KSS 25 | Self-Directed IRA Investing

 

Kevin interviews Blake Safford, the Director of Business Development for NuView Trust, a regulated custodian for self-directed IRAs and other retirement accounts. Most people that come to NuView Trust are people who either want to diversify their investment portfolio outside of the stock market with the traditional investment options that are available to them, or grow their real estate investments tax-free or tax-deferred. Blake discusses the rules and benefits of investing in self-directed IRA and opening a solo 401(k), as well as outlines their differences. He also touches on prohibited transaction s and what a disqualified party is, and suggests opening a NuView account to give you better guidance.

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Interview with Blake Safford of Nuview Trust

I’ve invited Blake Safford. He’s with the NuView Trust Company and they are a self-directed IRA company. I happen to be familiar with this company years and years ago when I lived up in Lake Mary Heathrow area in Florida. It’s in Northern Central Florida. They had an office just outside of our back entry to our community. I’ve been to those offices several times. They have since moved, they’ve grown and they’ve expanded in the business. They’ve been in a lot of relationships with real estate investment clubs and other investors and go to some events. They’re a company that’s been around and proven to be successful in this. I met Blake and asked him to be on and he was gracious enough to do that. Blake, welcome.

Thank you, Kevin. I appreciate you having me on the show. For those that don’t know me, I’m the Director of Business Development for NuView Trust specializing on the retail side of the business. Our clients come to us because they either want to diversify their investment portfolio outside of the stock market with the traditional investment options that are available to them there. To grow their real estate investments tax-free or tax-deferred. Those capital gains taxes can eat away your returns. We exist because we want to give you more buying power for future investment opportunities. That can be done in a variety of different IRA accounts. Kevin is going to touch on some of those throughout the show.

Through the various plans that you offer and I’m a big believer in diversification and a quick visit to their website, it’s NuViewTrust.com. You can go directly to their website. It’s great to be able to look at these whole investments as a portfolio. I’ve never been just a note guy. I’m very well known as an expert in the note industry, but I come from a more traditional real estate background. I also have done some things in the stock market, not much, but I’ve dabbled with that and the private entities and things. Your accounts open up to all of those. For those who are not familiar, tell us a little bit about the advisory role that you have or don’t have. Give us an overview of how these accounts work and what you all can do, what you cannot do, what’s up to the individual to do or get advice on their own.

We do get a lot of clients that come to us. They expect us to advise them on how or what to invest in. We simply cannot do that being in a custodial role. Where NuView Trust fits in is we simply are a custodian for the alternative assets held inside of an IRA. I like to compare us to Charles Schwab and Fidelity. If you want to make purchases inside of an IRA outside of a stock market, you can’t go to Fidelity or Charles Schwab because that’s not what they hold there or that’s not what they specialize in. That’s why you need a custodian like NuView Trust because if you do want to make those alternative asset purchases inside of an IRA, you have to have a custodian for those investments. That’s where we fit in. We do provide education to our clients or any prospective client. We hold a biweekly face-to-face educational opportunity at our office. It’s not educating on what or how to invest. It’s educating on the rules and benefits of self-directed IRA investing.

You can’t sell a property to your parent or something like that or finance it. There are some rules and regulations about this. I love the freedom of being able to invest in whatever I believe is best for me to invest in as well. If anybody feels that they need outside advice on that, you can do that but it’s not your job or NuView’s job to tell them specifically, “That’s a good one, do that.” That’s up to the individual but I love the freedom of that. I know there are different types of accounts as well. Tell us about some of the different plans that you have for self-directed IRAs, then I want to come back full circle and talk a little bit about the difference with the IRAs and 401(k)s.

KSS 25 | Self-Directed IRA Investing

Self-Directed IRA Investing: Custodians can help you make alternative asset purchases inside an IRA.

 

When it comes to investing with IRAs, it’s important to understand the different plan types and see which plan type is best suited for you. That is one thing that here at NuView, we can educate you on and point you in the right direction as far as what you qualify for. For the clients that have an existing 401(k) from a previous employer, that is simply a roll-over to an IRA. That’s a good place to start. A very common client that we get here is someone who’s maybe worked for a while with a company that had a company-sponsored 401(k) plan and for whatever reason parted with that company. They have this 401(k) plan sitting with Fidelity or Schwab that’s not doing anything.

They come to NuView because we give them control over those funds to where they can self-direct it to what they want to invest in or what they are an expert in. It’s very common. We will start with the roll-over 401(k)s. The home for the roll-over 401(k) is a traditional IRA. It’s very important to understand why you would roll a 401(k) into a traditional IRA is simply around when you’re paying a tax. With IRA investing, there’s what’s called pre-tax and post-tax. With a traditional IRA where you would roll over the 401(k), you haven’t paid the tax on the funds in the account yet. Whatever you’re growing that account to, you will be taxed when you take the required minimum distribution once you reach the age requirement. The benefit of making those contributions and growing the account is number one, you’re not paying the capital gains tax inside of that account, but you’re also getting the tax deductions from the contributions that you’re making inside of that.

I will start there because that’s a very common home for roll-over 401(k)s. From there, we will talk a little bit about the Roth IRA. The main difference between the Roth and the traditional is when you’re paying the tax. With the traditional, you’re paying the taxes on the money once it comes out versus with the Roth, you’re paying taxes on the dollars once they go into the account. To use another analogy, we like to say you’re paying taxes on the seed versus paying taxes on the crop. Think about that for a second because the Roth IRA is a tremendous wealth building tool for a variety of reasons. I always like to use the example of doubling $1 twenty times. Let’s say you take $1 and you were to double it twenty times at a taxable rate of 25%, which we would all agree is a very good successful investment return if you’re doubling $1 twenty times. At the end of the day, you would end up with $72,000 at a taxable rate of 25%.

Why would you want to take that same dollar and invest it with the Roth IRA? As I mentioned, you’re paying taxes on the seed but you’re not paying taxes on the crop. Whatever you gain on that dollar grows tax-free. If you were to take that same dollar in a taxable vehicle at 25% but this time you do it inside of a Roth, you wouldn’t end up with $72,000 at the end of the day. You would end up with $1.2 million because those gains are growing tax-free. I don’t know about you, but that is one of the best wealth-building vehicles.

That’s quite a difference between the two. As far as working with people because I go out and do live events and note training and such and I run into some similar scenarios. I get this a lot, “I’m working for another company right now. I want to make the note investing on the side. You were talking about IRAs and 401(k)s. Can I use my 401(k)?” You have to go back and explain to people, “You can’t use that one because that’s a company-sponsored plan and you work for a company.” That company sets up, “Here are the guidelines,” and if they put it with companies like Schwab or something. You can invest in the vehicles that Schwab specializes in so it does limit what you’re able to do. For somebody who is working for another company, they can’t self-direct that money out of their 401(k) unless they leave the company or retire from the company. Can they start their own business and have a 401(k) at that business and start to contribute there as well?

With the great power of the solo 401(k) comes a little extra responsibility. Click To Tweet

It’s very important to understand that you will not be able to use your 401(k) account for self-direction if you are currently employed by the company that offers that plan. Once you are separated from that company, you are free to do whatever you wish with that account. If you were to be a sole proprietor or if you had an LLC, you would qualify for what’s called an individual 401(k) plan, which makes you the trustee of the plan. You’re able to contribute both as an employer and as an employee. That plan, the Solo 401(k) has a lot of benefits. The major benefit is it is the plan that allows you to contribute the most amounts of tax-free or tax-deferred dollars. I believe $56,000 is the 2019 contribution limits.

Another great benefit with that plan that the other IRA plans don’t offer is it gives you what we call checkbook control. With the Solo 401(k), you’re able to go into a bank and establish a checking account for that 401(k) plan. If you’re the type of investor that executes on a lot of transactions or a high volume of transactions, that’s very attractive for you. You’re able to take advantage of investment opportunities at a faster pace than if you were to be processing them through a normal IRA account. The other major benefit that we see with the Solo 401(k) is the ability to take a 50% loan to yourself. You can use it for whatever type of investment that it’s needed for. It is important to understand that you do have to pay that back to the 401(k), otherwise you are taxed on that.

If someone were to borrow from their 401(k), they could use that money for any purchase. They have to put that back. It’s not an investment, is that correct?

Yes. The one last benefit that I forgot to mention, but I think it’s very important. The Solo 401(k) plan is the only retirement plan that allows you to take on debt finance and not be subject to what’s called Unrelated Debt Finance Income tax. For example, if you saw an investment opportunity and you didn’t have enough capital to buy the property 100%, you could take out a loan with Solo 401(k) and not be subject to what’s called UDFI tax.

It’s interesting to me as an instructor when I see other companies that come out and talk about this particular topic. Everything seemed so IRA-centric. I try to tell people in my events, IRA is one type of an account. Using that same scenario, if you’re working for another company and you have a 401(k) with that company and you’re maxing that out, you can’t open your Solo 401(k) and contribute and max that out. There’s the total overall maximum. If you’re not contributing the whole thing, then you can form your own investment company and do an IRA as he was talking about the Solo 401(k) but you can always do an IRA. That’s the individual retirement account. You can do both of those. You have a 401(k) and an IRA. If somebody is in this full-time or somebody has retired from a position or better yet, if somebody is new to this and they’re starting out and they’re doing real estate investing now full-time. The 401(k) is ten times if not 100 times better than an IRA for reasons that you mentioned. One is the contribution. How much is the contribution now on a Solo 401(k)?

KSS 25 | Self-Directed IRA Investing

Self-Directed IRA Investing: A solo 401(k) can give you checkbook control.

 

It’s up to $56,000.

Versus your IRA, which is going to be subjected to income as well, which is what is that now around?

For a traditional, it’s $6,500. The Roth IRA is also $6,500. It’s a very significant difference.

Especially if you make more income, that $6,500 starts to go down, which drives me nuts. It’s like you’re almost penalized for making more money. That’s a huge difference for me with the 401(k). The ability you can borrow from it outside of investing for emergencies or something that comes up on that. You pay that money back. When you borrow that, that’s also tax-free. If you hire your children or your spouse in the business, your company can offer the plan to them as well. There are some other nuances that I’ve heard about that. If you do make a mistake on the checkbook control, your custodianship is to make sure it’s an allowable investment. If you somehow do something on your own without proper advice and you make a mistake and you get corrected on that mistake, you’re not putting the entire account at risk like you would potentially with an IRA. That’s my understanding of it as well.

That’s a great point and I didn’t touch on that. With the great power of the Solo 401(k) comes a little extra responsibility. When you’re opening the traditional IRA or the Roth IRA and you open that with a custodian like NuView, we’re doing all the administrative and all the record keeping of that account. When you open a Solo 401(k), all NuView Trust does is provide you with the plan documents. We give you the vehicle, but the Solo 401(k), with all the flexibility that it has to offer, there’s a little bit more responsibility on the client’s end. We always advise you’re the record keeper of the account. It’s your job to make sure that you’re the bookkeeper and the record keeper and you’re doing all the reporting for that Solo 401(k). Before you open up a Solo 401(k), please either speak to your CPA or have a plan as far as how you’re going to be the bookkeeper of this plan. Especially if you’re going to be making a lot of different investments and there are going to be a lot of transactions within that account. If you’re taking advantage of these tax benefits, you need to make sure that you’re keeping the proper bookkeeping as well.

The only thing that can't be held inside of an IRA would be life insurance and collectibles. Click To Tweet

Is that something that you also offer education on as far as somebody learning how to get that before they open up an account like that?

We offer educational opportunities on the Solo 401(k) plan. We’ve had specific Solo 401(k) classes that we’ve hosted here at NuView. That’s something we make sure our clients are well-educated on.

Is that an education online? You do live events in Florida as well, and maybe in other places as well. If somebody wants more information on the educational format, how would they go about that?

We hold face-to-face educational events at our office every other Thursday. It’s the first Thursday and the third Thursday of every month. We are also starting to launch our own webinars series. That will primarily be on introduction to self-directed IRAs. Our website, NuViewTrust.com is also a wealth of information. There’s a specific link on there for Solo 401(k)s or whichever IRA plan type that you’re interested in. Last but not least, one of the three uniques about NuView Trust is we’re very relationship-driven. We only have one location, but we have business development representatives on call during normal business operating hours, 8:30 AM to 5:30 PM, Monday through Friday. We are here waiting for your call. We can be a support for further education to answer any questions or concerns that you have.

In my opinion, everybody that’s investing in real estate and real estate notes needs to have one of these accounts. If you’re best suited for an IRA, get the IRA and work with someone like Blake to determine if that’s the traditional IRA or a Roth IRA or if you need to do a roll-over. Look into that 401(k) because I know in the industry for some reason, everybody talks in terms of IRAs and they assume everybody knows about the other plans. You don’t need a big company to set up a 401(k) and get the same benefits. You can do a 401(k) that’s on the traditional taxation side or the Roth side. That’s where you need to get some help and some education on doing that. I know this is a broader topic, but it’s important because there are disqualified parties. There are things called prohibited transactions. These are the guidelines that investors have to work in, whether they’re investing in real estate or notes. Can you talk a little bit about that for us?

KSS 25 | Self-Directed IRA Investing

Self-Directed IRA Investing: The IRA is the owner of whatever investment opportunity that it invests in.

 

That is probably the most important topic when it comes down to IRA investing. It’s understanding who is a disqualified party and what is a prohibited transaction. Those are the two things that can get you in trouble with the IRS. I always tell people, NuView is not the police. We’re not going to police every transaction. We will stop a prohibited transaction from occurring but it’s important to understand who a disqualified party is. I will start with that. The most important thing to understand is that the IRA is the owner of whatever investment opportunity that it invests in. A lot of people seem to think that if Blake’s IRA purchases a property, that Blake owns the property. That’s not the case. The IRA owns the property and the IRA just benefits Blake. I hope that example paints a clear picture of that.

You have to think of your IRA or your 401(k) as a separate individual. That goes all the way through the financing as well and the documents that are signed. It’s a separate individual, much like a corporation is. If you have a corporation, you think about that the same way and account for it the same way.

With the disqualified party subject, the IRA can’t do business with yourself, your spouse, your parents, your grandparents, your children or your grandchildren and the same for your spouse’s side as well. It’s important to understand the only thing that can’t be held inside of an IRA would be life insurance and collectibles. People always ask, “Why not life insurance?” Who does life insurance benefits? Your beneficiaries. It doesn’t benefit you at all. It’s the same thing with collectibles. You’re not able to valuate at the end of the year, it doesn’t hold a value. What may be worth $1 million to you might not be worth $1 million to someone else.

I hear you on that. My great grandfather was the welterweight boxing champion of the world. I’ve got his buckle and there are only three of them made from this one buckle. It’s been in our family for years and we think it’s worth $1 million. You go to some of the auction houses and things like that and they go, “Not so much.” I get it there. That would be an example of a collectible coin collection. You can have bullion but stamp collections, even alcohol collections, spend some brandies or whatever you’re doing. You make sure when somebody is looking to invest in something, is this prohibited transaction? Is it a qualified party or disqualified party on that? Other than that, the individual investor decides if it’s a good investment for them or not. That’s the way the whole relationship works.

NuView’s role in that is the one thing we can advise you on what a prohibited transaction is. We simply can’t tell you whether 123 Blue Street is a good investment or not. That is the self in self-direction. That is up for our clients to make that investment.

It is ideal to have your account funded so as not to miss out an investment opportunity. Click To Tweet

Maybe it’s not quite your role in the office, but maybe you hear some stories. What are some of the crazier things that people have invested with IRAs and 401(k)s? Can you think of any stories?

I do have one and it wasn’t a prohibited investment. We have a client that owns a racehorse inside of their IRA. The horse competes in races and it is an investment and you can hold it inside of an IRA because the horse can be valuated at the end of the year.

I hear all kinds of different stories with people investing in such. What about fees? I know it’s probably on your website which is NuViewTrust.com, but how do the fees work within the organization in general terms?

One that makes NuView unique is we’re one of the very few custodians that offer asset-based fee. With the asset-based fee, it doesn’t matter whether you hold $15,000 or $10 million inside of your IRA. We’re going to charge you $295 a year to hold that asset. A lot of custodians will charge what’s called a portfolio value-based fee schedule, which the fees are determined on what the value in the account is. A definite benefit or an advantage that NuView has to offer is our competitive fee schedules.

I’m sure there are people reading this blog that have built up substantial accounts at this point in time. They may want to look at that and compare your fee structure with what they’re currently doing. They could roll over their IRA or 401(k) from another self-directed company into NuView Trust and that fee base alone is important. You’re saying it’s not based upon how many assets, the net worth, or the gross of what those assets are worth. It’s more fee-based.

KSS 25 | Self-Directed IRA Investing

Self-Directed IRA Investing: You only need $50 to open an account with NuView.

 

That’s a great point because I forgot to mention, Glen Mather, the CEO and Founder of NuView Trust, the reason why he created NuView was he wanted to buy a piece of real estate inside of his IRA. He was being charged thousands of dollars a year from the financial institution that would hold it. The reason why he came up with NuView is that he didn’t understand how they would charge so much to hold this asset. That’s a little history on how NuView was founded and a little history on our CEO, Glen Mather.

I met Glen a number of times. Every time I run into him, it’s over at the Central Florida Real Estate Club, which he goes to on occasion. I’ve met him there a couple of times, but I didn’t know that story and that’s interesting. That makes sense because I’ve seen that as well where people are like, “The fees after a while start building up and building up.” That’s very important. If you have an account and you’ve built that up, it’s absolutely worth to at least have the conversation and run the numbers and see if that makes sense for you. Blake, if someone wants to contact you and further discuss this, are you the right person for that? How should they contact somebody at NuView?

My role within the company is the Director of Business Development on the retail side. I do have several business development representatives that work with me. Feel free to reach out to us. My direct line is (407) 519-9171. I can be reached out by email at BSafford@NuViewIRA.com or feel free to go onto our website. There’s the main office number that can direct you to the sales team. One of our dedicated professionals would be happy to answer any questions or educate you further on self-directed IRAs.

I will have to pop up to the office one of these days. I’m in Winter Park, Florida. They’re right up the road in Longwood, Florida. It’s a good company and good people. I enjoyed meeting Glen and Blake at events. I like the fee structure. I like that story. For a lot of people, it makes a lot of sense for them to do that. It looks like the educational component is growing. If you’re not here in Central Florida and you can’t attend their events at the office, check back, look online, and get educated about this topic. There’s a plan for everybody, no matter if you’re just starting out on this or if you’re already working with the company and doing this part-time. It should be something that becomes a part of everybody’s plan. We have a technique in the note business that enables people to own a part of note for very little money. This isn’t something where you look at, “I will start an IRA when I’ve got $10,000 to fund it or to open an account.” What does it cost to open an account and how much do you have to fund it with NuView?

Typically, we charge $50 to open an account. If we do a podcast or we’re at an event, we will waive the application fee. You bring up a good point because with NuView, we have a variety of different plan options and one plan might not be the only plan that you want to utilize. Our Vice President, Jason, he has a traditional or Roth, an HSA which works in conjunction with a high deductible health care plan and then also an educational savings plan that he has for his son. Those are all plans that you can partner on investments. I didn’t touch on that earlier. I’m glad you refresh my memory on that. It’s important to understand that you can have multiple retirement accounts and have a traditional and a Roth. It’s very common here at NuView.

$50 is nothing to open the account. How much do they have to put in the account to open it?

There’s no minimum requirement to open an account here at NuView. The one thing I would add is it is up to our clients to identify investment opportunities. We always recommend opening the account and the next step is to get the accounts funded. If you come across an investment opportunity and it’s time sensitive, if you don’t have your account funded, you might miss out on that opportunity. We do our part on sending the transfer request or the roll-over request in the case of the 401(k). It is in the hands of the other custodian on when they send the funds to NuView, which gives you the power to execute on that trend of actions. We always recommend setting up the account, but the next step is to make sure the account gets funded as soon as possible. We don’t want you missing out on any investment opportunity.

They can open an account without having to fund it at that time but to start investing, you’re going to have to fund that, which makes it where there’s no excuse not to do this. If you’re in the investment realm in real estate or real estate notes, open an account. It costs you hardly anything to get started in this. You can start to leverage and start to partner, then it can get fun after that. If you do have children, like you mentioned Jason did and I have a son as well, you can hire your children in the business. It’s a tax deduction for you for the expenses of paying that son. They’re earning income and they’re entitled to open an IRA on their own. You start funding part of the money that you’re paying them into the IRA. Make sure they’re legitimately doing something for the business. They get a tax deduction on that side. Now they’re growing the account tax-free and they don’t have to fund the whole deal. They could partner on a deal with you. Maybe they only contribute $500 on something and make some money in that fashion. That is the wealth accelerator that Blake started talking about in the very beginning. If you take out the taxation, it changes the numbers drastically. Blake, I do appreciate you being on so much. Do you have any final thoughts you want to share with anybody?

I appreciate you giving me the opportunity to be a guest on the show, Kevin. NuView Trust exists to be a resource for you and help you take advantage of those investment opportunities through your IRA. We’re here for your support through education. I will encourage you to come by if you live in the area to attend one of our face-to-face educational classes. We have a class being taught on private lending. We have a special guest speaker who specializes in private lending. It will be an intro to NuView and self-direction but also we have a special guest speaker on private lending with an IRA. It would be a good class to attend and please reach out and I will get you RSVP for any upcoming classes we have.

Thank you, Blake. I do appreciate it and I will have to follow up with you and who knows, maybe I will come up there and do a class for you. I plan on doing some training in Orlando as well. Maybe I will invite you to come down or somebody to come down and talk about NuView at our events as well. Thank you for reading this episode of the show and please go to our website, KevinShortle.com and sign up for the mailing lists so that you can keep in touch with everything on training, on books, on materials, on new content. I’m always creating new things and inviting guests as with Blake from NuView. I always want to keep you informed about the other things around the industry that can help us all within the business. I look forward to talking to you again. Thanks.

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About Blake Safford

KSS 25 | Self-Directed IRA InvestingSales, marketing, and business development background. Visionary sales leader revolving around core values of work ethic, attitude, collaboration, and performance.