Chat Transcript – 1-21-08 with Special guest Jim Hitt
Posted on January 22, 2008
santo hi, jim, are you the equity expert
jim_hitt I’m the Ira expert
santo jim, sorry, my mistake
Bill Hi Jim Can I go ahead and start asking questions?
jim_hitt My company Entrust Carolinas does self directed IRA’s which allows you to invest in non-traditional assets like real estate
santo hi mike
Mike_Summey Hi everyone.
Mike_Summey Hi Jim
Jeff S Hi Mike
jim_hitt Mike this is Jim Hitt T
Bill My wife and I have individual IRAs estimated value 25-30K each. How can we set up a self directed IRA to invest in a piece of real estate together?
danko hello all
Mike_Summey Jim Hitt is here, so if you have a question about how to use you self directed IRA to buy real estate you may want to ask before the chat gets too busy.
jim_hitt Go to my website entrust carolinas.com
Mike_Summey Hi danko
Mike_Summey Hi sparky
sparky37 hi mike
sparky37 missed u last week
sparky37 carleton was a great fill in
sparky37 so was Al
Al Lee Hey, thanks sparky
jim_hitt Bill, you and your wife can partner with each other to buy real estate with the ira
Al Lee HI, Mike, santo
danko congratulations on your award, Mike
Al Lee Hi, jim_hitt
santo hi Al, no audio yesterday on the radio show
Mike_Summey Hi Al, sorry but I had to step away for a minute.
Mike_Summey Thanks danko
jim_hitt Mike Thanks for the invite tonight
Bill CAn we partner in income producing RE or retirement property?
jim_hitt Any IRA investment must be for investment purposes
Al Lee santo, the computer that transmits went completely down. I have to take it in and get it repaired. I am hopin git is just the power supply. If the disk is dead, I have to rebuild the transmit computer by installing a bunch of stuff on another computer
Jeff S I have a Roth IRA, can that be used for Real Estate investing ?
Mike_Summey I’ll be doing the “Your Money with Brett & Joe” radio show from New York tomorrow evening at 7:30. I think you can listen at www.yourmoneyshow.com
Bill Okay, and more detailed information is on your website? how to set it up from our current mutual funds, etc.?
jim_hitt jeff, Yes
Al Lee jim, I hope you don;t mind if I hit (no pun) you with some hardball questions about IRA + real estate
Jeff S AH, Thanks Jim, I’ve had a Roth for a while and had no idea
Mike_Summey Hi ayates
jim_hitt Al fire away
Al Lee jim, OK: First, what happens to the capital gain treatemnt if you own RE in an IRA? Don;t you lose that benefit?
ayates Hi Mike, glad to be here
Mike_Summey ayates, glad to have you. Is this your first chat?
ayates yes it is
jim_hitt Al, You get to have tax free treatment in a Roth IRA which is better than capital gains treatment
Mike_Summey ayates, just feel free to jump in anytime with your questions. We’re all friends here.
Mike_Summey Hi Doug
Doug_in_CT It is great to be in the chat lobby again.
Al Lee jim, so would you say it is better in a Roth than in a standard IRA?
Mike_Summey Where ya been Doug?
Doug_in_CT Celebrating the holidays — got another today, sort of
jim_hitt Al, If you have a Roth it would be your first choice. A traditonal IRA will still allow tax free growth.
Mike_Summey I plan to sign a contract tomorrow to build 3 – 4 Unit buildings to add to my portfolio.
Al Lee jim, Ok.
Doug_in_CT So building is better than buying these days for you Mike?
Al Lee jim, Now, what about using leverage within the IRA?
sparky37 how do you use your roth to buy investment property?
jim_hitt Al, You can leverage your IRA with Non-recourse loans.
Mike_Summey Doug, not necessarily. It’s just that I have the property and it’s not producing anything right now.
Mike_Summey Hi jason
jasonannable hi!
Al Lee jim. is the income that is attributed to the borrowed portion also tax deferred?
Doug_in_CT My wife and I each have a Roth that we had hoped to use to fund further real estate deals but as it is, we are unsure how to proceed.
jim_hitt Al, a Non-recourse loan just means the lender can foreclose but can’t sue for any shortage if the property is sold for less than the loan balance
jim_hitt Al, The portion that is borrowed is subject to UDI
Al Lee jim, yes, I do know that. But, a non-recourse loan is very hard to find and the rates are terrible and they want to do 50% LTV usually
Doug_in_CT UDI?
Al Lee That means Unrelated Business Taxable Income, right?
Al Lee OR is UDI somethign different?
Mike_Summey Hi broadway!
jim_hitt Doug, Go to our website and there is a wealth of information on how to setup an account and what you can invest in
Mike_Summey Hi wps
broadway Hello Mike and all
wps hi
Doug_in_CT Thanks Jim, what is that URL?
jim_hitt Al, Missed a letter UDIT
jim_hitt entrustcarolinas.com
Doug_in_CT Thanks,
jim_hitt Al, The ltv is 65-70% at iralending.com
Mike_Summey Hi tiledog
Al Lee jim, that is the highest non-recourse lending LTV I have heard of. Good to know.
Mike_Summey Jim, unfortunately I’ve never had an IRA or 401K.
Mike_Summey Hi oz
Al Lee What is the tax rate on the portion of inocme earend by the leveraged poriton of th eproperty? The UDIT or UBTI (are they the saem thing?)
jim_hitt Al, Even with the taxes on the borrowed money the profit after the UDIT will grow tax free or deferred
oz hi mike
Al Lee portion of the property–is what I tried to type
jim_hitt Al, UDIT is on debt and UBIT is on business income in an IRA
Mike_Summey The first 20 years I was investing in real estate, I exceeded a 100% per year compounded return on cash invested. When I tell stockbrokers that they think I’m crazy.
jim_hitt Al, the tax rate is the trust rate
Mike_Summey Hi Mark
MarkCT Hi Mike
Al Lee jim, isn’t the trust rate HIGHER than most people’s personal tax rate?
Mike_Summey It looks like CT is well represented tonight.
Doug_in_CT Go Huskys
jim_hitt Al, Yes it is
MarkCT When you live in a state as expensive as CT you need alternative sources of income.
Doug_in_CT Yeah Baby
Mike_Summey Congratulations on your latest purchase Mark.
jim_hitt Al, The rules allow for leverage in an IRA however the leverage portion is not part of the IRA and the irs wants its share. Don’t forget the profits compound tax advantaged
MarkCT Thanks Mike. Probably my best deals to date.
MarkCT Definately a better market for getting good deals than a couple of years agao
Mike_Summey Mark, you should try this Offer Generator program we sell. It’s great!!!! 
Doug_in_CT Tell us more Mark
Al Lee I have often said to people that if they HAVE money in an IRA already and can buy real estate for all cash, it is better than buying stocks or mutual funds–but if they have to use debt to buy the real estate is probably isn’t that good a deal. Do you think I am telling them wrong?
MarkCT Good advice Mike.
Mike_Summey Jim, is it too late for me to open an IRA?
Mike_Summey Hi Penny
jim_hitt Al, I do.
Penny Hi Mike
jasonannable Hi Mike. Does the offer generator account for joint venture deals?
jim_hitt Al, Give me a call at 828-257-4949 and we can talk about the benefits
Doug_in_CT “Never too late to start investing” I think I may be quoting Mike Summey here.
Jeff S Al, are you saying you can buy houses with Roth IRA money?
MarkCT Doug a guy from England owned a couple of properties that he was looking to unload. Basically I got both properties from him for half of what he was asking.
Mike_Summey jason, the Offer Generator doesn’t care how many owners there are, it simply shows you how to buy “RIGHT”
Al Lee jim, Great! please ‘splain on me why and I will correct my advice to folks. (a little Ricky Ricardo lingo there)
Doug_in_CT Awesome. Are they apartments Mark?
Mike_Summey Hi scott
scottdallas Hi Mike!
jasonannable ah cool! I’ll check it ou
MarkCT Used alot of the negociating techniques such as asking for the lowest amount he would accept for the property. Actually worked. Without even starting the negociations he lowered his asking price significantly
MarkCT Single family homes.
Mike_Summey jason, its the best tool a long term investor can own…bar none!
jim_hitt Al, as an example most deals will work out to about 80-85% of the profit after taxes remaining in the IRA. This would not be possible without the leverage available.
Doug_in_CT What town are they in Mark?
Al Lee I think you have to convert yoru IRA to a self-directed IRA and pay an administrator an annual fee to be able to buy real estate in your IRA, Jeff
scottdallas Where do I get this tool Mike?
MarkCT Santo’s favorite town. Buffalo.
Jeff S Ok, Thanks Al
Mike_Summey scott, the only place it is available is on our website in the online store. It’s only $69.95 and I’ll guarantee its the best $69.95 you’ll ever spend.
Al Lee jim, but if you buy real estate outside the IRA and take teh normal depreciation you coudl make 100% of it non-taxed.
scottdallas I trust you! Sounds great!! Whats it called again?
Al Lee jim might know more details about self-directed IRA’s.
Mike_Summey scott, its the Weekend Millionaire Offer Generator.
Doug_in_CT What about doing an Option in a Roth IRA Jim?
MarkCT I assume you are from Dallas Scott. I own four properties in Dallas. Used the Offer Generator to negociate the selling price for each one.
Al Lee I don’t know what is involved in converting a Roth IRA to be self-directed. Jim, do you?
jim_hitt Al, The real estate outside of an IRA is subject to taxes unless you exchange when you dispose of the property
scottdallas Wow! Thats great. Yes I am in Dallas – how did you ever guess – ha ha.
MarkCT Tricky
jim_hitt Doug, Options are great for IRA/s
MarkCT Actually bought two of my properties from Al. One met a tragic fate but the other one is doing very well.
Al Lee jim, true–but I DO exchange (Section 1031) and if I want cash, I just refi with cash out so there is no tax on that, either.
Al Lee Mark, yoru tragic fate made you a nice profit, didn;t it?
Doug_in_CT It sounds like you are getting around Mark, getting some frequent flyer miles or do you have good managers?
Al Lee Everyone should have such “tragic” fates
MarkCT Yes it did. Tragic fate but actually made alot of money from it. Alowed me to purchase two other properties.
scottdallas There are alot of tragic fates in todays real estate unfort.
Mike_Summey scott, you can check it out here at www.weekendmillionaire.com/og-tour.php
jim_hitt Al, To convert a roth IRA to a self directed you need to move the roth to a custodian that allows investments in non traditonal assets like our company
scottdallas You got lucky if you made a few bucks
scottdallas Thanks Mike!! I will take advantage of it. Keep doing what you do!!
MarkCT Doug as much as I wanted to purchase in CT the prices don’t make it a viable option. I consider my neighborhood the good Ol USA.
Al Lee Mark, you do know that I just started a property management company in Dallas, don’t you. Think of www.rentHouseManager.com next time you buy in Dallas.
scottdallas Al – you just dont stop! Awesome!!
jim_hitt Al, the 1031 exhange and Self Directed IRA investing are tools, you choose the tool that works best for your situation and the particular property you want to invest in. You can do an exchange inside of an IRA and avoid the UDIT also.
Al Lee scott, thanks. I was forced to do this when the large company that owned the property management company I used for a lot of houses went bankrupt.
MarkCT I read it in a previous transcript Al. I’m doing OK with my current property manager. Wish you started it a couple of years ago when I went through two other management companies before finding a decent one.
Mike_Summey I plan to inspect a 32 unit apartment complex in SC in the next few days and I just got word that a local bank is going to have 2 nice foreclosures there in the next few weeks.
Al Lee jim, that is interesting. I did notknow you coudl exchange within the IRA. I guess I never thought of it.
Al Lee Mark, if youhave one you like–STAY THERE!
Mike_Summey Al, that’s why I invite people like Jim to be a guest in our chats. The more information we can exchange the better it is for everyone.
Doug_in_CT I am feeling the need to be a “defensive” at the moment. Getting a loan on investment property seems to be getting harder and harder.
MarkCT Al are you noticing that rents are starting to creep up in Dallas?
Al Lee I keep getting smarter and older. Problem is that some day I will take all this knowledge to the grave with me.
Mike_Summey Jim, your company performs the custodial role in self directed IRAs doesn’t it?
Jeff S Doug, I have never purchased one yet, and i was beginning to look into it and I heard it was very difficult
jim_hitt Mike, It does
scottdallas Al – you need to let us hire you as a consultant. Or have some classes. I would be there! Soaking it all in!
Al Lee Mark rents are moving up and vacancy rates moving down. All because of the lending crisis. What wa a disaster for many real estate companies is a boon to investors who buy and hold
jim_hitt Mike, We have clients investing in real estate to boat docks for rental
Mike_Summey Al, that’s the worst thing a successful thing can do to his fellow man. don’t take the knowledge that brought you success to your grave and only leave behind the things you accumulated.
MarkCT I’m seeing the same thing Al. I own in several states and its the same story all over. I’m increasing rents accross the board.
Al Lee scott, just go to my website www.myRentProperty.com and you can email me any time. I try to answer any questsion as well as I can. I also have many dozens of articles and recorded radio programs online for free viewing/listening.
Mike_Summey My prediction is that the next 2-3 years will be the best times for long term investors I’ve seen in my lifetime.
MarkCT Doug its true that its getting harder to get lenders to lend. Bought the last couple of properties via Seller financing.
scottdallas I know! I listen and read you. I will shoot you an email and pick your brain.
Doug_in_CT I sent an article to Mike entitled “Apartment rents jump as home prices plunge” that noted rents are rising dramatically in the West.
Al Lee Mark. When you hear that the real estate market is “terrible”, look further to see for whom it is terrible. It is usually great for their opposite numbers (a little British lingo there).
Mike_Summey Doug, you will find seller financing will be much more predominate as conventional lender financing dries up.
Doug_in_CT Great Tip, thanks.
MarkCT I agree Al. Its a great market for long term income-based real estate investing. Actually saw some financial wiz on CNN saying that now is the time to get into rent-based real estate investing.
Al Lee Mark, once in a while CNN gets something right. I am sure it was not intentional, though.
Mike_Summey As for lender financing, keep this in mind…they have to loan money to survive. Their inventory is money. Their business is renting it for more that it costs them. Go figure!!!
Jeff S Mike, since last week was my first week I wanted to say Hi to you and tell you I’ve enjoyed your books so far. I am really new to this and am hoping to get started.
MarkCT Forward thinking compared to those saying to stay out of real estate. But comforms to conventional wisdom to buy low.
Mike_Summey Jeff, thanks. Sorry I couldn’t make it last week. I enjoy these chats and sharing information.
Doug_in_CT OK, so I want to put $4,000 in a Roth IRA to work in real estate, What should I do Jim?
Al Lee Mike, I am considering not going to my grave and just continuing living indefinitely. I sort of like it.
Jeff S Sure thing, I’m learning
scottdallas Great to see you guys again. Thanks for the info and all you do!! See you again soon! Be profitable everyone!
Mike_Summey Al, if you figure out how, we’d all like to know!
Jeff S FYI, I think you can put $5,000 into a ROTH IRA this year
jim_hitt Doug, You can purchase options or partner with yourself on the next deal you do or make a small loan to an investor
Doug_in_CT Parntering with myself? No there is a guy, I’m not sure I trust.
Mike_Summey Everyone, check out Jim’s website. He can offer you many ways to invest your retirement funds other that stocks & bonds.
jim_hitt The contribution limit in 2008 is $5000 or $6000 if you are 50 or older
jim_hitt You can still make a 2007 contribution if you have not done so yet
Mike_Summey Hi Ken
Doug_in_CT No, that is interesting. So lets say I find a house for sale for $140,000. I want to put 10% down. Can I put 10K down and my IRA put the other 4K?
jim_hitt Doug, Yes you can
Mike_Summey Al dropped his wine glass! 
Doug_in_CT That sounds very interesting. I am going to try that on my next deal.
Al Lee I got knocled out by a computer gremlin. If there was a message to me, please repeat it as I can not see the historical text. Mike, not wine tonight. I will have tea!
sparky37 Jim is this something we can do ourselves or do we need someone to set up?
jim_hitt Doug, Give me a call at 828-257-4949 and I will give you more info on the proper structure
santo a wine glass filled with gin
Mike_Summey Jim, can your IRA own an interest in an LLC that you are also a member of?
MarkCT Mike there is a lot of talk about the govenment giving a tax rebate check as part of the stimulus package. Just curious as to how you would invest that money. Pay down debt or save it to purchase additional property.
sparky37 Mark, you can buy a big mac with that check!
jim_hitt Sparky, You will need a custodian such as entrust carolinas to handle the transaction
Mike_Summey Mark, I’m afraid that in your case or mine, we’ll be lucky if we get enough for a nice dinner out.
jim_hitt Mike, Yes
Al Lee Mark, the check will not be enough to worry about. Just go out to dinner and you will spend it. The government woudl be better off using that money to fix some roads or other infrastructure.
Doug_in_CT Lets say the house is worth $200K and I sell it 10 years from now for $500,000. My IRA owns 1/3 of the investment. Does that mean my Roth now has over $100,000 in it?
MarkCT Super-size it is then.
Mike_Summey Jim, can your IRA contribute the down payment on a property owned by an LLC and you sign for the loan?
sparky37 Jim is entrust part of the big entrust symbol entu?
jim_hitt Mike, The LLC memberships have to be purchased by the IRA and yourself at the same time, not after you or the IRA already own the memberships
Al Lee http://roadsnotrebates.blogspot.com/ here is a blogspot about it
jim_hitt Doug, Thats correct
MarkCT Time to put the kids to bed. Good chat.
jim_hitt Mike,
Al Lee Goodnight, Mark
jim_hitt Mike, the beneficiary of the IRA can not guarantee any loans.
jim_hitt Sparky, No we are not
sparky37 ok
sparky37 Jim, do you handle deals all over the usa?
jim_hitt The Entrust Group is a 30 office national company with about 3billion in assets under management
Mike_Summey jim, so if your IRA puts up a down payment, and another member signs the note, the IRA could own 90% or more of the LLC and the person merely signing the note could be given 5-10% interest just for their signature. Is that right?
jim_hitt Sparky, We have done deals all over the world
jim_hitt Mike, Thats correct
Al Lee jim, but in Mike’s scenario that other person coudl not be the person whose IRA is putting up the down payment, right?
Mike_Summey If anyone wants to ask me a question tomorrow evening on the “Your Money with Brett and Joe Show” all you need to do is call in to 516-780-4348 a little after 7:30 Eastern. You can listen at www.yourmoneyshow.com
Mike_Summey Jim, it seems to me that someone with good credit would be more than willing to sign a note in exchange for an interest in the property if they had to put up no money and would stand to benefit significantly. Of course you’d have to cinvince them the deal was good.
Mike_Summey convince
Doug_in_CT That sounds like you are on to something there Mike.
Mike_Summey Doug, just another idea.
jim_hitt I was knocked off the computer,
Mike_Summey Jim is drinking the same wine as AL!
jim_hitt if I missed any questions sorry
jim_hitt Diet Coke
Mike_Summey Jim, it seems to me that someone with good credit would be more than willing to sign a note in exchange for an interest in the property if they had to put up no money and would stand to benefit significantly. Of course you’d have to cinvince them the deal was good.
jim_hitt Mike, Thats true, many people have good credit no cash to invest.
Mike_Summey Jim, that’s the point I was trying to make! Glad you picked up on it and I hope everyone else did too.
Doug_in_CT This could also help with the 10 properties and the Fannie Mae situation. The signatory gets the house in his name.
Doug_in_CT Maybe you get better terms (i.e. lower rate) because the non-investor has a sky high score 720 and up.
jim_hitt Mike, The use’s of the self directed IRA is incredible and very profitable I hope the folks in chat land will give it a try.
jim_hitt Mike, Thanks again for the invite
danko thanks for the info, jim. It was very informative
sparky37 Jim I will be calling you
jim_hitt Sparky, Thanks
Doug_in_CT Me too.
Jeff S Jim, I’ll check out your web site as well, thanks
danko Great chat tonight. See you all next week. ‘Night.
jim_hitt I will look forward to talking with all of you.
sparky37 Mike any deals coming up on Offer Generator?
sparky37 with new book
Mike_Summey Jim, so if I’m correct, a person with $100,000 in an IRA could conceivably use the cash to make 20% down payments on 5 $100,000 properties, get someone with good credit to lend their signature in exchange for a 10 or even 20% interest in the properties and the holder of the IRA could benefit from the appreciation and debt reduction on $500,000 rather than just the $100,000 in the IRA>
jim_hitt Mike, Thats a perfect plan and works also
Mike_Summey sparky, $69.95 is not a deal, its a STEAL!!!
sparky37 I agree but Roger taught me to always ask for more!
Mike_Summey Jim, thanks so much for joining us tonight and sharing your vast knowledge. It’s people like you who make these chats so educational and exciting.
Mike_Summey sparky, ask Roger, not me. I haven’t been to his seminar!
sparky37 LOL
jim_hitt Mike, I enjoyed it and I hope it was beneficial to your group, the questions were great.
Doug_in_CT Thanks Jim, you definitely are getting the wheels turning here.
Mike_Summey I’s past 9:00 now and I’m going to cal lit a night. Again, let’s all thank Jim for joining us tonight.
Penny goodnight everyone, see you guys next week
Mike_Summey goodnight
sparky37 Thanks Jim, nite Mike
jim_hitt Good night all
Doug_in_CT Goodnight Mike and everyone.
Jeff S Good night all
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