Directed IRA Podcast
A show dedicated to educating and informing self-directed IRA and 401(k) investors on strategies, investments, legal structures, tax rules, and pitfalls. Hosted by tax lawyers Mat Sorensen and Mark Kohler who are also co-founders of Directed IRA & Directed Trust Company (https://directedira.com) where they have provided self-directed accounts for thousands of customers. They cover and discuss Roth IRAs, solo(k)s, prohibited transactions, real estate, start-ups, notes, PPMs, PE/VC Funds, UBIT/UDFI, IRA/LLCs (aka, checkbook IRAs), and share examples and stories from their thousands of clients who have self-directed their retirement for decades.
Directed IRA Podcast
Open Forum: Listener Questions Answered!
Welcome to the Directed IRA Podcast! In this episode, we're diving into an open forum where we answer your questions about retirement accounts, including how to sell assets in your account, operate a Solo 401(k), and more. We’re breaking down what you can and can’t do so that you can make the most out of your retirement planning.
Got questions? Head over to DirectedIRA.com/podcast and submit yours for future episodes. We’re here to help you navigate the complexities of retirement with expert advice.
Some of your questions have been so detailed that they could fill a novel! If that's you, it might be time to schedule a tax consult with a lawyer. We're here to make sure you're fully equipped with the knowledge you need.
Learn how to take control of your retirement - https://directedira.com/
Shop my products - https://shop.matsorensen.com/
Blog & Articles - https://matsorensen.com/blog/
Connect with Mat online:
Instagram: https://www.instagram.com/matsorensen/
Facebook: https://www.facebook.com/mat.sorensen.1
LinkedIn: https://www.linkedin.com/in/matsorensen/
TikTok: https://www.tiktok.com/@sorensenmat
YouTube: https://www.youtube.com/@MatSorensen
Websites:
https://directedira.com
https://matsorensen.com
https://kkoslawyers.com
https://mainstreetbusiness.com
0:00 - **Intro and Open Forum Format**
Matt Sorensen and Mark J. Kohler introduce the open forum episode, answering listener questions on self-directed retirement accounts.
0:06 - **Real Estate Investing with IRAs: Cash vs. Leveraging Debt**
A question is raised about whether to buy one property with cash or multiple properties using debt. They explain the pros and cons, including the impact of UDFI (Unrelated Debt-Financed Income) taxes when leveraging.
2:02 - **Investing in Leveraged Multifamily Properties with Traditional and Roth IRAs**
A listener asks about investing traditional IRA money in multifamily properties with leverage. Matt and Mark discuss UDFI taxes on cash flow and capital gains and the advantages of using Roth IRA funds.
3:17 - **Example: Buying a Property with Debt in an IRA**
They provide a detailed example of buying a $100,000 property using $40,000 from an IRA and a $60,000 loan, explaining how UDFI taxes apply to the leveraged portion of gains.
5:19 - **Cash Flow and UDFI on Real Estate Investments**
They discuss how depreciation and mortgage interest can minimize UDFI on cash flow, often resulting in little to no taxable income year to year.
6:03 - **Transferring a Property into a Solo 401(k)**
A listener asks about transferring an Airbnb property into a Solo 401(k) as a contribution. The hosts explain why this is prohibited and outline the correct process for contributing cash instead of property.
10:46 - **Using Leverage to Buy Multiple Airbnbs**
They suggest using a non-recourse loan in a Solo 401(k) to buy additional properties without triggering UDFI and offer a strategy for scaling investments using leverage.
12:53 - **Managing Fix and Flip Projects in a Solo 401(k)**
A question is answered about how to manage payments and contractors for a property purchased through a Solo 401(k), advising using a debit card instead of a credit card linked to the account.
15:22 - **Taking RMDs (Required Minimum Distributions) from Multi-Member IRAs**
They explain how to handle RMDs for a multi-member IRA LLC and discuss whether in-kind distributions are possible.
19:06 - **Using a Solo 401(k) to Fund a Business**
A listener asks about using retirement funds to start a coffee shop. The hosts explain three options: using a ROBS (Rollovers as Business Startups), investing through a self-directed IRA without working in the business, and using a Solo 401(k) loan.
26:00 - **Maximizing a Solo 401(k) Loan to Fund a Business**
They outline a strategy for using a Solo 401(k) loan to finance a business, explaining how to avoid UDFI while maintaining full control over the business.
30:25 - **UDFI on Buying Properties with Existing Mortgages**
A listener asks if UDFI applies when purchasing a property with an existing mortgage through an IRA. They clarify that UDFI still applies if the property has debt, even if the IRA didn’t take out the loan directly.
32:24 - **Strategies to Minimize UDFI Taxes**
They offer several strategies to reduce or avoid UDFI taxes, including paying off the loan before selling a property or using a Solo 401(k) instead of an IRA to eliminate UDFI on leveraged real estate investments.
37:48 - **Closing Remarks and Event Announcements**
Matt and Mark close the episode, reminding listeners to submit questions for future open forums and sharing details about upcoming events.