Broke is a State of Mind

Last night I was at the WCRT Detroit meeting in Royal Oak. My good friend Jared Pomranky brought the WCRT (formerly Windy City Round Table) to Detroit as a large sub-group of the original founded in Chicago. I have been a part of the WCRT Detroit since it's inception 18 months or so ago.

I will do a nice long post about all of the entrepreneur groups that I belong to sometime in the near future.

As I was saying at the WCRT meeting last night a newer friend of mine Jeremy Burgess, strictly a Detroit investor, put together a small presentation on leveraging your time. I agreed with basically every single point that he hit on. His message wasn't what prodded me to write this blog about him.

I don't know Jeremy and his wife Jenna very well but what I know is extremely intriguing. The Burgess' came to Detroit, yes they live and pay taxes in the city, from Washington state. Some may look at this as a jail sentence. They look at it as the best opportunity in real estate in America. "Michigan resident's are too close to the opportunity to see it" Jeremy said to me last night. That was one of the most eye-opening statements that I have heard in a long time.

For those of us that cry the Big 3 Blues and whine that you can buy but you can't sell, how can a guy from Washington state move to the City of Detroit and continually net well in the five figure range monthly? The answer is Belief.

Belief in his investing strategy.
Belief in his partner.
Belief in himself.
And most of all.........
Belief that this once great city is on its way back to the top.

You metro Detroiters may laugh at the last belief, but would you believe if you were bringing in over $10,000 every month as a full time real estate investor?

My sites............
http://www.reiaofmacomb.com/
http://www.prettymihomes.com/
http://www.weoffertoday.com/

Own a Million Dollar Building and Not Pay Income Tax On Rent Collected

Bold statement? Not if you understand a little tax code. The government has set up a program that 99% of American's qualify for. With this American Liberty you can buy an income producing building and I don't care if it generates 1 penny or 1 million dollars per year, you do not pay income tax on the "earned income" the same way you would if you don't use this program.

Alright I've kept you waiting long enough. It's a self directed Roth IRA. For those of yor reading this that understand the Power of self directed IRA's, this may be elementary. I'm here to eduate the folks that mey have heard rumors and think that it's all B.S. And for those that have no clue what an IRA even is.

I> Individual

R> Retirement

A> Account

Most of us have something like this set up whether it's in the form of a 401k, 403b, profit sharing, or a Roth IRA. What most "brokers" either don't want you to know, or they are just ignorant to the fact that it is possible. With self directed IRA's You get to choose what Your money is invested in. Now I believe in diversification. There is certainly gobs of cash to be made in the stock market. My issue with Chrysler stock for example, is who is truly making the decisions that affect your retirement?

With a self directed IRA you can buy property, lend money out for people to buy houses with, just like a bank, and you can still buy stocks, bonds, or funds within that IRA. That's all fine and dandy, but now I want to talk about the Monster benefits and advantages to using self directed Roth IRA's specifically.

1. You are investing with POST taxed money.

What does this mean?

At age 59 and 1/2 all of the funds in your Roth can be withdrawn without paying any capital gains or income tax!

2. You can purchase real property with the funds in your IRA as long as all of the gains for the sale or rent goes back into the IRA.

3. The most powerful advantage to using your Roth IRA to buy real estate is whatever type of income the property produces whether it is rent or profit from a sale, once you hit the age of 70 and 1/2 you cannot be taxed on those gains!!!

I will give an example. I am using round numbers so don't call me out on the details, I'm just getting my point across.

You are 40 and 1/2. You buy a building in your Roth IRA. It is a 10 unit building. You paid $500,000. At this point the rent doesn't matter but you bring in $500 per unit. 30 years go by and you make your final payment on the building that your Roth owns. For numbers sake lets conservatively say that your building has doubled in 30 years, as does your rent. Now you have a building worth $1,000,000 and you are bringing in $10,000 per month before expenses.

Because you bought this building in a Roth you will NOT be taxed on that $10,000 per month in income for the rest of your life. Maybe you aren't interested in $10,000 per month. then sell your building for $1,000,000 that you bought for $500,000. Your profit will be 500k right? Most people pay 38% income tax. If you owned this building in an LLC or your own name and not in your Roth, you would pay $170,000 in capital gains. I like the No Capital Gains option better, how about you?

I have to believe that in my scenario above you would keep the building and receive your tax free 10k every month with a smile on your face the same way Warren Buffet would.

Now comes the toughest question to ask. How the heck do I get $500,000 in my Roth if I'm only allowed to contribute $4000 per year. I'm going to teach you a way to blow up your Roth account with as little as $1.00!!!

I'm sure to open a self directed Roth Ira with most companies they will not only let you contribute $1. But I wager $500 is enough to get started.

Okay are you ready to put $5000 in your Roth IRA every month and completely comply with IRS codes?

Here is the easiest route to choking your self directed Roth IRA full of cash to buy property or lend money out of.

Make an offer to purchase a house for $100,000. 00. Make your Roth IRA account the purchaser. Make the consideration, the earnest money deposit, a promissory note for $500. That's your downpayment. Now find a guy like me that buys, sells, and leases real estate for a living and assign(sell) that accepted purchase agreement to me for $5000.00. Now I become the buyer and you have successfully made 5k out of thin air, and a little bit of work. You have to at that point send that $5000.00 check to your self directed IRA company. Now you have $5500 in your Roth.

Now you may say how can you put that money in your Roth time after time if $4000 is the limit per year. Because your Roth actually made the offer with post taxed monies, that you opened the account with a month earlier, any gains that those monies make go directly into the Roth tax free.

How many times a year can you do that over the next 30,40, or 50 years for you young stars out there reading this and educating your self?

I do personally invest with my self directed Roth IRA. I am not licensed to sell them. I am not an attorney nor do I fall under any SEC guidelines. So what you've read here is 100% informational. However I can send you to the right people to help you get your own Self Directed IRA's. I can also help you place any monies in your IRA or other retirement accounts if you are interested in private money lending.

If you made it to the REIA of Macomb in July you would have heard most of this. If you missed it and are interested in learning more and have funds to invest, call or e-mail me direct.

My sites to visit:
http://www.prettymihomes.com/
http://www.weoffertoday.com/
http://www.reiaofmacomb.com/