How To Master Ira Real Estate Investing For Retirement

All right, I got good news and I got bad news. 

The market is in a terrible position  as it sits today. We’ve entered bear market territory, likely a recession. The S and P is down over 20% and NASDAQ down over 30%.  Things are rough in the standard investment markets right now, not only that crypto is in a tailspin, most of them are going to zero and Bitcoin is getting its butt kit and gold. Well, gold is gold. So is that what the entire investment world looks like completely? 

The good news is – No, it is definitely not what the entire investment world looks like right now. There are many investment opportunities that are doing great and using a structure like an IRA can maximize your tax efficiency, even while accessing almost any asset you can think of. If you set it up correctly. 

Today, we’re diving in on a very exciting topic. The topic of IRAs, AKA investment, retirement accounts, the different IRAs available, the different strategies. Then we have two bonuses for you as well, including how to invest in real estate with your IRA and then also, answering the questions: how do I personally invest with my IRA and what strategies do I personally use and find successful? 

For those that don’t know me, my name is Nick DeAngelo with Saint Investment Group. We currently have 150 million under management today and are raising another 100 million,  currently. I write these blogs because investing is the absolute best way to personal freedom and I want you to have the information you need to make the best decisions possible. 

As a reminder, I’m not a CFA CFP. I’m not an attorney, I’m not an accountant. So what does that mean? That means that you should get professional advice from your advisors. Every single investment situation is different so you wanna be positive you’re making the best decisions for your specific situation. Investments always carry risks, and there is a risk to go to zero on some investments. So please, please, please check with the pros for your situation to make sure it’s a good fit. 

What exactly is an IRA? 

IRAs are structures that allow you to make various tax deferred investments while you’re still in your working years. With the understanding that you get the fruits of these investments in your golden years, AKA your retirement years. This allows you to live a safe, happy thriving life in those years, where you’re no longer working on a daily basis and have moved towards the retirement stage.  Typically and classically, these investments are managed by what’s called a custodian, such as the massive examples of TD Ameritrade, Charles Schwab, or even ETrade et cetera. There are a number of them that everybody has heard of. The biggest custodians are pretty much run of the mill, as far as they’re investing in their strategies. And therefore, if they custodian for you for your IRA, they’re gonna make pretty run of the mill investments on your behalf. These are going to be by the book, AKA the book written by the American financial industry. 

So coming from that playbook, the investments they make are probably gonna be in stocks, bonds, and mutual funds, the classic normal standard stuff. Often, however, these investments will be in their financial products or in the financial products of a semi-related company. AKA they’re dipping into a little bit of both sides. They’re selling you the IRA custodianship and then offering you only assets that they also make a piece of and that they manage themselves. So this limits your opportunities as far as what you can invest in, but they’re handling it all for you. Now, before we drill down on the different types of IRAs, there are three major considerations as it relates to IRAs in investing overall for the long term. One is asset allocation, AKA diversification. The basic question is how are you gonna split up your money? If you have a set amount of money with a set pie, how do you carve that pie into different investments and different categories? 

Now there are literally thousand plus page books, entire anthologies on this subject alone. So we’re not gonna drill down too deep on this, we’re gonna touch on this just very lightly so that we can focus on the IRA topic as a whole, but it is very important for you to understand how and why your assets should be allocated. Do some research on that and maybe we’ll even do a video on that in the future so that you can learn a little bit more about that just from us and our take on it. 

For me, I am very heavily weighted in real estate. No surprise there. I also include some stocks, AKA equities, as a minority share of that pie. But real estate is by far the majority. Now I do diversify my real estate investments. However, I use things like geography, different cities, different asset classes, different sizes of the investments to make sure that I’m not overly exposed to one single asset or one single industry or one single local market. 

Now we use a similar strategy at Saint, although it’s much bigger, it’s nationwide and it’s much, much more diversified to make sure that we maintain a really safe fund and a wide diversity for our investors. The second consideration is to identify your risk tolerance for investing. 

Now, let’s start with the extreme example, the obvious one of crypto now for a while, people were talking about 30000% returns and all these crazy things. The reality is most crypto investments have gone to zero. Now there are some of the big ones that have just taken an absolute beating, but the majority have actually gone to zero as an extreme example of very high reward, also leading to very high risk and how that doesn’t always pan out. Ugh, but that’s one end of the spectrum. There is another end of the spectrum and that’s being too safe. If you just have your cash sitting in the bank, that’s one of the “safest” things that you could do, right? 

The risk for losing those assets is remarkably low, except that there’s other considerations. Think about inflation. If you had your cash just sitting in the bank right now over the last year or so, you might have lost 12 or 14% depending on the calculation in just inflation. So you’re actually getting destroyed just by having your cash sitting there, which is considered the safest investment. Most typically, it’s thought, more towards the middle is the most preferred, where you can get access to safe, but moderate returns while still having a pretty safe investment. That’s the standard philosophy – that said, the absolute best case scenario is what we call asymmetric returns. Asymmetric returns, in short, are returns that offer a higher upside than they do risk or downside. Now, while this is the goal of any investor, this is literally what we built the same income fund model for. 

You can say that we live this, we breathe this, and this is our strategy top to bottom day to day. For us, the number one rule was capital preservation, which means don’t freaking lose money. 

I think it was uncle Warren, AKA Warren Buffet, who said, “rule number one, never lose money. Number two, never forget rule number one”. Now that’s oversimplifying it in many cases, but the reality is if you take a big loss, it’s much harder to come back from that big loss than it is to consistently make money over time. Those consistent returns pay off over time, every time. 

Consideration number three, timeframes. Again, there’s a lot of strategy here. I’ll over simplify it. If you’re looking at a time horizon of 10 years or more can afford to be a little bit more aggressive with your investments, giving yourself the best chance for the higher returns goal with a longer time horizon. Is that time the hard work for you.That means you are looking for things that have compounding. That means you’re looking for investments with two things, compounding returns, investments that can exponentially grow over time. And two you’re looking for investments that appreciate these are the crucial factors for a long time horizon in investing. Now, as far as compounding returns, there are some stock strategies that do have that compounding return advantage. Think of things like ETF investments in the S and P 500 or NASDAQ over a long period of time, the bumps and the bruises and the high points to equal a longer, typically smoother, typically standardized return over a long period of time. If you don’t get killed by fees, these are very good structures to be in. For me. The absolute best example is real estate period. I know that’s no shocker to you, but typically if you choose an investment with a high likelihood of appreciation, you also get tax benefits and some cash flow most likely along the way as well. 

Furthermore, you can also hedge against long term inflation through real estate, which just checks so many boxes that it’s a big deal for me. Also, if you wanna learn more about using real estate to hedge against inflation, check out our video that literally covers using real estate to hedge against inflation. There’s a ton of good info there. Definitely check it out. In addition, if you have that longer time horizon, you can invest in more interesting things with higher returns like funds that might have a long time horizon, that aren’t a good fit for some people, but might have higher returns than the teens. Maybe even the low twenties for some of these real estate funds I’ve seen out there, although they’re going to tie your money up for a much longer period of time. 

That’s why this is good. If you have a long term strategy, you can plug into those higher return investments, through real estate funds. Now, the other end of the spectrum is, if you have five years or less, that’s a whole different strategy as it relates to time. Typically, if you have that short of a time horizon, you want to ratchet down your investment risks. If you get knocked out of the market or take a 50% reduction in year three, you still gotta live for a period of time. The risk here is the higher likelihood over time that you’re going to lose money. And if you don’t have the time to make the money back up and you have a short time horizon, you must be more careful with your investments. What does that mean in practical application? That means most likely you need to focus on cash flow instead of appreciation or compound interest. 

In addition to cash flow, you’re looking for things that you can re-capitalize very quickly AKA have access to your money when you need it. If you’re stuck in a fund or some kind of structure that has many years before you can get your money back, but you only have five years on your time horizon, that’s a bad structure to be in. That puts you at risk for not being able to have your money when you need it, which is the worst case scenario. There are great options for short term investing. You can look at things like income funds that just pay you a set amount every single month. That’s basically like buying a stream of income, or you can invest in things like annuities. Typically they have a much lower return than the income fund model, but it is an option for stable money coming in the door. 

If these are done correctly and you’re investing with someone that knows what they’re doing, you’re, volatility is going to be much lower in the assets that are foundationally paying the investors, that income from the income fund or annuities with those three considerations. 

Let’s jump into IRAs. 

So for IRAs, there are four major options. 

  • Option number one, the custodian does it for you. This is the custodian held one. We talked about TD Ameritrade, etcetera. 
  • Option two, the self-directed IRA, AKA still kind of a custodian account. It’s not really self-directed, but they call it self-directed. 
  • Option three. The true self-directed IRA, AKA, you choose your investments. 
  • Option four is the Roth IRA. Now there is so much to say about the Roth IRA and it’s an entirely different structure for the IRA. So we will not be diving into that in depth today. I’m just kind of putting a placeholder on this because it is worth checking out. 

We will definitely be doing a video on this in the future so keep an eye out. 

Number one, the custodian IRA. Now this is exactly what it sounds like. This means the custodian does everything from top to bottom and your job is just to continue investing into the account for them. That means they choose the assets. They choose the allocation. They choose everything 100% and it’s pretty dang hands off for you. So basically your returns are 100% reliant on what they choose for your retirement. So if you pick the wrong one or they make some bad moves there, Ugh, that’s your money. That’s going down the drain. 

Here’s a hint for you. Most will not even beat the market. Okay? And by most, I mean, close to zero will beat the market. Why is that? Between fees, commissions, different taxes. It is a near 100% likelihood that you will not even match the S and P 500. If someone else is doing your investing for you, AKA more than likely you’re getting below market returns. 

I know I’m repeating myself on this, but it’s very much worth understanding. It’s a big deal. Now to be fair, the custodians, the broker and the government all want to be paid in this structure where the custodian is managing your IRA. All of those entities get paid first and you get paid last with your own money. Just something to keep in mind. Also your cost for this service can be all over the board. Oftentimes you’ll see flat fees like a 1%. You might even see things like the old school model, which is 2% annual fees on the value of what they hold. In addition to 20% of the upside that they make for you. 

This high level of fees, taxation, and high broker fees over the long term, erodes, massively the value and options that you have the value of your IRA portfolio. Also robo advisors are very typical for custodians to use, to be fair. 

It does help the custodian bring down costs arguably to you as the consumer, but basically what it does is reduce your life savings and everything you’re relying on to survive in retirement. You’re now reducing to something where you’re going back and forth with an automated chat bot. So your personal opinion on that may vary, but it’s one way to look at it. 

So it’s not all bad though. There are some huge pluses to this. One is it’s gonna keep you on track for the long term. So if you’re with a custodian, they have long term projections, they have long term strategies that they can employ that over a longer period of time are generally pretty stable because if people don’t really drill down on the investment side and they’re investing in all kinds of wacky stuff, they can really lose a lot. So it’s nice to have the custodian as the backstop to say, no, no, no. We’re gonna choose your long term path because it’s more than likely just gonna stick to their game plan, which again, probably not gonna tap you out to zero. Also, you essentially don’t have to do anything except deposit money. That’s kind of nice. 

If you think about the value of your time at this stage of your life, it’s nice to not have to pour in hours into managing the whole portfolio yourself. So essentially there’s very little time output on your end. To kind of summarize in exchange for most likely below market returns and dozens and dozens of people nibbling away at your total investment amount and dozens of people nibbling away at your investment through fees and taxes and broker commissions. You do get the added benefit of really not spending that much time on it. And most likely them making decisions with your money – that’s not gonna take you to zero. 

All right, option number two, the self-directed IRA, AKA the custodians list. The reason it’s annoying is because in this case, self-directed means a list of investments that you get from your custodian that you can invest in AKA it’s their list. Meaning they’re choosing the investments, meaning more than likely they have some vested interest in what you’re allowed to invest in. So it’s not uncommon to see a list full of their own financial products or financial products in semi-related companies and the kicker. You still have to spend your own time now researching their products. So you don’t have the benefit of it getting managed on its own with very little effort on your part, cuz you have to research and you get the minimized investment returns because it’s still their products and there’s still all these fees and broker commissions and taxes that you get hit with. 

Overall, this to me is the worst option. I can’t personally recommend it. If your custodian has some secret model that really works well. I don’t know, but for me, this is the worst option and I don’t plan on doing this at all. 

Option number three, the true self-directed IRA, meaning you do it yourself and you choose for yourself. The first step is you need to set up an IRS approved entity. Typically I see business trusts on one hand or LLCs on the other. I would definitely talk to a tax professional for what the best fit is for you. But that’s what I see most commonly. In this case, you are the manager and you assume full responsibility and control over what your IRA does and what assets are going to support yourself in your retirement stage. Ugh, that’s a lot of responsibility. I’ll get into some ways where you can get some big help from professionals without going the custodian route. 

Essentially the holy grail that you are going for to go for a self-directed IRA is what’s called checkbook control. When you have checkbook control, you become free from the custodian’s limiting choice. The custodian is not in the middle. They don’t limit your investment options and you get to effectively choose what you think are the best opportunities for yourself. This means, when you know your time horizon and your risk tolerance, you can best put those into effect in your investments rather than dealing with maybe a robo advisor or a robo chat bot, et cetera. Also again, with the amount you’re saving in fees, taxes and broker commissions. The reality is this compounds over time, this adds up in a major way. If you take how much you’re saving in those and compound that over decades, this can literally be millions of dollars that you’re adding to your IRA over time. 

This is massive and you still get the benefits of the IRA, but keep in mind when you are self-directing you must be compliant with the IRS at all times, you gotta make positive. This is the case. So please, please, please have a professional involved that you can make positive. Your compliance is in order. 

So why go through all the hassle of doing it yourself? Well, other reasons would you go through all the hassle of doing it yourself? Well, it gives you the opportunity to invest in a massive range of assets. This can be anything from individual stocks to bonds, to mutual funds like you can get in the custodian IRA, but it also includes the full boat of real estate opportunities like single family homes, retail, industrial, office, self storage, apartment complexes, et cetera. It opens your investment world to so many different things that you’re typically limited by that it’s such a massive opportunity just on choice alone. 

There is a con to that, however. It does, typically, take on the front end a lot of work to set up and research. Not only the structures, but the assets that you choose to invest in. If you’re sitting down and you want to be the one who chooses your investments, each individual investment, this is taking your time to do so. So that means you gotta drill down endlessly to make sure that those are good fit. Also it’s worth noting that the benefits AKA the income and the returns from those investments, don’t go to you. They go to your IRA. So they go to you in the future. It’s like you are giving a gift for the future you, but it is often a lot of work in the present to give to the future you. And there’s always questions of, what else could you be doing with your time in the present to make more money? 

Speaker 1 (19:04):

The good news is if you choose your assets wisely, you do your research and you set it up properly. The reality is it’s very possible to beat not only the stock market, but to crush custodian, IRA returns and to maintain a very safe portfolio that will provide for you in your golden retirement years. All right, good news. We’re jumping into the bonus sections. The first bonus section is how to invest in real estate with your self-directed IRA. I love this section. 

The first answer to this is you gotta set it up correctly. Get the professionals, get with your CPA, get the direction to make sure this is perfectly on track. A hundred percent compliant from there. The reality is it’s kind of as simple as cutting a check from your IRA account and buying the assets that you want through the IRA. While this is very simple and easy to do, it’s all about the setup on the front end. 

Now the taxes are deferred, meaning you don’t pay today, but you will often pay in the future. However, you can do the investments now and get the benefits of today’s market. Again, you’re doing this for future you. Future you is gonna high five past you, and you’re gonna be thankful you did this for yourself. Be sure to know that income and benefits go into the IRA account. So that account is what accrues. It’s great from a compounding returns perspective, but today you’re not getting that money. So you gotta plan accordingly. These are just kind of the basics, there is a lot to this, definitely talk to your CPA and any specific advisor you might need on this subject. That said, there are ways to invest in things like vacation  homes, your future, retirement home, and even many opportunities out of the country. So investing in real estate through your IRA is limitless. And it’s mostly about you finding the best opportunity investment for you. 

Final thing I’ll say on this is one of the most important and just understanding your time investment into these self-directed IRA owned assets. Just keep in mind if you’re working your tail off for these investments, you’re not getting any of the benefits today. For me, I use a slightly different strategy that I find as the best of both worlds for what I’m looking for. I’ll talk about that in the next bonus. Section bonus section number two. So what do I specifically do? We’ve been talking about IRAs. We’ve been talking about different considerations. So all that said, what do I do personally, to invest with my IRA? 

Let’s talk about it.

 First of all, what is my motivation is a key factor here. I am slammed through the fund, whether it’s managing the business and the funds, et cetera, or my family or that small amount of free time, I try to carve out time for myself. 

My goal with my IRA is truly not to manage it day to day and have a ton of added extra responsibilities and research and hours that I gotta put in. So what do I do? I still go the self-directed route. I still think it’s the best opportunity for me and my situation. So I go that route, but I just choose my assets very carefully. Again, I’m super real estate biased so I invest in real estate, much more heavily. That is split into two different categories. I am looking for the long-term funds with the higher return. That’s one side of the coin, cuz I got a long time horizon. I’m looking for things that are seven to 10 years out. No problem. I’m good with that. And the other is I’m looking for that short term income because I can compound with most of that as well. So I’m investing in a lot of income fund type opportunities. I actively invest into our competitors. It’s not just Saint that I invest in because of that. I have different appreciation horizons where I get paid from different funds that I’ve invested in. And I have that stable income from things like income funds. So I can see my IRA grow in multiple different leaps and bounds.

 In addition, I do like stocks and equities, but as a minority portion also I limit this only to index ETFs for myself. I invest in the S and P 500 NASDAQ, Dow Jones, industrial Dow Jones, and the Russell between those four. I feel like I got great exposure to everything. I feel like I’m very diversified in equities and I just don’t want to invest in individual stocks. I don’t wanna spend the time reading K ones. I don’t wanna read their quarterly updates on all those BS that I’m not even in the boardroom for the real discussions. I don’t trust any one single individual company with my retirement future so I invest in those four index ETFs that are very low cost and I found success with that. 

I hope all of that about IRAs was super helpful for you that there’s some major takeaways and action items that you can put into effect today. Don’t forget, if this was beneficial for you, please like this blog to show other people that they can get good information from it and definitely watch out for us on social media so that we can get you more information like this. As soon as it comes out, any questions or anything you’d like to see comment below. And we will not only respond – If you’re looking for more information, check out our other videos on YouTube. And also we have an amazingly beneficial resource section on the Saint investment website. You can check that out at Saint, and there is so much there’s everything from free eBooks to all kinds of articles on other topics. There’s our podcast on there. I highly encourage you to check it out. Thanks guys, and have a great day.