paid off sooner. And so that's at least a 16 % annual rate of return. If I look at what my...

Retirement accounts get because I've still invest in the market a little bit. It's not 16 % And that if I but now you say well Matt, what if I took? That same hunt. Let's say I took a hundred thousand dollars. Okay, and Let's just actually run these numbers. Okay, if you can I geek out for a second All right. Let's just take this take a hundred grand. Okay, let's say I can get a 16 % rate of return on that and let's talk about my retirement account Okay

Craig Fuhr (15:22)
Yeah, geek out.

Mat Sorensen (15:33)
I'm going to make $16,000 at the end of the year, right? And I always look at like, well, how long is it going to take me for my money to double? Most investors know the rule of 72, right? That's this take 72, divide it by your rate of return. And that tells you how long it takes for your money to double. So if I take 72, I divide it by 16 in four and a half years, my $100,000 will be $200,000. Okay. Well, let's take that.

16 % rate of return. Let's say that you took 100,000 of personal money, not retirement account dollars. I took 100 grand, and I'm trying to build this for long-term wealth. I make $16,000 that first year. What tax bracket am I in? Let's say I'm in a 30 % Fed, 5 % state tax bracket. That $16,000 is really only $10,400.

Now I really got a 10 % rate of return. Now if I take 72 and I divide it by 10, that's seven and a half years it takes for my money to double. So can have my money double in four and a half years, or I can have my money double in seven and a half years. Okay, take 100K. Okay, it doubles in four and a half years to 200, and 200 becomes 400 in nine, 400 becomes 800 in 13 and a half,

And then 800 becomes $1.6 million in my IRA because I was paying no tax on the money I'm making in, what is that? That's 14, in 18 years, okay? In 18 years, $100,000, getting 16 % rate of return, investing and lending in real estate, secured on it, my 100 grand without putting any new contributions in, any more money becomes $1.6 million. Take what you're doing outside your retirement account because your money's only gonna double every 10 and a half years.

How long is that gonna take me to get to the same 1.6 million? It's not good. It's gonna take me 7.2 years now. I got that, let's see, that is now, it's gonna take me 28 years plus. And that's the power of the retirement account is I'm making money. I don't pay any tax on it as I'm growing and building the wealth.

Jack BeVier (17:34)
41.

Mat Sorensen (17:51)
And which means every dollar gets to be reinvested. So I'm accelerating my wealth creation. then of course, if you're doing Roth dollars, which you mentioned earlier, Jack, you were doing Roth. All my accounts now are Roth. I had some traditional accounts. I've converted everything to Roth because I want this to all come out tax free too at the end of the day as well. I think that's the power and the difference of using a retirement account to not using it.

Now I still do a little private money lending of personal funds. This is my short term money. I'm 44. I can't touch my retirement account either. And I still have enough opportunities and other money outside my retirement account. I'm doing private loans on real estate outside of it as well. But I know that I got this tax that eats into my rate of return. Now you can take rental properties. We can deep dive on that too. Because there are some

Jack BeVier (18:35)
Yeah. So for that.

Mat Sorensen (18:42)
other considerations there. I just wanted the private money lending is like the cleanest, think easiest one and that is very popular.

Jack BeVier (18:49)
Yeah, totally agree. For those that are listening to this right now, don't have a self-directed IRA. Maybe do have a 401k through work or a legacy 401k from when they weren't real estate investors full time. It's still invested in the stock market. You know, when you go to do an IRA, there's annual contribution limits and the annual contribution limits are scaled out based off of your personal income too. So.

I think it's is it $7000 right now is the highest max. So getting from. Yes.

Mat Sorensen (19:17)
Yeah, 7,000 a year. If you're 50

year old, you get an extra thousand bucks, it's eight grand.

Jack BeVier (19:22)
Okay. So how to, but somebody who's right now listening to this 40 years old, who's, who's like, this is a great idea. know, um, if they put, putting seven grand in a year, it's going to be 14 years before they have that a hundred grand that we started this example with. So how do we get from where they're at today to, I've got a hundred grand to start making real estate loans.

Mat Sorensen (19:34)
Yeah. Yep.

Okay, all right. Let me hit a couple things here, because this is really important question. I'm gonna make a couple different points, because everybody's sitting in a different spot. The first thing is, everyone starts at freaking zero. So if you're sitting there and you're like, well, I have zero money in my retirement account, this isn't for me. That was me 10 years ago. That was my largest client that has a $400 million Roth IRA that he's grew through real estate investing.

Everybody starts at zero with a retirement account. So if you're sitting there and you're like, well, I'm not going to do it because I can't, you gotta get off of that. Okay. Now it might take you five years to get enough money and account to go do a deal. I have a lot of clients that can go turn that can make a one year contribution and they're doing, they're wholesaling a property. They're doing option deals. They're cutting other deals. You know, I had one client early on. What he did is he converted $10,000.

of traditional dollars to Roth. This is like 10, 15 years ago, just 10 grand. He put an option on a piece of real estate. He was a developer. This was like agricultural property on the highway. It was worth like 350 K. He went to the landowner and he says, Hey, I want to have the rights to buy this property for a $450,000 purchase price over the next five years. You must sell it to me at that price over the next five years. And I'm going to give you $10,000.

secure that option. Landowners like cool, knock yourself out. You want to overpay for it, I'll buy the same agricultural property down the street. It doesn't matter to me. But what my client knew is that the county and state were going to put in a exit off the highway there. And this is possibly going to turn into highway commercial property. So his Roth IRA spent $10,000, got an option, he recorded a notice of option on title for this parcel. Three years goes by and

What happened is, sure enough, the freeway exit, highway exit, me, comes in and this turns into highway commercial. There's service station now there, a subway. And, but what my client did is he knew this property is going be a lot more valuable. He sold his option for over a million dollars to another developer who developed it out, put in the commercial, the highway commercial, freeway commercial type stuff. But he came in for $10,000 with his Roth IRA.

The property ended up being worth over one and a half million dollars in three years. Now my client does those deals. He would do those deals all the time. He just never do it with a Roth IRA. So to him, he came to me and he's like, how do I do this and not pay tax? I'm like, here's how we're going to do it. You're going use a Roth IRA. We got to get enough money to afford the option fee because your Roth IRA needs to buy and own the option. Three and a half years goes by. He sells the option to another developer.

Jack BeVier (22:18)
Mm-hmm. Mm-hmm.

Mat Sorensen (22:31)
over a million dollars of profit goes into his Roth IRA. Now the interesting thing about that, not only did he make over a million dollars totally tax free in his Roth, this client was in his mid 50s, so he's gonna be able to touch the money soon, not that he needed to, but the interesting thing about that one is it was a lower dollar amount so he could get into it. But when he called me three years later when he was selling the option to make sure he didn't jack it up, right? He's like, wanna try and screw this up, because this is a sweet deal.

And so we were on everything. I'm like, dude, it's cool. We did it right. You're doing right. Don't worry about it. But when we finished the call, he was pissed. Like he is very mad at the end of the call. And I'm like, dude, you just made a million dollars tax free in your Roth IRA. Why are you not happy? He's like, because nobody told me I could do this before. I'm 55 years old.

Jack BeVier (23:23)
Exactly.

Yeah.

Mat Sorensen (23:27)
I have the big CPA firm, the law firm, the financial advisor, all these people know I make a lot of money doing real estate deals. Not one of them told me this Roth IRA tool that I could use in specific deals to make money totally tax free. So that's one use case for some people. Not everyone can do those, but for some people.

Craig Fuhr (23:48)
Matt, in this particular case, how do you get around the seven or eight thousand dollar limit on the contribution? You said he started with ten.

Mat Sorensen (23:57)
So he

converted, so he had some traditional dollars that he just converted over to Roth. So a lot of people will have some traditional IRA or 401k dollars or even you could do two years of contributions in that example. Like right now sitting in January of 2025, if you didn't put money in for 2024, by the way, you could drop 7,000 bucks in for 2024 and you can put 7,000 in for 2025.

because your 2024 contribution isn't due until April 15, 2025. So that'd be another way you could double up and put 14,000 in. Oh, your spouse, your spouse didn't put money in, they could double up too and do 14K. You can have $28,000 of new contributions in, in a week.

Jack BeVier (24:32)
Can you do it?

Can you do, say you just got a regular 401k, it's invested in a bunch of mutual funds and Vanguard stuff and indexes. Can you do from your job, right? And you're 20 years into a job, you got a couple hundred grand in there over the years. Can you do a conversion from a traditional 401k into, like how do you get that money into a self-directed context?

Mat Sorensen (24:49)
Yeah.

So that one's a little difficult. you're, so let's go over 401ks. If you have an IRA, by the way, already, it's easy, right? And you can always roll over or sorry, transfer it to a self-directed IRA. I got an IRA at TD Ameritrade. I got a Roth IRA at Fidelity. You're just going to directed IRA. No tax, no penalty. It's a Roth IRA with us. We just let you invest in real estate. But let's say you were at a 401k at an employer. Let's say that this is your, let's say your example.

Jack BeVier (25:17)
one IRA to another IRA.

Mat Sorensen (25:32)
you're 45, let's say, you've worked there 20 years, you've built up a good amount of money, but it's the Dunder Mifflin 401k, let's say, all right, you'll say you're Jim Halpert, okay? And you're like, I wanna go do a real estate deal. The problem is the company 401k you work at is gonna lock you in until you either hit retirement plan age of 59 and a half or you leave. So that person can get stuck.

Jack BeVier (26:01)
Because, that company doesn't have self-directed IRAs and eligible custodian under their plan guidelines. But if you've got an old 401k from your last job.

Mat Sorensen (26:06)
Correct. Correct.

Exactly. Yeah. So let's take the office. For example, what was, what was Steve Carell, what was Mike's Michael Scott's girlfriend that was his boss, she quits in the show. Jan, okay, Jan. All right. Okay, Jan worked at Dunder Mifflin had a good 401k, but she quits or gets fired. I don't remember, you know, there's some drama about that. And then but now she could move her 401k to self direct because she no longer works there. Okay. And so

Jack BeVier (26:12)
then that's an option.

Get in.

Craig Fuhr (26:22)
Yeah,

very nice, babe.

Mat Sorensen (26:38)
So she's, she's cool. It, but then let's take another example though. most people have seen the office if you haven't, let's take, what's his name? Creed or Meredith. Okay. They still work at Dunder Mifflin in, know, but they're over 59 and a half. So they're 401k even though they still work there, they can roll it out to self-directing. Okay. They're not locked in. The company can't lock them in and restrict them from moving it out.

Jack BeVier (26:45)
Sorry.

Mat Sorensen (27:04)
So once you leave or hit retirement plan age, they have to let you roll out. Now some companies, if you go back to Jim Halpert, you still work there, you're in your 40s. Some companies let you do what's called an in-service rollover. And I've looked up plans to stick this over the years. It says 60 % of companies allow you to do an in-service rollover of vested employer contributions, which sounds weird, but it's basically if your company was doing matching or any profit sharing that they were putting into your 401k, it's vested.

you're allowed to roll that out, even though you still work there and you're not yet 59 and a half. So that's one I've used quite a bit. It's a little more nuanced. The first person you talk to at customer service, whoever the plan administrator is, is not gonna know that. You're gonna need to escalate to press that. I've had, if I have someone that has like a really large account, we'll press that to see if it's worth it to get an in-service rollover.

Jack BeVier (27:44)
Mm-hmm.

So you mentioned the, you mentioned the land, the lease, the land option idea, bringing that down, you know, to, to, you know, my level of like the kind of deals that, that we're doing all the time that I've seen applications. This is, is in the context of wholesaling because it doesn't cost much, if anything, like the barrier to entry to, to putting a property under contract might be a hundred dollar deposit, thousand dollar deposit, in order to, to, lock up that contract that they, then go and assign.

Craig Fuhr (28:11)
Yes, yes.

Mat Sorensen (28:19)
Totally.

Jack BeVier (28:23)
How much do you see folks building up their account through wholesaling?

Mat Sorensen (28:30)
a a ton actually, but that's for certain people. So let me say like, like, that's not me. Okay. got 150 employees, you know, I don't have time and that's not what I'm doing. But if you're like a full-time real estate investor, you will come across those deals where you can wholesale a deal or assignment, whatever you want to call it, where you can, for five grand, you could lock it up and make 10 grand possibly. And you can do that five times a year.

Jack BeVier (28:38)
People who are doing that, yeah.

Mm-hmm.

Craig Fuhr (28:55)
Let me ask you on that.

I was speaking to a potential borrower yesterday and Jack, we might want to have on the podcast by the way. Started a wholesaling company in Phoenix about four years ago and right now they're doing about 100 transactions a month. So very impressive scale there. I always thought that there was a little uninformed here so inform us all.

Let's say this gentleman goes out and finds a deal, puts a deposit down of $1,000. thinks he's going to make a $30,000 wholesale fee on it. Goes through all the paperwork for that. And he does make a $30,000 wholesale fee. I always thought that there was some sort of arms-length transaction compliance that you had to adhere to when

when doing these types of trends.

Mat Sorensen (29:48)
Yeah. Yeah. So there's, kind of two rules you got to think of whenever you're doing any type of transaction with an IRA. One is what's called the privative transaction rule. And the other one is a tax issue called UBTI or UBIT. And the, the, the arms length thing is more about privative transaction. So as long as his IRA, and if you're doing wholesale, you want to use an LLC. So what we talked about earlier, your IRA owns an LLC, you're the manager, it drops 5k in it, let's say.

You go find a deal what's going to cost you a thousand. So the LLC goes and gets a property under contract, puts a thousand deposit down, and then you're going to go wholesale it and assign it for a $30,000 fee, which will go back into the LLC. Now, as long as that person you contracted with to get the property and the person you're wholesaling it to, that's going to buy it and give you the 30 grand, as long as those are unrelated people, there's no privated transaction. If this is your own company or you're selling it to your spouse or your parents or your kids, it can get into a privated transaction.

Jack BeVier (30:45)
I've had this, so like, let me, cause I'm Uber freaking detailed. like a little devil in the details that I've been scared about in that regard is, but say like, now if I'm just in the, in the course of business, I'm just out there networking and I'm can say that, Hey, yeah, I'm here in the context of the manager of my checkbook LLC. And that's how I found the deal. That's cool. But if I've got my real estate business that I own as a, as, as an individual spending marketing money,

Mat Sorensen (30:45)
Most people aren't doing that.

Mm-hmm.

Jack BeVier (31:14)
to drive inbound leads. And then I go on an appointment and lock up that property, then wholesale it. I can't put that deal into my check into my IRAs, LL, my LLC, because it is a thing I'm concerned about because then I'm like, well, then I really kind of like, transferred that lead between those two companies and I feel that's a prohibited transaction. But in the context of just being out there, then I feel good about it, you know?

Mat Sorensen (31:26)
Yeah.

Yeah.

Yeah. Good point. There's something called self-dealing where you're benefit, but it's interesting the way the code is written is self-dealing is where you're benefiting from your retirement accounts investments. This is going to be the opposite. What you're saying is my retirement accounts benefiting from what I'm personally doing. I'm personally, my company I personally own is out there paying for marketing inbound leads that I'm then going and finding deals and opportunities. might

Jack BeVier (31:42)
Right.

Craig Fuhr (31:56)
Mm.

Mat Sorensen (32:06)
I might just contract it and wholesale it, whatever the strategy you end up doing. But then you're saying, well, I'm concerned about that. My retirement account doesn't go to the benefit of that. And it didn't pay for that lead. I think it's going to be kind of a, facts and circumstances thing. If, if, if those deals are coming through and you have a hundred deals and one of them you do with your IRA, I don't see an issue with that.

Jack BeVier (32:21)
Yeah, that's fair.

Mat Sorensen (32:30)
If it's like you're paying for it all personally and your IRA is doing every deal, I got a problem. Then there's different shades of gray in the middle there of those two scenarios I gave, you know. And so if the intent of what you were doing was to just get deals for your IRA and you're personally paying for it, I got a problem. But if the intent was this is my business and how I make money day to day. And when I find certain deals that work in my IRA, I do them in my IRA, and you're doing like less than five deals a year in that.

Jack BeVier (32:40)
Yeah, yeah.

Mat Sorensen (32:58)
in that IRA, I'm not really as concerned about that issue. Because if you think about it, you could be a stockbroker, or you could have your own stock investment or company or whatever. And you're like, well, I also buy certain deals that I find that are good in my IRA. I was spending all this time and research. I'm going to conferences and networking, and I'm paying for the Wall Street Journal and Bloomberg and da, da, da, da, da. And then I buy some of IRAs. Well, if it's an incidental like that,

The IRS doesn't care. In fact, they want you to be informed and find good opportunities to grow and build your retirement account. And so it's going to kind of get down to intent. So if you would have otherwise spent that money on that marketing for personally, and your IRA ends up doing some deals, I just don't see there's much risk. So if that helps. And this is where sometimes the law is subjective a little bit, unfortunately.

Jack BeVier (33:43)
Yeah, I got you.

So let's talk about, let's talk about for folks who were like, I mean, why don't I build a rental portfolio in my retirement account? I'm gonna, I'm gonna go, I got 20 grand in there. I'm gonna go put that money down, get a hard money loan to buy this property and then get the property fixed up. When I'm done refinance it, put a 30 year loan on it, tuck it away and never pay tax bill like ever, ever. Why, why, why doesn't that work? Or does that work?

Mat Sorensen (34:11)
Mm-hmm. Yeah.

it works. It depends though. So we did the private money loan that's a little cleaner, right? It's just interest income and you mentioned interest income is taxed, not great on the individual side, but no tax on the retirement account side. My money compounds and grows faster and the analysis is really clean, I think on that. That's an awesome way to build long-term wealth using your retirement account. So the rental is a little more tricky so you got to hang with me.

Let me say I've done this myself. I've bought rentals and done pretty well actually in my retirement account. I buy rentals outside my retirement account. It's not one or the other. And so it all depends on the specific deal. here's what's the money you're going to make on a rental property. Okay. And let's go over individual side versus your retirement account side. Let's say your IRA. In either way, I buy the property. I'm going to make rental income.

And I'm going to make capital gain income when I sell it. So I got two things I care about, cash flow and then the gain that I get when I sell the property. On the individual side, one reason a lot of people like real estate is even if they're cash flowing the property, when they own it, because of depreciation expense, they can have cash flow and money in their pocket. But on their tax return, they actually have a loss.

just the way that appreciation works, right? You buy a single family rental, you know, for let's say $275,000, you can depreciate over 27 and a half years. So I get a $10,000 expense on my tax return every year. So if I have $10,000 of cash flow that went into my pocket, it's as if I didn't make money, right? On my tax return, which is pretty cool. Okay. So depreciation is a big deal in real estate. That's a perk of it. And which helps on the rental income.

When I sell the property, I'm going to pay capital gains rate, which the max rate is 20 % right now. You might have a, let's say, 5 % state. So maybe you're at 25 % there. But I'm going to pay that. Now, you could 1031 it, sure. And I'll be honest, I have a lot of people that have made a lot of bad investments because they're hustling to do a 1031 and they do a deal they didn't otherwise wish they did.

Jack BeVier (36:31)
done.

Mat Sorensen (36:31)
Yeah, they just got rushed, they had deadlines and they didn't make it in time. some clients have success with it, but you got some options of way to kind of defer that tax with the 1031. But otherwise you're paying 25%. What else are you paying though? All that depreciation expense you took, you have to recapture. So you've got depreciation recapture coming back when you sell 35 % typically. So that's all coming back.

Jack BeVier (36:50)
Mm-hmm.

Mat Sorensen (36:59)
So if I took 10 years of depreciation expense in that example I gave, $275,000 property, and you're only taking the building side of this, not the land side, but just hang with me on the example. I'm just trying to make easy numbers for people and follow the logic. Let's say I got 10 years of that $100,000. Well, that $100,000, I have to recapture that depreciation and say it's 35%. That's $35K popping back on that's taxable on the sale now. A lot of people forget depreciation expense.

If you've been in the game long enough and you've sold enough properties, you understand it. Now you could just keep holding the property, suck out the equity, never sell the thing, die, let your kids inherit it, get a step up in basis, and there's some other good tax benefits there. So let me say this. I love the tax benefits on real estate on the individual side. I think there are some good tax perks, but depreciation recapture does come back and you will have capital gains tax.

Jack BeVier (37:31)
lecture.

Mat Sorensen (37:52)
If your cash flow exceeds your depreciation expense, you're paying ordinary income rates or whatever regular tax rates, whatever your tax bracket is on the rental income. Okay, let's walk through I bought the same 275K property in my retirement account. Now, if I buy it all out with cash, okay, and I'm come to debt because it's different. If I buy it all with cash, I pay no tax on the rental income no matter what depreciation is.

no tax when I sell the property. I don't have depreciation expense because I don't take depreciation. Because retirement accounts is an important point. Because a retirement account doesn't pay tax on its rate, on its income, rental income, capital gain income, there's nowhere to take depreciation. You can't, you don't really use it. And a lot of people are like, well, Matt, I don't get to take depreciation when I buy real estate in my retirement account. Well, your retirement account doesn't pay tax.

Now there's a couple of nuances and unique taxes you do pay, which I'm going get to in a second. But if you bought real estate with cash, which many of our clients do, there's no tax at all. So let's say I've got that $275,000 in a mutual fund right now paying me. I've been making 7 % over the last 10 years. I really run the numbers. What did I really make? Let's say I made 7%. If I can find a rental property that's going to get me 10%, 15%, 20 % return,

from the cash flow on the rental income, the appreciation when I sell, why would I not do that? Like my goal is to have the biggest retirement account possible when I hit 59 and a half. And so a lot of people, because there's $40 trillion in US retirement accounts, the average American has over 100K in an IRA or 401K. Most people, it's not like should I buy real estate in my retirement account or outside of it, it's.

Jack BeVier (39:20)
Mm-hmm.

Mat Sorensen (39:40)
Should I just buy real estate in my retirement account, period, because I happen to have a lot of money in it, and my other option is sticking in the mutual fund or target date fund I'm already at, not giving me a great return. How do I increase that retirement account and make it bigger? Well, it's getting a better return. Where can I get a better return? Maybe it's real estate, you know. Okay, all right. Now the last example. Thanks for hanging with me.

Jack BeVier (40:02)
Yeah.

Add debt. Yeah. Add debt though. Cause I'm like, Oh cool. Like, you know, then I'm going to do like, let's just do that a thousand times. You know, I'm just going to, that's how I'm going to build my rental portfolio.

Craig Fuhr (40:03)
And it's awesome.

Mat Sorensen (40:09)
Okay.

Craig Fuhr (40:10)
Sure.

Yeah, I've got 275, but I really want to stretch that over the course of many houses rather than just.

Mat Sorensen (40:11)
Yeah.

Yeah. Okay. Well, let, let me come to that one here in a second. Okay. Thanks for hanging with me let me explain this. Cause I think you guys are getting to like really the crux of the issue here on use it, not what's the strategy, what's the benefit, what's the downside. Okay. When we were talking about individual and I bought that property for 275 K I might've only put down a hundred thousand dollars or less to buy that property. Right.

And so I got debt leveraging my purchase price. It only cost me $100,000 maybe to buy it, but I bought a $275,000 asset. I probably could have gotten away putting 50 to 75K down, you know? And so my return get on my, like my cash on cash return on the individual side is really high, right? Because I got the benefit of leveraging debt. Now debt costs more now than it did five years ago. So there's a cost to the debt. You are paying the bank.

leverage it but if you believe in the property and you have appreciation and you're and you can cash flow it with the debt it becomes a very compelling investment because I have less cash in my cash on cash return can can increase. Okay so if you're like well I want to I don't want to put that whole 275 down map or instead of buying one property I want to buy three properties and get debt. Let's just stick with one. Let's say that you only had a hundred thousand dollars in your IRA but you wanted to buy that property

And let's say it was 300k, so I can do the math easier here. So now I've got one third of cash in, and two thirds of it is debt from a loan. Now the important thing when you buy real estate, you can get a mortgage to increase your purchasing power. The first note is on the debt is you have to get what's called a non-recourse loan. And a non-recourse loan basically means you don't guarantee the debt personally if you

The IRA defaults on the loan. The bank can foreclose and take the property back, but they can't go after the IRA for any deficiency or you personally. And so there's a number of bank lenders. They're on our website that lend on these all day long. They usually require 30 to 40 % down though. And these are basically debt service coverage ratio loans. They're not going to look at your credit. They're going to look at the property. They will appraise it, but they're really looking at is the rental income on this going to cover the debt service? So if you're familiar with like a DSCR OMB, that's basically what they are, and they're non-recourse.

built for retirement accounts. Okay, so I got 200K of debt, 100K of cash. I did a non-recourse loan. I bought this property and now it's 300K in the example so I can do the math. All right, now there is a tax called UBTI that has a component of it that I will just call UDFI, unrelated debt financed income. This is a chapter in my book, so if you wanna geek out on it, we've got other webinars and content on this, but I wanna make sure you understand what it is.

Basically this tax is the IRS has said, you know what?

When you go and leverage your retirement account dollars with money that was not in your retirement account, you're going to go get a loan to buy more assets than your retirement account had money to put into. Well, you're going to tax the profits from that debt because it wasn't retirement account money. We'll let the profits go back in, but you're going to pay tax on profits from the debt piece of it. So in that 100K, 200K example, they're going to say, what's the profit you made on the 200K?

Now rent, let's look at rent. Now here's where you do take depreciation. Because now I can use depreciation to offset any tax on the debt side, this UDFI, from the rental income. So just like the example earlier saying, let's say you don't pay any tax on the rental. most clients we see when they're using debt and they're leveraging to buy more assets than when a retirement account had, when UDFI comes on a rental, they're not really having to deal with it on the rent side.

But when they sell the property, yeah, because the depreciation offsets it. But when they sell, now we've got cap gain. When you sell, and let's say at the time you sold it, let's say that that property now was worth $400,000 when you sold it. You bought it for $300,000. You had $200,000 of debt. What's looked at here is what is your leverage ratio? Now I have a hundred.

Jack BeVier (44:07)
because the depreciation offsets enough.

Mat Sorensen (44:34)
Let's say I have a hundred thousand dollar gain, okay, because I sold it for 400. Now the leverage ratio is your adjusted basis minus the debt. Now your basis is what you paid for it plus improvements minus depreciation. So let's say I took some depreciation but I also did a little bit of improvements. So let's just say my adjusted basis is 300k, basically what I bought it for. And then my debt on it is 200k.

So, and I, let's say I sell this one in a couple of years, I didn't really pay down the debt that much. I'm just doing these so I can make the math. So really I have two thirds of this deal is still leveraged. So on that 100K, two thirds of that will be subject to UDFI tax. So 66,000 will be subject to UDFI tax. The other 30, 33, 34. Now you get capital gains rate when you sell the property.

Jack BeVier (45:24)
At what rate? what rate?

Mat Sorensen (45:30)
There's a lot of people don't know that they think you have to pay the ubit trust tax rates But for retirement accounts on capital gains, you actually get to take cap gains rate, which is a max Fed rate of 20 % right? So now On that hundred thousand dollar gain. I'm paying 20 % for the capital gain, but only on the debt piece Which in that example I had sixty six thousand Twenty percent is gonna be like thirteen grand so

I got $100,000 gain, but I only paid $13K in tax. That's about a 13 % rate. So it's not tax free. It's not, you know, and if this is, let's say this was a Roth account, I did have to pay some tax when otherwise I'm thinking this is all tax free. So, but what did I get? I only had $100K and I got to buy a $300,000 asset. If I think of my $100K sitting in my IRA right now that could buy a mutual fund,

How much mutual funds can I buy? 100K. The banks and brokerages won't give you more margin on that. So, but if I could go buy a $300,000 asset that I think is gonna cashflow better, that is gonna appreciate and get a better return than the mutual fund, I will pay tax though on this UDFI component, but it's not the end of the world. Now it is more complex. You're gonna do a 990T tax return on your IRA when you sell that property to claim that tax and calculate it.

Craig Fuhr (46:28)
Okay.

Mat Sorensen (46:55)
And you're not going to find that return on TurboTax, OK? You will need a CPA to do that return or an accountant that understands those. that's if you do add in debt. And I think, and here's what I have a client ask this question quite a bit. Well, Matt, I have $300,000 in my retirement account. Should I go buy one property outright with cash, or should I buy three of those properties similar and go get a

a non-recourse loan and buy more assets. And I'm like, just run the numbers. Every time we've ran the numbers, if those are good deals, buying three that's going to have more assets working for you, you're typically only paying the UDFI at the sale, it's only on the debt piece, you're always better off buying more assets and getting a better return. And so, yeah, you get a little diversification between the properties too. And so,

Jack BeVier (47:43)
Diversification, yeah.

Mat Sorensen (47:49)
So I think it's actually a cool thing because most people when they think of their IRA dollars, think of, I have 100K, I can buy something for worth 100K. Well, you can actually leverage them maybe by three times that, but you will pay tax on the debt piece of

Jack BeVier (48:04)
Yeah, but it's still, it's no worse off than if that was a hundred grand was outside of your IRA. And we only have you for 10 more minutes and I can't let you go unless we talk about, uh, making investments into limited partnerships and some of the pitfalls on that side. Um, talk to us, talk to us about, talk to us about your experience there. Like what's the, what's the right application of this structure to that? Like limited partner, general partner context syndications.

Mat Sorensen (48:10)
Right.

Yeah.

Yeah.

Yeah.

Yeah,

that's very popular. A lot of IRAs are investing into syndications in the real estate space. And there's structures on how those can be. at the end, you're either investing in LLC or at LP, and your IRA is just the investor. It's put in $100k or $50k, and they're buying a commercial office building, or they're buying a multifamily property, or an RV park, or whatever. And I've done some of those myself.

Actually, my Roth 401k is invested into some deals. By the way, UDFI is, you're exempt from it on 401k and solo-k dollars. So we should probably note that here in a second, what the heck a solo-k is. But let's focus on investing in a private fund, basically, real estate fund. That same UDFI issue trickles down to you. Most of those syndications are leveraging with debt.

And so when you get your K1, you're invested in a private real estate fund, you get your K1, a lot of times that K1 has a loss on it, right? Even if, again, they're cash flowing because they're depreciating. In fact, a lot of those deals, they're cost segregating, they're accelerating depreciation, in fact. And so you're not worried about this UDFI thing because your K1 is just showing losses, even if they're sending you distributions and cash flow back into your retirement account. But this

this UDFI issue can hit when they sell the property because then you're going to have a cap gain on your K1 because your IRA is invested and it gets a K1 for its share of the tax reporting and its profits or loss. But now with the IRA, well then it will have to file this 990T and you'll run that UDFI calculation I did for the fund. What the property that it sold that pushed through this capital gain, what was the debt leverage on it?

my IRA got the benefit of that debt leverage even though it was in a fund context it does trickle down. you will have that. that's again I kind of go back to what's your overall return after that tax and remember it's only cap gain tax on the debt leveraged piece and so if the fund is otherwise going to generate more revenue cash flow and capital gain taking into account the UDFI tax you'll pay on the debt leverage piece

that's better than the mutual fund or target date fund you've been into, that's going to grow your account faster. Now there are, we have a lot of accounts invested in private REITs and I actually love that structure for IRAs because private REITs are exempt from UDFI and UBIT. And so we're seeing this as being a

growing trend among a lot amongst a lot of real estate syndicators, particularly like IRAs is they're like, why don't I go get REIT treatment, you know, on this? And so, so I've invested in some of those as well, because you don't have to worry about UDFI. They can go get debt leveraged. Now, they have to have like 100 investors or more to get that private REIT tax treatment. They don't have to do the private REIT in terms of like the security structure. could just be a REG D fund or it could be a REG A fund. But if you're someone raising capital,

from IRAs and you're gonna have a hundred or more investors, you should seriously talk to your tax counsel about doing a private REIT. You can easily attract a lot of IRA dollars. You know, the one guy that you see out there a lot like on social media is like Grant Cardone, right? He's got this reggae fund, invest $5,000, you can be in it. It's a REIT from a tax structure. And so here, you know, there's a bunch here in Phoenix that are raising to that. They've just gone to that REIT structure so they just take that issue off the table for IRAs.

Jack BeVier (52:00)
So raising, you mentioned that. So God, wouldn't that be an awesome problem to have? Hey, I've got a hundred investors that I've convinced to that have self-directed IRAs that I want to invest in my deals. What are you seeing in terms of investors sourcing this tremendous pot of capital that's maybe misallocated once access to alternatives, but doesn't know how to do it. And we got a whole bunch of sponsors listening to this podcast saying like, Hey, how do I tap that?

How do I tap that pool of capital? What are you seeing on that side?

Mat Sorensen (52:31)
So you got to do it right, is all I got to say. it comes down to a couple of things. Provide the right education and resource, and be able to execute on it quickly, and overcome the pain points. And this is what our team spends a lot of time doing. We had a private real estate group out of Texas. They had about 1,000 investors between different funds that they've done over the years on real estate deals primarily.

And they've raised a lot of money, had a good reputation. They had tinkered with IRAs, but kind of found it to be a pain in the butt. Their sales team and investor relations team hated it. And they're like, let's just not do these. We talked them into it said, guys, we can make this easy. This is not as complicated. XYZ company you are with, I won't say their name sucks. We don't. And we can make it easy. And I can also tee it up for you by teaching how powerful this concept can be for your investors. So we did a series of webinars with them. They invited their list of investors.

and prospective investors. We opened over 350 accounts for them in six months. They raised over $30 million from those accounts to invest in their next fund vehicle that they were doing IRA investment dollars into. This was three webinars, that was it. But we had our business development team who does this for a lot of relationships. Single point of contact, here's the process, we know their subscription documents, we know their investment documents.

open your account, transfer over your money, and we go get it funded. And so it took a little bit of education and their team having to buy into this can work. Getting that to their group of investors that had already invested with them, their investor group just didn't even know they could use their IRA. They just went to their current people who already believe in them, invested in them, and said, if you have an IRA, did you know you could also invest that into this next fund we're raising for right now? And their people were like, really? I didn't know could do that.

Jack BeVier (54:06)
Yeah, right.

Mat Sorensen (54:21)
We do the training, I'm little bit third party validation on it. It's the expertise of ours and we wanna teach it, ask any questions and then make sure our team is connected with our investor relations team on opening the accounts, getting them funded and invested. And that's just one example, but that's something we've done a lot to actually grow our business is unlock that money, help someone raising capital unlock that money. Because if you think about it, there's even a lot of people that...

Jack BeVier (54:41)
Mm-hmm.

Mat Sorensen (54:48)
that didn't invest money with you that otherwise would have because they had that 100K and I don't know what your minimum is. Let's say it's a 100K minimum or 50K minimum for your fund. And they're like, yeah, but I might want to buy a new car next month or, you know, we got this, we're maybe going to upgrade our house or I got a kid going to college. But you know what they're not thinking about is that retirement account because they're 50 years old or 45. They can't touch it for 15 to 10 years, but they do want to get a better return on it.

And that money is not money they're worried about having next month or next year. That's long-term wealth building money. That could go into a private real estate fund that's got a five-year, seven-year time horizon. So a lot of people connect with that if you can also teach it in that way that, this is my long-term money. I can build wealth, grow that. It's real estate, which I believe in. I like this person, the sponsor, and their strategy, and the deals they're doing. And it's not money I'm worried about next month, next year, my kids going to college, the boat I want to buy, whatever.

So I think if you also connect that, that's helpful too. And there's a lot of people attracted to that, that frankly have a lot of money in retirement accounts, but they're kind of cash poor day to day. And they don't have a lot of their non-retirement account dollars to invest. So.

Craig Fuhr (55:58)
I think what I've seen in the past is folks that they've heard of self-directed IRAs, they don't know how to traverse the, you know, making the investment, the paperwork involved with that and sort of, and then as well, that's my retirement. You know, all I know is putting it into a fund that I've heard about and it just sitting there growing, maybe not optimally, but growing. And so,

Mat Sorensen (56:10)
Yeah.

Craig Fuhr (56:25)
Tell us quickly, because we only have you for a limited time here, we need to get you back on the show, Matt. This has been fascinating.

Mat Sorensen (56:29)
Yeah, no problem. That's right. We can keep going

for a little bit. Don't worry. I got a meeting, but they'll wait for me.

Jack BeVier (56:34)
you

Craig Fuhr (56:35)
Tell us, tell us more about how you, how you help educate people like that. I'm 55 years old and I've got 500 grand that's growing in an account and I'm really worried that, you know, like anything could happen. Right. And I know about real estate. I'm interested, but I just don't, you know, I want to pull the trigger, but I'm not sure. Tell us how, how your company goes about educating folks like.

Mat Sorensen (56:42)
Yeah.

Mm-hmm.

So what we're doing is we want to help people understand, all right, if you've got retirement account dollars and you've determined you want to make an investment in whatever sponsor, whatever syndicator fund it is, we're just going to help you get from A to Z. And our team breaks that down. OK, it's over here. OK, you've got 300k at Fidelity in this old employer 401k. All right.

Well, you want to put 100 into this? Well, we'll help you just roll over 100. Keep the 200 over there doing whatever you've been doing before. You don't have to go all in. That's the other thing we like, especially someone brand new into real estate is like, you don't have to go the whole thing in. but let's you know, what do you want to allocate to this? let's set aside and then a lot of those people if it does well, they go over invest the rest of money. And so but we just help with the paperwork and process because that's really been the barrier. And a lot of people that have been raising in this group out of Texas was

They their investor relations team just hated the process. And so when they got someone that wanted to invest, they just didn't even go down that avenue. Not because the person wasn't interested in investing in their deal or didn't feel comfortable about real estate or the strategy or the deal that they had, but just about the process of getting the money finally invested. And so that's where we break down the barriers is just making it easy for them to get through the process. I mean, it's why we're the fastest growing company in the space. have over 1,000 five star reviews is we just

execute and make it easy. Like that's like our motto here.

Craig Fuhr (58:22)
Yeah, I think that's

a real differentiator in the custodian space. mean, certainly the ones that I've dealt with, they're just, you know, it's kind of a black hole. You put the money in and you're out there looking for an investment, but no one's really teaching you, hey, once you get that, once you identify the opportunity, here's the things that we can do to help you out rather than, have fun traversing all of that.

Mat Sorensen (58:26)
Yeah.

Exactly.

Right. Yeah. And we know when people are new, they're going to have a couple questions and things. And so we, we really try to grab and own that relationship. But I think, you know, if you have good deals and you're raising capital and you're talking to those people that want to invest, I think that you just got to ask that additional question. Did you know you can also invest your IRA or 401k into this deal? Really? You know, and I was sitting at this desk actually, and there's a, a good friend of mine that raises money on real estate deals. And he said that

asking that one question, double the amount of money that he can raise. Just asking that one question as they're talking in capital is just saying, did you know your IRA or 401k could also invest in this? And so the explanation of the deal is all the same. Here's the opportunity, here's who we are, here's our background, here's our strategy, you know, and then, okay, they've asked a lot of their questions about the deal, who are you? And they're thinking, all right, I may want to invest and then just saying,

do you hire a foreign cake and invest is like, dude, it's like, we were foolish. Like we left so much money on the table for so many years just because we didn't ask one more question.

Jack BeVier (59:50)
Yeah, what if this number were 30 % higher because there was no taxes taken out of it, right? Like what if the net number was the gross number? know, it's quite a difference maker.

Mat Sorensen (59:57)
Yeah, yeah.

Yeah,

yeah, and you don't even have to get into just the retirement account strategy of it. I mean, you can, you know, some people want to geek out on that. You know, you got the pilot or the engineer or something, you know, they're going to model this out and, know, the doctor or something, they're going to have an Excel spreadsheet and, you know, model it out. And that's cool. But frankly, you're doing that anyways with them with their other money. But I just think it's a cool strategy. I'll say this, though, too. It isn't for everyone.

It's not a strategy for everyone. There's different people though that can hit this. I think the last one we talked about is probably the easiest because you don't have to be the one finding a deal, analyzing a deal. You can just be looking at someone's fund or that's raising on a deal. They've done the work. You can diligence them, look at what their stuff is, determine whether you want to invest. And that's probably the easiest barrier that more people can fit into. Then you got another group and let's just take the real estate side.

A lot of people just would be a bad real estate investor personally too. They just don't have that, what it takes to go look at a deal, analyze it, they don't know it yet or they're not willing to spend the time to go educate on it. So like all have family members are like, Matt, I hear about your company, you guys are doing so great, should I self-direct my IRA? And I'm like, well, what would you invest into? Well, what should I invest into? I'm like, you're not a good candidate for this. Like you need to be passionate about something, learning about something.

Our best customers here are ones that already invest in real estate, and they're just like, wait, I could use my IRA for this? They already know real estate. We have a group called Meta Angels. They invest in startup. This is a physician group. And they invest in startups that are in the health care space. And that's all they do. And this is like angel investing, startup investing. They do very well.

Jack BeVier (1:01:29)
Mm-hmm.

Mat Sorensen (1:01:46)
Why? Because they understand that space. They feel comfortable investing. They can see the business opportunities where they could be. And so it doesn't just have to be real estate. We have people that are like crypto nuts and make money in crypto. And they're like, they love crypto. They're doing crypto. So our thing is just kind of like invest in what you know. And if you don't know investing or you don't want to care about it, fine, stick with the target date fund with Wall Street. You're to have average returns at best. You're going to be paying ridiculous fees. But

But I do think that is one thing we're saying. It is not for everyone, but it's for a lot more people that aren't doing it right now because they just don't know what's an option or they've had some of these barriers with other companies or learning about it where someone tried to confuse them. And so that's what we're trying to do is help make it easy, make it attainable for people, but also spread the word that this is freaking possible.

Craig Fuhr (1:02:35)
Jack, you and Fred have obviously raised a lot of capital over the years. Have you ever utilized any retirement money from investors?

Jack BeVier (1:02:43)
Yeah, we have. we have, we think it's a great source. We'd love to do more of it. It's one of those, know, you, call the custodians and you're just like, let's do a webinar. They're like, great, invite your people. We're like, how about we invite your people too? And they're like, no, that's how we maintain being a custodian is we can't endorse anybody. So like, okay, cool. All right. So it's, it's no like, you know, silver bullet for, raising money, somehow getting your, know, getting your foot in the door with the custodians, but

Mat Sorensen (1:02:47)
Hahaha.

Craig Fuhr (1:02:54)
yeah.

Mat Sorensen (1:02:59)
Yeah.

Yeah.

Jack BeVier (1:03:08)
But, but you know, once you've gone through the hard work of building a reputation and building a following on the investor side and a track record on maximizing the value of that investor network, this is like a critical tool to doing that. couldn't agree more.

Mat Sorensen (1:03:21)
Yeah, and I think even just kind of the onesie twosie deals for people that are just, you know, maybe they're flipping a property every few months and and they're like, I need capital to do these deals. I'm just telling you like the friend you do yoga with that you golf with and you want to raise 100k from them to do a deal. It's more likely they've got it in their IRA or 401k than they've got it in an investment account or a savings or checking account. And so knowing that that money could be used for your deal, even on just like a onesie twosie basis for people.

that are at that level right now, that's huge. That's pretty big. Because what happens, here's the other thing that's unique about the retirement account money. And this is even me with my money. Like, I'm that guy for my friends that do real estate, okay? I'm that guy that's like, do you have a deal for me? You know, and what happens is I go invest it with them, they do that deal, they pay me back. I'm like, where's your next deal? Again, this isn't money, I'm gonna go buy a car, get a nice house, pay for my kids college with.

I got 15 years, I need that money invested next month. I'm like, hey, you just paid me off, when's your next deal? And so once you get those sources of funds, it's easier for them to keep coming back to you, because it is great long term wealth building, and it's your people's long term money. So just another little angle on it.

Craig Fuhr (1:04:34)
Matt, it's been an absolutely fascinating conversation. I love how you just break it down into sort of common language. And frankly, your examples couldn't have been more. We talked to a lot of guys on this show, Jack, and sometimes it's very high level, but the way you broke it down was apparent, should be apparent for everyone. The book is the self-directed IRA handbook. I'm sure you can find that anywhere. Correct, Matt?

Mat Sorensen (1:04:45)
Yeah.

Mm-hmm.

Yeah, it's on Amazon. It's on my website. You can get it anywhere. You can get it tomorrow on Amazon, you know.

Craig Fuhr (1:05:02)
Let's say some of our listeners want to reach out, out, find out how they can use your company as a custodian and get in the game. How do they find you?

Mat Sorensen (1:05:11)
Yeah, easy. Go to direct at IRA.com and you can book a call with any of our team members there. They can help answer any of your questions. Talk about do I got funds other work somewhere else. Am I just starting with new contributions. Go over the different account types and then get you set up. So our annual fees 395 a year. Then we have a 50 dollar fee when you buy or sell something. But it's all right there on the Web site. We just disclose everything our fee structure. Some custodians are a little tricky to figure out how the heck their fees work. We try to make it simple but.

Easiest way, get to our website. We have a ton of resources there, education, our podcast, our webinars, and then just book a call with our team. It's free. We'll help walk you through it.

Craig Fuhr (1:05:48)
Well, Jack, as with all of our episodes and the great guests that we have, we're not endorsing anyone, but I'll just say this. And Jack, I'd love for your comments. know, all self-directed IRA custodians are not equal. At least it's been my experience and I've had very little, but enough to know that, man, the fees can certainly be a little hidden. The paperwork hassles can certainly be cumbersome.

To find that one who's almost a partner with you, so to speak, in helping you traverse some of the hurdles that come along with investing in your IRA is paramount. And we couldn't be more glad to have you on the show.

Mat Sorensen (1:06:25)
Thank you so much. appreciate that guys. Yeah. Thank you for having me. It's been a pleasure to be on and yeah, let us know where I can be a resource or when I get to come back. I'm happy to do it. Well, I want to check in on Jack's hair. What's going on, you know, in six months. Let's see. The flow will be complete.

Craig Fuhr (1:06:36)
Alright.

Jack BeVier (1:06:37)
Good deal.

Yeah.

Craig Fuhr (1:06:41)
Yes, let's,

we need to schedule a six month hair appointment with Jack, yes.

Jack BeVier (1:06:46)
I'm gonna

be full on highlander by then.

Mat Sorensen (1:06:48)
yeah, yeah. I love it.

Craig Fuhr (1:06:50)
Any last words to wisdom, Mr. BeVier?

Jack BeVier (1:06:52)
No, no, no, no, really appreciate it. Thank you, Matt. I bought the book back in 2018 and I was just like, this guy's talking about this concept on a higher level than the other custodians that I've been working with. And so that immediately drew me to working with Directed. I moved a big chunk of my IRA over to you guys and I've been a happy customer since. So I was like, Hey, we, you know, we got to talk about some tax stuff. Like we got to get Matt on. So I was thrilled that you took us up on the offer. So thank you.

Mat Sorensen (1:07:20)
Yeah, my pleasure guys. Thanks for having me.

Craig Fuhr (1:07:22)
Alright man, we'll talk to you soon. That is Real Investor Radio for today. Hope you guys enjoyed it. Please reach out to Matt if you're looking for more assistance and pick up the book. We'll talk to you soon.